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PROSPECTUS - NOVEMBER 29, 1999
Morgan Stanley Dean Witter
FUND OF FUNDS
DOMESTIC PORTFOLIO AND INTERNATIONAL PORTFOLIO [COVER PHOTO]
A MUTUAL FUND THAT CONSISTS OF TWO SEPARATE PORTFOLIOS
THE DOMESTIC PORTFOLIO SEEKS TO MAXIMIZE TOTAL INVESTMENT RETURN
THE INTERNATIONAL PORTFOLIO 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.
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CONTENTS
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The Fund Overview..................... 1
The Domestic Portfolio....... 1
Investment Objective....... 1
Principal Investment
Strategies................. 1
Principal Risks............ 11
Past Performance........... 15
Fees and Expenses.......... 16
Additional Risk
Information................ 18
The International
Portfolio.................... 21
Investment Objective....... 21
Principal Investment
Strategies................. 21
Principal Risks............ 24
Past Performance........... 28
Fees and Expenses.......... 29
Additional Risk
Information................ 30
Fund Management.............. 33
Shareholder Information Pricing Portfolio Shares..... 35
How to Buy Shares............ 35
How to Exchange Shares....... 37
How to Sell Shares........... 39
Distributions................ 40
Tax Consequences............. 41
Share Class Arrangements..... 42
Financial Highlights ............................. 50
Our Family of Funds ............................. Inside Back Cover
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION
ABOUT THE FUND.
PLEASE READ IT CAREFULLY AND KEEP IT FOR FUTURE
REFERENCE.
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[Sidebar]
TOTAL RETURN
AN INVESTMENT OBJECTIVE HAVING THE GOAL OF SELECTING SECURITIES WITH THE
POTENTIAL TO RISE IN PRICE AND PAY OUT INCOME.
[End Sidebar]
OVERVIEW
Morgan Stanley Dean Witter Fund of Funds (the "Fund") is an open-end,
non-diversified mutual fund that consists of two separate portfolios
(each, a "Portfolio") --
Domestic Portfolio
International Portfolio
Each Portfolio invests primarily in shares of other Morgan Stanley
Dean Witter Funds (the "Underlying Funds"). Beginning on the next
page is a summary of each Portfolio.
THE DOMESTIC PORTFOLIO
[ICON] INVESTMENT OBJECTIVE
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The Domestic Portfolio seeks to maximize total investment return.
[ICON] PRINCIPAL INVESTMENT STRATEGIES
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The Domestic Portfolio normally invests at least 65% of its total
assets in shares of the Underlying Funds described below. These
Underlying Funds are intended to give the Portfolio broad exposure to
the U.S. equity and fixed-income markets. At any time the Portfolio's
"Investment Manager," Morgan Stanley Dean Witter Advisors Inc., may
add or substitute Underlying Funds in which the Portfolio may invest.
In deciding how to allocate the Portfolio's assets among the selected
Underlying Funds, the Investment Manager considers its outlook for
the U.S. economy and financial markets, and the relative market
valuations of the Underlying Funds. The Portfolio normally expects to
invest between 50%-100% of its assets in Underlying Funds which
invest primarily in equity securities and between 0%-50% of its
assets in Underlying Funds which invest primarily in fixed-income
securities. There are no minimum or maximum percentages in which the
Portfolio must invest in any Underlying Fund.
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THE UNDERLYING MORGAN STANLEY DEAN WITTER FUNDS
The following is a brief summary of the investment objectives and
principal investment strategies of the Underlying Funds that the
Investment Manager presently considers for investment. The
Portfolio's Investment Manager also serves as the Investment Manager
to each of the Underlying Funds. For a complete description of an
Underlying Fund, please see its prospectus, which is available free
of charge by calling (877) 937-MSDW (toll-free).
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AGGRESSIVE EQUITY FUND
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INVESTMENT OBJECTIVE Capital growth.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and other equity securities
(which may include convertible securities) of U.S.
or foreign companies that (i) are covered by
Morgan Stanley Dean Witter Equity Research and
(ii) offer the potential for superior earnings
growth in the opinion of the fund's Investment
Manager. The Investment Manager utilizes a
process, known as sector rotation, that emphasizes
industry selection over individual company
selection. In addition, the fund may invest in
foreign securities, equity securities that are not
covered by Equity Research, fixed-income
securities, and options and futures.
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AMERICAN OPPORTUNITIES FUND
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INVESTMENT OBJECTIVE Long-term capital growth consistent with an effort
to reduce volatility.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in a diversified portfolio of common stocks. The
fund's Investment Manager invests in companies
that it believes have earnings growth potential.
The Investment Manager utilizes a process, known
as sector rotation, that emphasizes industry
selection over individual company selection. In
addition, the fund may invest in convertible debt
and preferred securities, fixed-income securities
such as U.S. government securities and investment
grade corporate debt securities, and foreign
securities.
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2
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CAPITAL GROWTH SECURITIES
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INVESTMENT OBJECTIVE Long-term capital growth.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks. The fund's Investment Manager
currently utilizes a two-stage computerized
screening process designed to find companies that
have demonstrated a history of consistent growth
in earnings and revenues over the past several
years, and that have solid future earnings growth
characteristics and attractive valuations. In
addition, the fund may invest in U.S. government
securities, investment grade fixed-income
securities, preferred securities, convertible
securities, real estate investment trusts known as
"REITs" and foreign securities.
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COMPETITIVE EDGE FUND -- "BEST IDEAS" PORTFOLIO
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INVESTMENT OBJECTIVE Long-term capital growth.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 80% of its assets in
common stock including depository receipts of
companies included in the "Best Ideas" subgroup of
"Global Investing: The Competitive Edge List," a
research compilation assembled by Morgan Stanley
Dean Witter Equity Research -- or such
supplemental companies as selected by the fund's
Investment Manager. This subgroup consists of
approximately 40 companies (including foreign
companies) that Equity Research believes have a
long-term sustainable competitive advantage in the
global arena. In addition, the fund may at times
purchase securities that are not included on the
Competitive Edge "Best Ideas" List.
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CONVERTIBLE SECURITIES TRUST
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INVESTMENT OBJECTIVE High total return through a combination of current
income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in convertible securities. The fund's convertible
securities may include lower rated fixed-income
securities commonly known as "junk bonds," and
"enhanced" and "synthetic" convertible securities.
In selecting fund investments, the fund's
Investment Manager considers market, economic and
political conditions. In addition, the fund may
invest in common stocks directly, non-convertible
fixed-income securities and foreign securities.
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DEVELOPING GROWTH SECURITIES TRUST
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INVESTMENT OBJECTIVE Long-term capital growth.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and other equity securities of
companies that the fund's Investment Manager
believes have the potential to grow much more
rapidly than the economy. The fund will invest
primarily in smaller and medium-sized companies.
In addition, the fund may invest in fixed-income
securities issued or guaranteed by the United
States government, its agencies or
instrumentalities, investment grade debt
securities, and foreign securities.
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DIVIDEND GROWTH SECURITIES INC.
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INVESTMENT OBJECTIVE Reasonable current income and long-term growth of
income and capital.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 70% of its total assets
in common stocks of companies with a record of
paying dividends and the potential for increasing
dividends. The fund's Investment Manager initially
employs a quantitative screening process in an
attempt to identify a number of common stocks
which are undervalued and which have a record of
paying dividends. The Investment Manager then
applies a qualitative analysis to determine which
stocks it believes have the potential to increase
dividends. In addition, the fund may invest in
fixed-income, convertible and foreign securities.
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FINANCIAL SERVICES TRUST
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INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in a diversified portfolio of common stocks and
other equity securities of companies engaged in
financial services and related industries. The
fund's Investment Manager seeks to identify
companies which it believes show good appreciation
prospects and value. In addition, the fund may
invest in common stock and other equity securities
of companies not in the financial services or
related industries, fixed-income, convertible,
U.S. government and foreign securities.
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4
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GROWTH FUND
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INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and convertible securities
primarily of companies having stock market values
or capitalizations of at least $1 billion. The
fund's "Sub-Advisor," Morgan Stanley Dean Witter
Investment Management Inc., invests the fund's
assets by pursuing an "equity growth" philosophy.
That strategy involves a process that seeks to
identify companies that exhibit strong or
accelerating earnings growth. In addition, the
fund may invest in foreign securities.
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HEALTH SCIENCES TRUST
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INVESTMENT OBJECTIVE Capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks of health sciences companies that
are located throughout the world. In deciding
which securities to buy, hold or sell, the fund's
Investment Manager invests in companies based on
its view of business, economic and political
conditions. In addition, the fund may invest in
common stocks of non-health sciences companies,
preferred stock and investment grade fixed-income
securities.
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HIGH YIELD SECURITIES INC.
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INVESTMENT OBJECTIVES High current income and, secondarily, capital
appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in fixed-income securities (including zero coupon
securities) rated lower than investment grade,
commonly known as "junk bonds," or in non-rated
securities considered by the fund's Investment
Manager to be appropriate investments for the
fund. In deciding which securities to buy, hold or
sell, the Investment Manager considers an issuer's
creditworthiness, economic developments, interest
rate trends and other factors it deems relevant.
In addition, the fund may invest in securities
rated investment grade or higher (or, if not
rated, determined to be of comparable quality)
when the Investment Manager believes that such
securities may produce attractive yields.
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5
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INCOME BUILDER FUND
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INVESTMENT OBJECTIVES Reasonable income and, secondarily, growth of
capital.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in income-producing equity securities, including
common stock, preferred stock and convertible
securities. The fund's Investment Manager uses a
value-oriented style in the selection of
securities. In addition, the fund may invest in
fixed-income securities (which may include U.S.
government securities, junk bonds and zero coupon
securities), REITs and foreign securities.
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INFORMATION FUND
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INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and investment grade convertible
securities of companies engaged in the
communications and information industry that are
located throughout the world. In addition, the
fund may invest in investment grade fixed-income
securities.
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INTERMEDIATE INCOME SECURITIES
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INVESTMENT OBJECTIVE High current income consistent with safety of
principal.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in intermediate term, investment grade
fixed-income securities, including mortgage-backed
and zero coupon securities. These securities may
include corporate debt securities, preferred
stocks, U.S. government securities, and U.S.
dollar-denominated securities issued by foreign
governments or corporations. In deciding which
securities to buy, hold or sell, the fund's
Investment Manager considers domestic and
international economic developments, interest rate
trends and other factors. The fund will normally
maintain an average weighted maturity of between
three to seven years. In addition, the fund may
invest in fixed-income securities rated lower than
investment grade.
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6
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MARKET LEADER TRUST
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INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and other equity securities
(which may include foreign or convertible
securities) of companies that the fund's
Investment Manager believes are established market
leaders in growing industries. The Investment
Manager considers companies to be "market leaders"
if they are nationally-known and have established
a strong reputation for quality management,
products and services in the United States and/or
globally. In addition, the fund may invest in
equity securities of other companies, corporate
debt and U.S. government securities.
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MID-CAP DIVIDEND GROWTH SECURITIES
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INVESTMENT OBJECTIVE Total return.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in a diversified portfolio of common stocks and
other equity securities of companies whose
capitalization falls within the range of companies
comprising the Standard & Poor's Mid-Cap 400
Index, that currently pay dividends and that have
the potential for increasing dividends. In
addition, the fund may invest in certain other
common stocks, and fixed-income, convertible and
foreign securities.
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MID-CAP EQUITY TRUST
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INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and convertible securities of
medium-sized companies with market capitalizations
within the capitalization range of companies
comprising the Standard & Poor's Mid-Cap
400 Index. The fund's "Sub-Advisor," TCW Funds
Management, Inc., invests the fund's assets in
companies that it believes exhibit superior
earnings growth prospects and attractive stock
market valuations. In addition, the fund may
invest in equity securities of small
capitalization and large capitalization companies,
foreign securities and fixed-income securities.
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7
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NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
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INVESTMENT OBJECTIVE Capital growth.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks of domestic and foreign companies
engaged in natural resource and related
businesses. In addition, the fund may invest in
common stocks of companies not in the natural
resource areas, investment grade corporate debt
securities and U.S. government securities.
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PRECIOUS METALS AND MINERALS TRUST
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INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and other securities of foreign
and domestic companies principally engaged in the
precious metals and minerals business. The fund
also may invest a portion of its assets in gold,
silver, platinum and palladium bullion and coins.
In addition, the fund may invest in common stocks
of companies that are not primarily engaged in the
precious metals and minerals business and long-
term U.S. government securities.
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S&P 500 INDEX FUND
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INVESTMENT OBJECTIVE To provide investment results that, before
expenses, correspond to the total return of the
Standard & Poor's-Registered Trademark- 500
Composite Stock Price Index.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 80% of its total assets
in common stocks of companies included in the
S&P 500 Index. The Investment Manager "passively"
manages the fund's assets by investing in common
stocks in approximately the same proportion as
they are represented in the Index. In addition,
the fund may invest in stock index futures on the
S&P 500 Index and Standard & Poor's Depository
Receipts.
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8
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SHORT-TERM BOND FUND
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INVESTMENT OBJECTIVE High current income consistent with the
preservation of capital.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in bonds issued or guaranteed as to principal and
interest by the U.S. government, its agencies or
instrumentalities (which may include mortgage-
backed and zero coupon securities), and investment
grade corporate and other types of bonds. In
selecting fund investments, the Investment Manager
considers both domestic and international economic
developments, interest rate trends and other
factors and seeks to maintain an overall weighted
average maturity for the fund of three years or
less. In addition, the fund may invest in foreign,
asset-backed and restricted securities, and junk
bonds.
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SPECIAL VALUE FUND
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INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks of small capitalization companies
(generally between $100 million and $1 billion)
that the fund's Investment Manager believes are
undervalued relative to the marketplace or similar
companies. In addition, the fund may invest in
common stocks of companies which have medium or
large market capitalizations, convertible and non-
convertible fixed-income securities, and foreign
securities (including depository receipts).
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U.S. GOVERNMENT SECURITIES TRUST
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INVESTMENT OBJECTIVE High current income consistent with safety of
principal.
PRINCIPAL INVESTMENT STRATEGY Invests all of its assets in U.S. government
securities (which may include mortgage-backed or
zero coupon securities). In making investment
decisions, the fund's Investment Manager considers
economic developments, interest rate trends and
other factors. The fund is not limited as to the
maturities of the U.S. government securities in
which it may invest.
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9
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UTILITIES FUND
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INVESTMENT OBJECTIVE Capital appreciation and current income.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stock, other equity and investment grade
fixed-income securities of companies that are
engaged in the utilities industry. The fund's
Investment Manager will shift the fund's assets
between different types of utilities and between
equity and fixed-income securities, based on
prevailing market, economic and financial
conditions. In addition, the fund may invest in
foreign securities.
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VALUE FUND
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INVESTMENT OBJECTIVE Total return.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stock and other equity securities that
the fund's "Sub-Advisor," Miller Anderson &
Sherrerd, LLP, believes are undervalued based
primarily on price/earnings ratios, as well as
price/ book ratios and various other value
measures. In addition, the fund may invest in
foreign, convertible and fixed-income securities.
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VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
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INVESTMENT OBJECTIVE High total return through capital appreciation and
current income.
PRINCIPAL INVESTMENT STRATEGY Invests in a diversified portfolio of common
stocks represented in the Standard &
Poor's-Registered Trademark- 500 Composite Stock
Price Index. The fund generally invests in each
stock included in the S&P 500 in equal proportion.
In addition, the fund may purchase and sell stock
index futures to simulate investment in the S&P
500.
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In addition to the principal investment strategies of the Underlying
Funds described above, the Portfolio may use the following investment
strategies:
DEFENSIVE INVESTING. The Portfolio may take temporary "defensive"
positions in attempting to respond to adverse market conditions. The
Portfolio may invest any amount of its assets 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 Portfolio from an anticipated
market downturn, it could have the effect of reducing the benefit
from any upswing in the market. When the Portfolio takes a defensive
position, it may not achieve its investment objective.
PORTFOLIO TURNOVER. The Portfolio may engage in active and frequent
trading of Underlying Funds to achieve its principal investment
strategies. The portfolio turnover
10
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rate is not expected to exceed 300% annually under normal
circumstances. A high turnover rate, such as 300%, may increase the
Portfolio's capital gains, which are passed along to shareholders of
the Portfolio as distributions. This, in turn, may increase your tax
liability as a shareholder of the Portfolio. See the sections on
"Distributions" and "Tax Consequences." A high turnover rate would
not result in the Portfolio incurring higher sales charges/brokerage
commissions because the Portfolio would be trading Class D shares of
the Underlying Funds which are sold without any sales charges.
The percentage limitations relating to the composition of the
Portfolio apply at the time the Portfolio acquires an investment and
refer to the Portfolio's net assets, unless otherwise noted.
Subsequent percentage changes that result from market fluctuations
will not require the Portfolio to sell any security. The Portfolio
may change its principal investment strategies without shareholder
approval; however, you would be notified of any changes.
[ICON] PRINCIPAL RISKS
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There is no assurance that the Portfolio will achieve its investment
objective. The Portfolio's share price will fluctuate with changes in
the market value of the Portfolio's investments in Underlying Funds.
When you sell Portfolio shares, they may be worth less than what you
paid for them and, accordingly, you can lose money investing in this
Portfolio. In addition, the performance of the Portfolio may be
adversely affected because in allocating Portfolio assets among the
Underlying Funds the Investment Manager may consider the impact of
the allocation decision on the Underlying Funds.
Set forth below are the principal risks associated with investing in
the Underlying Funds described above. For more information about the
risks of investing in the Underlying Funds, please see their
prospectuses, which are available free of charge by calling
(877) 937-MSDW (toll-free).
COMMON STOCKS. A principal risk of investing in certain Underlying
Funds is associated with common stock investments. In general, stock
values fluctuate in response to activities specific to the company as
well as general market, economic and political conditions. Stock
prices can fluctuate widely in response to these factors.
Certain Underlying Funds may invest in stocks of small and
medium-sized companies. Investing in securities of these companies
involves greater risk than is customarily associated with investing
in more established companies. These companies' stocks may be more
volatile and less liquid than the stocks of more established
companies. These stocks may have returns that vary, sometimes
significantly, from the overall stock market.
FOREIGN SECURITIES. Certain Underlying Funds invest in foreign
securities (including depository receipts) which involve risks in
addition to the risks associated with domestic securities. One
additional risk is currency risk. While the price of Underlying
Fund shares is quoted in U.S. dollars, Underlying Funds generally
convert 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 sercurity's
local price remains unchanged.
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Foreign securities also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation,
exchange control regulation, limitations on the use or transfer of
Underlying 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. 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 an Underlying Fund to obtain or enforce a judgement
against the issuers of the securities.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be
more volatile. Furthermore, foreign exchanges and broker-dealers are
generally subject to less government and exchange scrutiny and
regulation than their U.S. counterparts. In addition, differences in
clearance and settlement procedures in foreign markets may occasion
delays in settlements of an Underlying Fund's trades effected in
those markets. Delays in purchasing securities may result in the
Underlying Fund losing investment opportunities. The inability to
dispose of foreign securities due to settlement delays could result
in losses to the Underlying Fund due to subsequent declines in the
value of the securities.
Many European countries have adopted or are in the process of
adopting a single European currency, referred to as the "euro." The
long-term consequences of the euro conversion for foreign exchange
rates, interest rates and the value of European securities that an
Underlying Fund may purchase are unclear. The consequences may
adversely affect the value and/or increase the volatility of
securities held by an Underlying Fund.
FIXED-INCOME SECURITIES. Certain Underlying Funds invest in
fixed-income securities (which may include zero coupon 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.
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. The Fund's fixed-income investments may include
zero coupon securities, which are purchased at a discount and either
(i) pay no interest, or (ii) accrue interest, but make no payments
until maturity. As merely illustrative of the relationship between
fixed-income securities and interest rates, the following table shows
how interest rates affect bond prices.
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<CAPTION>
<S> <C> <C> <C> <C> <C>
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1 year N/A $ 1,000 $ 1,000 $ 1,000 $ 1,000
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5 years 4.25% $ 967 $ 934 $ 1,038 $ 1,076
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10 years 4.75% $ 930 $ 867 $ 1,074 $ 1,155
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30 years 5.25% $ 865 $ 756 $ 1,166 $ 1,376
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Coupons reflect yields on Treasury securities as of December 31,
1998. The table is an illustration and does not represent expected
yields or share price changes of any Morgan Stanley Dean Witter
mutual fund.
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CONVERTIBLE SECURITIES. Certain Underlying Funds may invest in
convertible securities, which are securities that generally pay
dividends or interest and may be converted into common stock. These
securities may carry 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 be likely to 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.
With respect to certain Underlying Funds, there are no minimum rating
or quality requirements as to their convertible securities
investments and, thus, all or some of such securities may be rated
below investment grade. These "junk bonds" have speculative risk
characteristics which are described below.
There are also special risks associated with Convertible Securities
Trust's investments in "enhanced" and "synthetic" convertible
securities. These securities may be more volatile and less liquid
than traditional convertible securities.
JUNK BONDS. Certain Underlying Funds may invest in junk bonds, i.e.,
fixed-income securities rated lower than investment grade or, if not
rated, determined to be of comparable quality. Junk bonds are subject
to greater risk of loss of income and principal than higher rated
securities. The prices of junk bonds are likely to be more sensitive
to adverse economic changes or individual corporate developments than
higher rated securities. 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, to meet their projected business
goals or to obtain additional financing. In the event of a default,
an Underlying Fund may incur additional expenses to seek recovery.
The secondary market for junk bonds may be less liquid than the
markets for higher quality securities and, as such, may have an
adverse effect on the market prices of certain securities. The
illiquidity of the market may also adversely affect the ability of an
Underlying Fund's directors/trustees to arrive at a fair value for
certain junk bonds at certain times and could make it difficult for
the Underlying Fund to sell certain securities. In addition, periods
of economic uncertainty and change probably would result in an
increased volatility of market prices of high yield securities and a
corresponding volatility in an Underlying Fund's net asset value.
MORTGAGE-BACKED SECURITIES. Certain Underlying Funds may invest in
mortgage-backed securities, which have different risk characteristics
than traditional debt securities. Although the value of fixed-income
securities generally increases during periods of falling interest
rates and decreases during periods of rising interest rates, this is
not always the case with mortgage-backed securities. This is due to
the fact that the principal on underlying mortgages may be prepaid at
any time as well as other factors. Generally, prepayments will
increase during a period of falling interest rates and decrease
during a period of rising interest rates. The rate of prepayments
also may be
13
<PAGE>
influenced by economic and other factors. Prepayment risk includes
the possibility that, as interest rates fall, securities with stated
interest rates may have the principal prepaid earlier than expected,
requiring the Underlying Fund to invest the proceeds at generally
lower interest rates.
Investments in mortgage-backed securities are made based upon, among
other things, expectations regarding the rate of prepayments on
underlying mortgage pools. Rates of prepayment, faster or slower than
expected by the Investment Manager and/or Sub-Advisor, could reduce
an Underlying Fund's yield, increase the volatility of the Underlying
Fund and/or cause a decline in net asset value. Certain
mortgage-backed securities may be more volatile and less liquid than
other traditional types of debt securities.
CONCENTRATION POLICY. Unlike most industry diversified mutual funds,
certain Underlying Funds are subject to risks associated with
concentrating their assets in a particular industry. These Underlying
Funds' portfolios may decline in value due to developments specific
to the industry in which the Underlying Funds concentrate their
assets. As a result, these Underlying Funds may be more volatile than
mutual funds that do not similarly concentrate their investments.
OTHER RISKS. The performance of each Underlying Fund also will depend
on whether the Investment Manager and/or Sub-Advisor is successful in
pursuing the Underlying Fund's investment strategy. The Underlying
Funds are also subject to other risks from their permissible
investments, including the risks associated with investments in
options and futures, REITs, SPDRs and asset-backed securities. For
more information about these risks, see the "Additional Risk
Information" section.
In addition to the principal risks associated with the Underlying
Funds, the Portfolio also will be subject to the following risks:
NON-DIVERSIFIED STATUS. The Portfolio is a "non-diversified" mutual
fund and, as such, its investments are not required to meet certain
diversification requirements under federal law. Compared with
"diversified" funds, the Portfolio may invest a greater percentage of
its assets in the securities of an individual issuer, in this case
any Underlying Fund. Thus, the Portfolio's assets may be concentrated
in fewer securities than other funds. A decline in the value of those
investments would cause the Portfolio's overall value to decline to a
greater degree.
The performance of the Portfolio also will depend on whether the
Investment Manager is successful in pursuing the Portfolio's
investment strategy.
Shares of the Portfolio are not bank deposits and are not guaranteed
or insured by the FDIC or any other government agency.
14
<PAGE>
[SIDEBAR]
ANNUAL TOTAL RETURN
THIS CHART SHOWS HOW THE PERFORMANCE OF THE PORTFOLIO'S CLASS B SHARES OVER THE
PAST CALENDAR YEAR.
AVERAGE ANNUAL
TOTAL RETURNS
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL RETURNS WITH THOSE OF BROAD
MEASURES OF MARKET PERFORMANCE OVER TIME, AS WELL AS WITH AN INDEX OF FUNDS WITH
SIMILAR INVESTMENT OBJECTIVES. THE PORTFOLIO'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]
[ICON] PAST PERFORMANCE
- --------------------------------------------------------------------------------
The bar chart and table below provide some indication of the risks of
investing in the Domestic Portfolio. The Portfolio's past performance
does not indicate how the Portfolio will perform in the future.
ANNUAL TOTAL RETURN - CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 11.21%
</TABLE>
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, the return would be less than shown.
Year-to-date total return as of September 30, 1999 was 6.51%.
During the period shown in the bar chart, the highest return for a
calendar quarter was 16.39% (quarter ended December 31, 1998) and
the lowest return for a calendar quarter was -11.45% (quarter ended
September 30, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)
- ---------------------------------------------------------------------------------
LIFE OF PORTFOLIO
PAST 1 YEAR (SINCE 11/25/97)
<S> <C> <C>
- ---------------------------------------------------------------------------------
Class A 6.16% 7.22%
- ---------------------------------------------------------------------------------
Class B 6.21% 8.25%
- ---------------------------------------------------------------------------------
Class C 10.26% 11.90%
- ---------------------------------------------------------------------------------
Class D 12.34% 12.89%
- ---------------------------------------------------------------------------------
S&P 500 Index(1) 28.58% 28.44%
- ---------------------------------------------------------------------------------
Lehman Brothers Government/Corporate Bond
Index(2) 9.47% 9.75%
- ---------------------------------------------------------------------------------
Lipper Flexible Portfolio Funds Index(3) 16.52% 16.77%
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
1 The Standard & Poor's 500 Stock Index is a broad-based
index, the performance of which is based on the average
performance of 500 widely held common stocks. The
performance of the Index does not include any expenses, fees
or charges. The Index is unmanaged and should not be
considered an investment.
2 The Lehman Brothers Government/Corporate Bond Index tracks
the performance of government and corporate obligations,
including U.S. government agency and U.S. treasury
securities and corporate and yankee bonds with maturities of
one to ten years. The Index is unmanaged and should not be
considered an investment.
3 The Lipper Flexible Portfolio Funds Index is an
equally-weighted performance index of the largest qualifying
funds (based on net assets) in the Lipper Flexible Portfolio
Funds objective. The Index, which is adjusted for capital
gains distributions and income dividends, is unmanaged and
should not be considered an investment. There are currently
30 funds represented in this Index.
</TABLE>
15
<PAGE>
[Sidebar]
SHAREHOLDER FEES
THESE FEES ARE PAID DIRECTLY FROM YOUR INVESTMENT.
ANNUAL PORTFOLIO
OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE PORTFOLIO'S ASSETS AND ARE BASED ON
EXPENSES PAID FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999.
[End Sidebar]
[ICON] FEES AND EXPENSES
- --------------------------------------------------------------------------------
The table below briefly describes the fees and expenses that you may
pay if you buy and hold shares of the Domestic Portfolio. The
Portfolio offers four Classes of shares: Classes A, B, C and D. Each
Class has a different combination of fees, expenses and other
features. The Portfolio does not charge account or exchange fees. See
the "Share Class Arrangements" section for further fee and expense
information.
<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 PORTFOLIO OPERATING EXPENSES
- ---------------------------------------------------------------------------------------------------------
Management fee None None None None
- ---------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.23% 1.00% 0.54% None
- ---------------------------------------------------------------------------------------------------------
Other expenses(5) 0.44% 0.44% 0.44% 0.44%
- ---------------------------------------------------------------------------------------------------------
Total annual Portfolio operating expenses(5) 0.67% 1.44% 0.98% 0.44%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
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.
5 The Investment Manager has agreed to assume all operating
expenses (except for brokerage and 12b-1 fees) for the
Portfolio until such time as the Portfolio has $50 million
of net assets or until November 30, 2000, whichever occurs
first. The Investment Manager had agreed to assume all
operating expenses (except for brokerage and 12b-1 fees) for
each Portfolio until such time as the respective Portfolio
had $50 million of net assets or until six months from
commencement of the Fund's operations, whichever occurred
first, and has agreed to extend such expense assumption
through November 30, 2000. As a result of such assumption of
other expenses, for the fiscal period ended September 30,
1999, the actual "Other Expenses" amounted to 0.00% for each
Class of the Domestic Portfolio and "Total Fund Operating
Expenses" amounted to 0.23%, 1.00%, 0.54% and 0.00% for
Class A, B, C and D respectively of the Domestic Portfolio.
</TABLE>
16
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
This example shows what expenses you could pay over time. The example
assumes that you invest $10,000 in the Portfolio, your investment has
a 5% return each year, and the Portfolio'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 $590 $728 $ 879 $1,316 $590 $728 $ 879 $1,316
------------------------------------------------------------------ -----------------------------------------
CLASS B $647 $756 $ 987 $1,724 $147 $456 $ 787 $1,724
------------------------------------------------------------------ -----------------------------------------
CLASS C $200 $312 $ 542 $1,201 $100 $312 $ 542 $1,201
------------------------------------------------------------------ -----------------------------------------
CLASS D $ 45 $141 $ 246 $ 555 $ 45 $141 $ 246 $ 555
------------------------------------------------------------------ -----------------------------------------
</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.
17
<PAGE>
UNDERLYING FUND EXPENSES
The Portfolio will not pay any sales load or 12b-1 fee in connection
with its investments in shares of Underlying Funds. However, the
Portfolio will indirectly bear its pro rata share of the expenses
incurred by the Underlying Funds that are borne by Class D
shareholders of the Underlying Funds. These expenses are set forth in
the table below (as of each Underlying Fund's most recent fiscal year
end).
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL
FEES EXPENSES EXPENSES
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------
Aggressive Equity Fund 0.75% 0.31% 1.06%
------------------------------------------------------------------------------------------------
American Opportunities Fund 0.49% 0.12% 0.61%
------------------------------------------------------------------------------------------------
Capital Growth Securities 0.64% 0.20% 0.84%
------------------------------------------------------------------------------------------------
Competitive Edge Fund -- "Best Ideas" Portfolio 0.64% 0.22% 0.86%
------------------------------------------------------------------------------------------------
Convertible Securities Trust 0.60% 0.21% 0.81%
------------------------------------------------------------------------------------------------
Developing Growth Securities Trust 0.49% 0.20% 0.69%
------------------------------------------------------------------------------------------------
Dividend Growth Securities 0.35% 0.08% 0.43%
------------------------------------------------------------------------------------------------
Financial Services Trust 0.75% 0.22% 0.97%
------------------------------------------------------------------------------------------------
Growth Fund 0.79% 0.15% 0.94%
------------------------------------------------------------------------------------------------
Health Sciences Trust 1.00% 0.27% 1.27%
------------------------------------------------------------------------------------------------
High Yield Securities 0.39% 0.10% 0.49%
------------------------------------------------------------------------------------------------
Income Builder Fund 0.75% 0.17% 0.92%
------------------------------------------------------------------------------------------------
Information Fund 0.75% 0.26% 1.01%
------------------------------------------------------------------------------------------------
Intermediate Income Securities 0.60% 0.30% 0.90%
------------------------------------------------------------------------------------------------
Market Leader Trust 0.75% 0.24% 0.99%
------------------------------------------------------------------------------------------------
Mid-Cap Dividend Growth Securities 0.75% 0.30% 1.05%
------------------------------------------------------------------------------------------------
Mid-Cap Equity Trust 0.75% 0.30% 1.05%
------------------------------------------------------------------------------------------------
Natural Resource Development Securities 0.62% 0.28% 0.90%
------------------------------------------------------------------------------------------------
Precious Metals and Minerals Trust 0.80% 0.98% 1.78%
------------------------------------------------------------------------------------------------
S&P 500 Index Fund 0.31% 0.19% 0.50%
------------------------------------------------------------------------------------------------
Short-Term Bond Fund 0.70% 0.18% 0.88%
------------------------------------------------------------------------------------------------
Special Value Fund 0.75% 0.24% 0.99%
------------------------------------------------------------------------------------------------
U.S. Government Securities Trust 0.43% 0.09% 0.52%
------------------------------------------------------------------------------------------------
Utilities Fund 0.54% 0.11% 0.65%
------------------------------------------------------------------------------------------------
Value Fund 1.00% 0.30% 1.30%
------------------------------------------------------------------------------------------------
Value-Added Market Series -- Equity Portfolio 0.46% 0.13% 0.59%
------------------------------------------------------------------------------------------------
</TABLE>
[ICON] ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the
principal risks of investing in the Underlying Funds described above.
18
<PAGE>
OPTIONS AND FUTURES. If an Underlying Fund invests in options and/or
futures (including stock index futures or options on stock indexes or
on stock index futures), its participation in these markets would
subject the Underlying Fund's portfolio to certain risks. If the
Investment Manager's and/or Sub-Advisor's predictions of movements in
the direction of the stock, currency or interest rate markets are
inaccurate, the adverse consequences to the Underlying Fund (e.g., a
reduction in the Underlying Fund's net asset value or a reduction in
the amount of income available for distribution) may leave the
Underlying Fund in a worse position than if these strategies were not
used. Other risks inherent in the use of options and futures include,
for example, the possible imperfect correlation between the price of
options and futures contracts and movements in the prices of the
securities or indexes being hedged, and the possible absence of a
liquid secondary market for any particular instrument. Certain
options may be over-the-counter options, which are options negotiated
with dealers; there is no secondary market for these investments.
REITS. Real estate investment trusts, known as "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, the Underlying Fund would absorb duplicate
levels of fees when it invests in REITs. The performance of any REIT
holdings ultimately depends on the types of real property in which
the REIT invests and how well the property is managed. A general
downturn in real estate values also can hurt REIT performance.
SPDRS. S&P 500 Index Fund may invest in Standard & Poor's Depository
Receipts, securities referred to as SPDRs (known as "Spiders"), that
are designed to track the S&P 500 Index. SPDRs represent an ownership
interest in the SPDR Trust, which holds a portfolio of common stocks
that closely tracks the price performance and dividend yield of the
S&P 500 Index. SPDRs trade on the American Stock Exchange like shares
of common stock and have many of the same risks as direct investments
in common stocks. The market value of SPDRs is expected to rise and
fall as the S&P 500 Index rises and falls. If the Underlying Fund
invests in SPDRs, it would, in addition to its own expenses,
indirectly bear its ratable share of the SPDR's expenses.
ASSET-BACKED SECURITIES. Asset-backed securities have risk
characteristics similar to mortgage-backed securities. Like
mortgage-backed securities, they generally decrease in value as a
result of interest rate increases, but may benefit less than other
fixed-income securities from declining interest rates, principally
because of prepayments. Also, as in the case of mortgage-backed
securities, prepayments generally increase during a period of
declining interest rates although other factors, such as changes in
credit use and payment patterns, may also influence prepayment rates.
Asset-backed securities also involve the risk that various federal
and state consumer laws and other legal and economic factors may
result in the collateral backing the securities being insufficient to
support payment on the securities.
19
<PAGE>
YEAR 2000. The Portfolio could be adversely affected if the computer
systems necessary for the efficient operation of the Investment
Manager, the Portfolio's other service providers and the Underlying
Funds (and their respective portfolio securities) in which the
Portfolio invests do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related
computer problems could have a negative effect on the Portfolio and
an Underlying Fund, the Investment Manager and its affiliates are
working hard to avoid any problems and to obtain assurances from
their service providers that they are taking similar steps.
In addition, it is possible that the markets for securities in which
the Underlying Funds and/or Portfolio invest may be detrimentally
affected by computer failures throughout the financial services
industry beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity issues. In
addition, governmental data processing errors also may result in
overall economic uncertainties. Earnings of individual issuers will
be affected by remediation costs, which may be substantial.
Accordingly, the Portfolio's investments may be adversely affected.
20
<PAGE>
[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]
THE INTERNATIONAL PORTFOLIO
[ICON] INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
The International Portfolio seeks long-term capital appreciation.
[ICON] PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The International Portfolio normally invests at least 65% of its
total assets in shares of the Underlying Funds described below. These
Underlying Funds are intended to give the Portfolio broad
international exposure. At any time the Portfolio's "Investment
Manager," Morgan Stanley Dean Witter Advisors Inc., may add or
substitute Underlying Funds in which the Portfolio may invest. In
deciding how to allocate the Portfolio's assets among the selected
Underlying Funds, the Investment Manager considers its outlook for
the various economies and financial markets worldwide, and the
relative market valuations of the Underlying Funds. There are no
minimum or maximum percentages in which the Portfolio must invest in
any Underlying Fund.
THE UNDERLYING MORGAN STANLEY DEAN WITTER FUNDS
The following is a brief summary of the investment objectives and
principal investment strategies of the Underlying Funds that the
Investment Manager presently considers for investment. The
Portfolio's Investment Manager also serves as the Investment Manager
to each of the Underlying Funds. For a complete description of an
Underlying Fund, please see its prospectus, which is available free
of charge by calling (877) 937-MSDW (toll-free).
---------------------------------------------------------------------
EUROPEAN GROWTH FUND INC.
---------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE Capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in securities of issuers located in European
countries. The principal countries in which the
fund invests are France, the United Kingdom,
Germany, the Netherlands, Spain, Sweden,
Switzerland and Italy. The fund generally invests
in equity securities but may also invest without
limitation in fixed-income securities issued or
guaranteed by European governments. The fund's
Investment Manager and/or "Sub-Advisor," Morgan
Stanley Dean Witter Investment Management Inc.,
generally invest fund assets in companies they
believe have a high rate of earnings growth
potential. In addition, the fund may invest in
equity securities of non-European issuers,
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
government and convertible securities issued by
non-European governmental or private issuers,
forward currency contracts, options on currencies
and warrants.
</TABLE>
---------------------------------------------------------------------
INTERNATIONAL SMALLCAP FUND
---------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and other equity securities of
small capitalization companies located outside the
United States. The fund may invest more than 25%
of its total assets in securities of companies
located in each of the United Kingdom and Japan.
The fund's "Sub-Advisor," Morgan Stanley Dean
Witter Investment Management Inc., seeks
securities of companies with long-term growth
prospects, attractive valuation comparisons and
adequate market liquidity. In addition, the fund
may invest in equity securities of companies which
have medium or large market capitalizations,
fixed-income securities issued or guaranteed by
foreign governments, lower-rated convertible
securities and forward currency contracts.
</TABLE>
---------------------------------------------------------------------
JAPAN FUND
---------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common or preferred stocks of companies which
are located in Japan. The fund's "Sub-Advisor,"
Morgan Stanley Dean Witter Investment
Management Inc., generally invests fund assets in
companies it believes have earnings growth
potential and are attractively priced. The fund
also may invest in convertible securities and
fixed-income securities of companies located in
Japan or guaranteed by the Japanese government,
and in equity or fixed-income securities of
companies located in, or governments of, developed
countries in Asia, Europe or North America
(including the U.S.). In addition, the fund may
invest in forward currency contracts and options
on foreign currencies.
</TABLE>
22
<PAGE>
---------------------------------------------------------------------
LATIN AMERICAN GROWTH FUND
---------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and other equity securities of
Latin American companies. In determining which
securities to buy, hold or sell, the fund's "Sub-
Advisor," TCW Funds Management, Inc., selects
securities based on its view of their potential
for capital appreciation. The fund will normally
invest in at least three Latin American countries.
In addition, the fund may invest in Latin American
convertible and debt securities (including junk
bonds), other investment companies, options and
futures, and forward currency contracts.
</TABLE>
---------------------------------------------------------------------
PACIFIC GROWTH FUND
---------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE Capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its total assets
in common stocks and other securities of companies
which have a principal place of business in, or
which derive a majority of their revenues from
business in, Asia, Australia and New Zealand. The
principal Asian countries include: Japan,
Malaysia, Singapore, Hong Kong, Thailand, the
Philippines, India, Indonesia, Taiwan and South
Korea. The fund may invest more than 25% of its
assets in each of Japan, Hong Kong, Malaysia,
South Korea and/or Taiwan. The fund's Investment
Manager and/or "Sub-Advisor," Morgan Stanley Dean
Witter Investment Management Inc., generally
invest fund assets in companies they believe have
a high rate of earnings growth potential. In
addition, the fund may invest in securities of
other investment companies, forward currency
contracts, and options and futures.
</TABLE>
In addition to the principal investment strategies of the Underlying
Funds described above, the Portfolio may use the following investment
strategies:
DEFENSIVE INVESTING. The Portfolio may take temporary "defensive"
positions in attempting to respond to adverse market conditions. The
Portfolio may invest any amount of its assets 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
23
<PAGE>
posture is designed to protect the Portfolio from an anticipated
market downturn, it could have the effect of reducing the benefit
from any upswing in the market. When the Portfolio takes a defensive
position, it may not achieve its investment objective.
PORTFOLIO TURNOVER. The Portfolio may engage in active and frequent
trading of Underlying Funds to achieve its principal investment
strategies. The portfolio turnover rate is not expected to exceed
300% annually under normal circumstances. A high turnover rate, such
as 300%, may increase the Portfolio's capital gains, which are passed
along to shareholders of the Portfolio as distributions. This, in
turn, may increase your tax liability as a shareholder of the
Portfolio. See the sections on "Distributions" and "Tax
Consequences." A high turnover rate would not result in the Portfolio
incurring higher sales charges/brokerage commissions because the
Portfolio would be trading Class D shares of the Underlying Funds
which are sold without any sales charges.
The percentage limitations relating to the composition of the
Portfolio apply at the time the Portfolio acquires an investment and
refer to the Portfolio's net assets, unless otherwise noted.
Subsequent percentage changes that result from market fluctuations
will not require the Portfolio to sell any security. The Portfolio
may change its principal investment strategies without shareholder
approval; however, you would be notified of any changes.
[ICON] PRINCIPAL RISKS
- --------------------------------------------------------------------------------
There is no assurance that the Portfolio will achieve its investment
objective. The Portfolio's share price will fluctuate with changes in
the market value of the Portfolio's investments in Underlying Funds.
When you sell Portfolio shares, they may be worth less than what you
paid for them and, accordingly, you can lose money investing in this
Portfolio. In addition, the performance of the Portfolio may be
adversely affected because in allocating Portfolio assets among the
Underlying Funds the Investment Manager may consider the impact of
the allocation decision on the Underlying Funds.
Set forth below are the principal risks associated with investing in
the Underlying Funds described above. For more information about the
risks of investing in the Underlying Funds, please see their
prospectuses, which are available free of charge by calling
(877) 937-MSDW (toll-free).
FOREIGN SECURITIES. A principal risk of investing in each of the
Underlying Funds is associated with foreign stock investments. In
general, stock values fluctuate in response to activities specific to
the company as well as general market, economic and political
conditions. Stock prices can fluctuate widely in response to these
factors.
The Underlying Funds' investments in foreign securities (including
depository receipts) involve risks in addition to the risks
associated with domestic securities. One additional risk is currency
risk. While the price of Underlying Fund shares is quoted in U.S.
dollars, the Underlying Funds generally convert U.S. dollars to a
foreign market's local
24
<PAGE>
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 also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation,
exchange control regulation, limitations on the use or transfer of
Underlying Fund assets and any effects of foreign social, economic or
political instability. In particular, adverse political or economic
developments in a geographic region or a particular country in which
an Underlying Fund invests could cause a substantial decline in the
value of the Underlying Fund's portfolio. 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
an Underlying Fund to obtain or enforce a judgment against the
issuers of the securities.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be
more volatile. Furthermore, foreign exchanges and broker-dealers are
generally subject to less government and exchange scrutiny and
regulation than their U.S. counterparts. In addition, differences in
clearance and settlement procedures in foreign markets may occasion
delays in settlements of an Underlying Fund's trades effected in
those markets. Delays in purchasing securities may result in the
Underlying Fund losing investment opportunities. The inability to
dispose of foreign securities due to settlement delays could result
in losses to the Underlying Fund due to subsequent declines in the
value of the securities.
Many European countries have adopted or are in the process of
adopting a single European currency, referred to as the "euro." The
long-term consequences of the euro conversion for foreign exchange
rates, interest rates and the value of European securities that an
Underlying Fund may purchase are unclear. The consequences may
adversely affect the value and/or increase the volatility of
securities held by an Underlying Fund.
Certain Underlying Funds may invest in foreign securities issued by
companies located in developing or emerging countries. Compared to
the United States and other developed countries, developing or
emerging countries may have relatively unstable governments,
economies based on only a few industries and securities markets that
trade a small number of securities. Prices of these securities tend
to be especially volatile and, in the past, securities in these
countries have been characterized by greater potential loss (as well
as gain) than securities of companies located in developed countries.
Certain Underlying Funds may invest in foreign small capitalization
securities. Investing in lesser-known, smaller capitalized companies
may involve greater risk of volatility of the fund's share price than
is customarily associated with investing in larger, more established
companies. There is typically less publicly available
25
<PAGE>
information concerning smaller companies than for larger, more
established companies. Some small companies have limited product
lines, distribution channels and financial and managerial resources
and tend to concentrate on fewer geographical markets than do larger
companies. Also, because smaller companies normally have fewer shares
outstanding than larger companies and trade less frequently, it may
be more difficult for the fund to buy and sell significant amounts of
shares without an unfavorable impact on prevailing market prices.
Some of the companies in which the fund may invest may distribute,
sell or produce products which have recently been brought to market
and may be dependent on key personnel with varying degrees of
experience.
LATIN AMERICAN SECURITIES. Latin American Growth Fund concentrates
its investments in the common stock of Latin American companies.
Consequently, the fund's share price may be more volatile than that
of mutual funds not sharing this geographic concentration. Economic
and political developments in Latin America may have profound effects
upon the value of the fund's portfolio. In the event of
expropriation, nationalization or other complications, the fund could
lose its entire investment in any one country. In addition,
individual Latin American countries may place restrictions on the
ability of foreign entities such as the fund to invest in particular
segments of the local economies.
The securities markets of Latin American countries are substantially
smaller, less developed, less liquid and more volatile than the major
securities markets in the United States. The limited size of many
Latin American securities markets and limited trading volume in
issuers compared to volume of trading in U.S. securities could cause
prices to be erratic for reasons apart from factors that affect the
quality of the securities. For example, limited market size may cause
prices to be unduly influenced by traders who control large
positions. Adverse publicity and investors' perceptions, whether or
not based on fundamental analysis, may decrease the value and
liquidity of securities, especially in these markets.
In addition, many of the currencies of Latin American countries have
experienced steady devaluations relative to the U.S. dollar, and
major devaluations have historically occurred in certain countries.
Any devaluations in the currencies in which the fund's portfolio
securities are denominated may have a detrimental impact on the fund.
There is also a risk that certain Latin American countries may
restrict the free conversion of their currencies into other
currencies. Further, certain Latin American currencies may not be
internationally traded.
Most Latin American countries have experienced substantial, and in
some periods extremely high, rates of inflation for many years.
Inflation and rapid fluctuations in inflation rates have had and may
continue to have very negative effects on the economies and
securities markets of certain Latin American countries.
Latin American securities are also subject to the more general risks
associated with foreign securities which are discussed above.
26
<PAGE>
JAPANESE SECURITIES. Japan Fund concentrates its investments in the
common stock (including depository receipts) of Japanese companies.
Consequently, the fund's share price may be more volatile than that
of mutual funds not sharing this geographic concentration. The value
of the fund's shares may vary widely in response to political and
economic factors affecting companies in Japan. Securities in Japan
are denominated and quoted in yen. As a result, the value of the
fund's Japanese securities, as measured in U.S. dollars, may be
affected by fluctuations in the value of the Japanese yen relative to
the U.S. dollar. Securities traded on Japanese stock exchanges have
exhibited significant volatility in recent years. In addition,
Japanese securities that are not traded on the first sections of the
three main Japanese exchanges may be more volatile and less liquid
than those traded on the first sections. The decline in the Japanese
markets since 1989 has contributed to a weakness in the Japanese
economy. Continued economic weakness could result in further declines
in the Japanese securities markets. Japan's economy may be
significantly affected by any strains in its trade relations,
particularly with the U.S.
Japanese securities are also subject to the more general risks
associated with foreign securities which are discussed above.
PACIFIC BASIN SECURITIES. Pacific Growth Fund concentrates its
investments in the common stock of companies located in Asia,
Australia and New Zealand. Consequently, the fund's share price may
be more volatile than that of mutual funds not sharing this
geographic concentration. Economic and political developments in the
Pacific Basin region of the world may have profound effects upon the
value of the fund's portfolio.
OTHER RISKS. The performance of each Underlying Fund also will depend
on whether the Investment Manager and/or Sub-Advisor is successful in
pursuing the Underlying Fund's investment strategy. The Underlying
Funds are also subject to other risks from their permissible
investments, including the risks associated with investments in
fixed-income securities, convertible securities, junk bonds,
securities of other investment companies, options and futures, and
forward currency contracts. For more information about these risks,
see the "Additional Risk Information" section.
In addition to the principal risks associated with the Underlying
Funds, the Portfolio also will be subject to the following risks:
NON-DIVERSIFIED STATUS. The Portfolio is a "non-diversified" mutual
fund and, as such, its investments are not required to meet certain
diversification requirements under federal law. Compared with
"diversified" funds, the Portfolio may invest a greater percentage of
its assets in the securities of an individual issuer, in this case
any Underlying Fund. Thus, the Portfolio's assets may be concentrated
in fewer securities than other funds. A decline in the value of those
investments would cause the Portfolio's overall value to decline to a
greater degree.
The performance of the Portfolio also will depend on whether the
Investment Manager is successful in pursuing the Portfolio's
investment strategy.
Shares of the Portfolio are not bank deposits and are not guaranteed
or insured by the FDIC or any other government agency.
27
<PAGE>
[SIDEBAR]
ANNUAL TOTAL RETURN
THIS CHART SHOWS HOW THE PERFORMANCE OF THE PORTFOLIO'S CLASS B SHARES OVER THE
PAST CALENDAR YEAR.
AVERAGE ANNUAL
TOTAL RETURNS
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL RETURNS WITH THOSE OF A BROAD
MEASURE OF MARKET PERFORMANCE OVER TIME, AS WELL AS WITH AN INDEX OF FUNDS WITH
SIMILAR INVESTMENT OBJECTIVES. THE PORTFOLIO'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]
[ICON] PAST PERFORMANCE
- --------------------------------------------------------------------------------
The bar chart and table below provide some indication of the risks of
investing in the International Portfolio. The Portfolio's past
performance does not indicate how the Portfolio will perform in the
future.
ANNUAL TOTAL RETURN - CALENDAR YEAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 7.92%
</TABLE>
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 September 30, 1999 was 18.16%.
During the period shown in the bar chart, the highest return for a
calendar quarter was 17.72% (quarter ended December 31, 1998) and
the lowest return for a calendar quarter was -11.38% (quarter ended
September 30, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)
- ---------------------------------------------------------------------------------
LIFE OF PORTFOLIO
PAST 1 YEAR (SINCE 11/25/97)
<S> <C> <C>
- ---------------------------------------------------------------------------------
Class A 3.12% 2.28%
- ---------------------------------------------------------------------------------
Class B 2.92% 2.99%
- ---------------------------------------------------------------------------------
Class C 6.92% 6.61%
- ---------------------------------------------------------------------------------
Class D 9.04% 7.62%
- ---------------------------------------------------------------------------------
Morgan Stanley Capital International EAFE
Index(1) 20.33% 20.62%
- ---------------------------------------------------------------------------------
Lipper International Funds Index(2) 12.66% 13.09%
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
1 The Morgan Stanley Capital International Europe, Australia,
Far East Index measures the performance for a diverse range
of global stock markets within Europe, Australia, and the
Far East. The Index does not include any expenses, fees,
charges or reinvestment of dividends. The Index is unmanaged
and should not be considered an investment.
2 The Lipper International Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on
net assets) in the Lipper International Funds objective. The
Index, which is adjusted for capital gains distributions and
income dividends is unmanaged and should not be considered
an investment. There are currently 30 funds represented in
this Index.
</TABLE>
28
<PAGE>
[Sidebar]
SHAREHOLDER FEES
THESE FEES ARE PAID DIRECTLY FROM YOUR INVESTMENT.
ANNUAL PORTFOLIO
OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE PORTFOLIO'S ASSETS AND
ARE BASED ON EXPENSES PAID
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999.
[End Sidebar]
[ICON] FEES AND EXPENSES
- --------------------------------------------------------------------------------
The table below briefly describes the fees and expenses that you may
pay if you buy and hold shares of the International Portfolio. The
Portfolio offers four Classes of shares: Classes A, B, C and D. Each
Class has a different combination of fees, expenses and other
features. The Portfolio does not charge account or exchange fees. See
the "Share Class Arrangements" section for further fee and expense
information.
<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 PORTFOLIO OPERATING EXPENSES
- ---------------------------------------------------------------------------------------------------------
Management fee None None None None
- ---------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.24% 1.00% 0.77% None
- ---------------------------------------------------------------------------------------------------------
Other expenses(5) 1.10% 1.10% 1.10% 1.10%
- ---------------------------------------------------------------------------------------------------------
Total annual Portfolio operating expenses(5) 1.34% 2.10% 1.87% 1.10%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
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.
5 The Investment Manager has agreed to assume all operating
expenses (except for brokerage and 12b-1 fees) for the
Portfolio until such time as the Portfolio has $50 million
of net assets or until November 30, 2000, whichever occurs
first. The Investment Manager had agreed to assume all
operating expenses (except for brokerage and 12b-1 fees) for
each Portfolio until such time as the respective Portfolio
had $50 million of net assets or until six months from
commencement of the Fund's operations, whichever occurred
first and has agreed to extend such expense assumption
through November 30, 2000. As a result of such assumption of
other expenses, for the fiscal period ended September 30,
1999, the actual "Other Expenses" amounted to 0.00% for each
Class of the International Portfolio and "Total Fund
Operating Expenses" amounted to 0.24%, 1.00%, 0.77% and
0.00% for Class A, B, C and D respectively of the
International Portfolio.
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.
This example shows what expenses you could pay over time. The example
assumes that you invest $10,000 in the Portfolio, your investment has
a 5% return each year, and the Portfolio's operating expenses remain
the same. Although your actual costs may be
29
<PAGE>
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 $654 $927 $1,221 $2,053 $654 $927 $1,221 $2,053
------------------------------------------------------------------ -----------------------------------------
CLASS B $713 $958 $1,329 $2,431 $213 $658 $1,129 $2,431
------------------------------------------------------------------ -----------------------------------------
CLASS C $290 $588 $1,011 $2,190 $190 $588 $1,011 $2,190
------------------------------------------------------------------ -----------------------------------------
CLASS D $112 $350 $ 606 $1,340 $112 $350 $ 606 $1,340
------------------------------------------------------------------ -----------------------------------------
</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.
UNDERLYING FUND EXPENSES
The Portfolio will not pay any sales load or 12b-1 fee in connection
with its investments in shares of Underlying Funds. However, the
Portfolio will indirectly bear its pro rata share of the expenses
incurred by the Underlying Funds that are borne by Class D
shareholders of the Underlying Funds. These expenses are set forth in
the table below (as of each Underlying Fund's most recent fiscal year
end).
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL
FEES EXPENSES EXPENSES
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------
European Growth Fund 0.91% 0.23% 1.14%
------------------------------------------------------------------------------------------------
International SmallCap Fund 1.15% 0.97% 2.12%
------------------------------------------------------------------------------------------------
Japan Fund 0.95% 0.63% 1.58%
------------------------------------------------------------------------------------------------
Latin America Growth Fund 1.25% 0.73% 1.98%
------------------------------------------------------------------------------------------------
Pacific Growth Fund 0.95% 0.65% 1.60%
------------------------------------------------------------------------------------------------
</TABLE>
[ICON] ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the
principal risks of investing in the Underlying Funds described above.
FIXED-INCOME SECURITIES. Certain Underlying Funds invest in
fixed-income securities (which may include zero coupon 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.
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
30
<PAGE>
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. (Zero coupon
securities are typically subject to greater price fluctuations than
comparable securities that pay interest.)
CONVERTIBLE SECURITIES. Certain Underlying Funds may invest in
convertible securities, which are securities that generally pay
dividends or interest and may be converted into common stock. These
securities may carry 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 be likely to 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.
With respect to certain Underlying Funds, there are no minimum rating
or quality requirements as to their convertible securities
investments and, thus, all or some of such securities may be rated
below investment grade. These "junk bonds" have speculative risk
characteristics which are described below.
JUNK BONDS. Certain Underlying Funds may invest in junk bonds, i.e.,
fixed-income securities rated lower than investment grade or, if not
rated, determined to be of comparable quality. Junk bonds are subject
to greater risk of loss of income and principal than higher rated
securities. The prices of junk bonds are likely to be more sensitive
to adverse economic changes or individual corporate developments than
higher rated securities. 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, to meet their projected business
goals or to obtain additional financing. In the event of a default,
an Underlying Fund may incur additional expenses to seek recovery.
The secondary market for junk bonds may be less liquid than the
markets for higher quality securities and, as such, may have an
adverse effect on the market prices of certain securities. The
illiquidity of the market may also adversely affect the ability of an
Underlying Fund's directors/trustees to arrive at a fair value for
certain junk bonds at certain times and could make it difficult for
the Underlying Fund to sell certain securities. In addition, periods
of economic uncertainty and change probably would result in an
increased volatility of market prices of high yield securities and a
corresponding volatility in an Underlying Fund's net asset value.
LATIN AMERICAN SOVEREIGN DEBT SECURITIES. Latin American Growth
Fund's investments in Latin American sovereign debt are subject to
unique credit risks. Certain Latin American countries are among the
largest debtors to commercial banks and foreign governments. At
times, certain Latin American countries have declared a moratorium on
the payment of principal and/or interest on external debt. The
governmental entities that control the repayment also may not be
willing or able to repay the principal and/or interest on the debt
when it becomes due. Latin American governments may default on their
sovereign debt, which may require holders of that
31
<PAGE>
debt to participate in debt rescheduling or additional lending to
defaulting governments. There is no bankruptcy proceeding by which
defaulted sovereign debt may be collected. These risks could have a
severely negative impact on the fund's sovereign debt holdings and
cause the value of the fund's shares to decline drastically.
INVESTMENT COMPANIES. Any Underlying Fund investment in an investment
company is subject to the underlying risk of that investment
company's portfolio securities. For example, if the investment
company held common stocks, the Underlying Fund also would be exposed
to the risk of investing in common stocks. In addition to the
Underlying Fund's fees and expenses, the Underlying Fund would bear
its share of the investment company's fees and expenses.
OPTIONS AND FUTURES. If an Underlying Fund invests in options and/or
futures (including options on currencies), its participation in these
markets would subject the Underlying Fund's portfolio to certain
risks. The Investment Manager's and/or Sub-Advisor's predictions of
movements in the direction of the stock, currency or interest rate
markets may be inaccurate, and the adverse consequences to the
Underlying Fund (e.g., a reduction in the Underlying Fund's net asset
value or a reduction in the amount of income available for
distribution) may leave the Underlying Fund in a worse position than
if these strategies were not used. Other risks inherent in the use of
options and futures include, for example, the possible imperfect
correlation between the price of options and futures contracts and
movements in the prices of the securities or currencies being hedged,
and the possible absence of a liquid secondary market for any
particular instrument. Certain options may be over-the-counter
options, which are options negotiated with dealers; there is no
secondary market for these investments.
FORWARD CURRENCY CONTRACTS. An Underlying Fund's participation in
forward currency contracts also involves risks. If the Investment
Manager and/or Sub-Advisor employ a strategy that does not correlate
well with the Underlying Fund's investments or the currencies in
which the investments are denominated, currency contracts could
result in a loss. The contracts also may increase the Underlying
Fund's volatility and may involve a significant risk.
YEAR 2000. The Portfolio could be adversely affected if the computer
systems necessary for the efficient operation of the Investment
Manager, the Portfolio's other service providers and the Underlying
Funds (and their respective portfolio securities) in which the
Portfolio invests do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related
computer problems could have a negative effect on the Portfolio and
an Underlying Fund, the Investment Manager and its affiliates are
working hard to avoid any problems and to obtain assurances from
their service providers that they are taking similar steps.
32
<PAGE>
[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 $140 BILLION IN ASSETS UNDER
MANAGEMENT AS OF OCTOBER 31, 1999.
[End Sidebar]
In addition, it is possible that the markets for securities in which
the Underlying Funds and/or Portfolio invest may be detrimentally
affected by computer failures throughout the financial services
industry beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity issues.
Corporate and governmental data processing errors also may result in
production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by
remediation costs, which may be substantial and may be reported
inconsistently in U.S. and foreign financial statements. Accordingly,
the Portfolio's investments may be adversely affected.
[ICON] FUND MANAGEMENT
- --------------------------------------------------------------------------------
Each Portfolio 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 also serves as the Investment Manager to each
of the Underlying Funds described above. In addition, with respect to
certain Underlying Funds, the Investment Manager has retained a
Sub-Advisor to invest Underlying Fund assets. Morgan Stanley Dean
Witter Investment Management Inc. ("MSDW Investment Management")
serves as Sub-Advisor to the following Underlying Funds: Growth Fund,
European Growth Fund, International SmallCap Fund, Japan Fund and
Pacific Growth Fund. TCW Funds Management, Inc. ("TCW") serves as
Sub-Advisor to Latin American Growth Fund and Mid-Cap Equity Trust.
Miller Anderson & Sherrerd, LLP ("MAS") serves as Sub-Advisor to
Value Fund. 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.
MSDW Investment Management, together with its institutional
investment management affiliates, manages more than $137 billion, as
of July 31, 1999, primarily for employee benefit plans, investment
companies, endowments, foundations and wealthy individuals. MSDW
Investment Management also is a subsidiary of Morgan Stanley Dean
Witter & Co. Its main business office is located at 1221 Avenue of
the Americas, New York, NY 10020.
TCW is a wholly-owned subsidiary of TCW Group, Inc., whose direct and
indirect subsidiaries provide a variety of trust, investment
management and investment advisory services. TCW's main business
office is located at 865 South Figueroa Street, Suite 1800,
33
<PAGE>
Los Angeles, CA 90017. As of September 30, 1999, TCW Funds
Management, Inc. and its affiliates had approximately $57 billion
under management or committed to management.
MAS manages assets of approximately $62.4 billion, as of March 31,
1999, for investment companies, employee benefit plans, endowments,
foundations and other institutional investors. MAS is an indirect
subsidiary of Morgan Stanley Dean Witter & Co. Its main business
office is located at One Tower Bridge, West Conshohocken, PA 19428.
Joseph McAlinden, Executive Vice President and Chief Investment
Officer (since April 1996) of the Investment Manager, has been the
primary portfolio manager of the Domestic Portfolio and the
International Portfolio since the Fund's inception in November 1997.
Mr. McAlinden was formerly a Senior Vice President with the
Investment Manager (June 1995 - April 1996) and prior thereto was a
Managing Director of Dillon Read.
The Investment Manager does not receive a management fee from either
Portfolio or the Fund for the services and facilities furnished to
the Portfolio or the Fund. However, each Portfolio, through its
investments in the Underlying Funds, will pay its pro rata share of
the management fees and certain other expenses that are borne by
Class D shareholders of the Underlying Funds. Each Underlying Fund
pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the
Underlying Fund, and for expenses assumed by the Investment Manager.
The management fees paid by each Underlying Fund for its most recent
fiscal year are set forth in the "Fees and Expenses" section for each
of the Domestic Portfolio and the International Portfolio.
34
<PAGE>
[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.msdw.com/individual/funds
[End Sidebar]
SHAREHOLDER INFORMATION
[ICON] PRICING PORTFOLIO SHARES
- --------------------------------------------------------------------------------
The price of each Portfolio's shares (excluding sales charges),
called "net asset value," is based on the value of the Portfolio's
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 each Portfolio 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 assets of each Portfolio consist primarily of the Underlying
Funds, which are valued at their respective net asset values. The net
asset value of each Underlying Fund's 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 Underlying Fund's Board of Trustees. In
these cases, an Underlying Fund's net asset value will reflect
certain portfolio securities' fair value rather than their market
price. In addition, if an Underlying Fund holds securities that are
primarily listed on foreign exchanges, the value of the Underlying
Fund's securities may change on days when you will not be able to
purchase or sell your shares. The Portfolio's other securities are
valued in the same manner as the Underlying Funds' securities.
A Portfolio's short-term 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.
[ICON] HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may open a new account to buy Portfolio shares or buy additional
Portfolio 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 Portfolio. You may also purchase
shares directly by calling the Fund's transfer agent and requesting
an application.
Because every investor has different immediate financial needs and
long-term investment goals, each Portfolio 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
35
<PAGE>
[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]
help you decide which Class may be most appropriate for you. When
purchasing Portfolio shares, you must specify which Class of shares
you wish to purchase.
When you buy Portfolio 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 Portfolio shares.
<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>
<TABLE>
<S> <C>
* Provided your schedule of investments totals $1,000 in
twelve months.
</TABLE>
There is no minimum investment amount if you purchase Portfolio
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, or (3) 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 Portfolio shares for an existing account by
contacting your Morgan Stanley Dean Witter Financial Advisor, you may
send a check directly to a Portfolio. To buy additional shares in
this manner:
- 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 name of the Portfolio, 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).
- Make out a check for the total amount payable to: Morgan Stanley
Dean Witter Fund of Funds--Domestic Portfolio or Morgan Stanley
Dean Witter Fund of Funds--International Portfolio.
36
<PAGE>
- Mail the letter and check to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 1040, Jersey City, NJ 07303.
[ICON] HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of any Class of a
Portfolio 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. 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 or
Money Market Fund. If a Morgan Stanley Dean Witter Fund is not
listed, consult the inside back cover of that Fund's PROSPECTUS for
its designation. For purposes of exchanges, shares of FSC Funds
(subject to a front-end sales charge) are treated as Class A shares
of a Multi-Class Fund.
Exchanges may be made after shares of a Portfolio 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, a Portfolio'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.
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
37
<PAGE>
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 Portfolio 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 a
Portfolio for shares of another Morgan Stanley Dean Witter Fund there
are important tax considerations. For tax purposes, the exchange out
of a Portfolio is considered a sale of Portfolio 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 exchanges 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 previous exchanges. The
Fund will notify you in advance of limiting your exchange privileges.
CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements"
section of this PROSPECTUS for a 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.
38
<PAGE>
[ICON] HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell some or all of your Portfolio 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 share 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
Financial Advisor Witter Financial Advisor or other authorized financial
representative.
------------------------------------------------------------
[ICON] Payment will be sent to the address to which the account is
registered or deposited in your brokerage account.
------------------------------------------------------------------------------------
<CAPTION>
OPTIONS PROCEDURES
------------------------------------------------------------------------------------
<S> <C>
By Letter You can also sell your shares by writing a "letter of
instruction" that includes:
[ICON] - your account number;
- the dollar amount or the number of shares you wish to
sell;
- the name of the Portfolio;
- the Class of shares you wish to sell; and
- 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
Withdrawal Plan Family of Funds has a total market value of at least
[ICON] $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, 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>
39
<PAGE>
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.
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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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.
[ICON] DISTRIBUTIONS
- --------------------------------------------------------------------------------
Each Portfolio passes substantially all of its earnings from income
and capital gains along to its investors as "distributions." Each
Portfolio earns income from its Underlying Fund investments and
interest from fixed-income investments. These amounts are passed
along to Portfolio shareholders as "income dividend distributions."
Each Portfolio 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."
40
<PAGE>
[Sidebar]
TARGETED DIVIDENDS-SM-
YOU MAY SELECT TO HAVE YOUR PORTFOLIO DISTRIBUTIONS AUTOMATICALLY INVESTED IN
OTHER CLASSES OF PORTFOLIO 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]
Each Portfolio declares income dividends separately for each Class.
Distributions paid on Class A and Class D shares will usually 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. Each Portfolio, however, may retain
and reinvest any long-term capital gains. Each Portfolio 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. 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.
[ICON] TAX CONSEQUENCES
- --------------------------------------------------------------------------------
As with any investment, you should consider how your Portfolio
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 a
Portfolio in the Fund.
Unless your investment in a Portfolio 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:
- The Portfolio makes distributions; and
- You sell Portfolio 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 Portfolio 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 Portfolio.
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 full information on your dividends and capital
gains for tax purposes.
TAXES ON SALES. Your sale of Portfolio 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
41
<PAGE>
local income tax. Your exchange of Portfolio 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 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.
[ICON] SHARE CLASS ARRANGEMENTS
- --------------------------------------------------------------------------------
Each Portfolio 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 maximum annual 12b-1
fee applicable to each Class of a Portfolio:
<TABLE>
<CAPTION>
CLASS SALES CHARGE MAXIMUM 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 1.00%
---------------------------------------------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.00%
---------------------------------------------------------------------------------------------------------------
D None None
---------------------------------------------------------------------------------------------------------------
</TABLE>
CLASS A SHARES Class A shares of each Portfolio 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
42
<PAGE>
[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]
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:
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
-------------------------------------------------
AMOUNT OF SINGLE PERCENTAGE OF APPROXIMATE PERCENTAGE OF
TRANSACTION PUBLIC 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:
- - A single account (including an individual, trust or fiduciary account).
- Family member accounts (limited to husband, wife and children under
the age of 21).
- Pension, profit sharing or other employee benefit plans of
companies and their affiliates.
- Tax-exempt organizations.
- Groups organized for a purpose other than to buy mutual fund
shares.
COMBINED PURCHASE PRIVILEGE. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares of a
Portfolio 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
Portfolio 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.
43
<PAGE>
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 a Portfolio), at
the time a purchase order is placed, that the purchase qualifies for
the reduced 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 a Portfolio 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 CDSC upon sale) if your account qualifies
under one of the following categories:
- A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.
- 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.
- 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 Dean Witter Reynolds'
Retirement Plan Services serves as recordkeeper under a written
Recordkeeping Services Agreement ("MSDW Eligible Plans") which have
at least 200 eligible employees.
- 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.
44
<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]
- 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 Portfolio 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 Portfolio shares, and (2) the sale proceeds were maintained in
the interim in cash or a money market fund.
- 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.
- 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 of each Portfolio 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.
<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:
- 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
45
<PAGE>
(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.
- 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 include a direct transfer of IRA,
403(b) Custodial Account or retirement plan assets to a successor
custodian or trustee).
- Sales of shares held for you as a participant in an MSDW Eligible
Plan.
- 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 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.
- 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 12b-1 fee
of 1.0% of the average daily net assets of Class B shares.
CONVERSION FEATURE. After ten (10) years, Class B shares will convert
automatically to Class A shares of a Portfolio 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
46
<PAGE>
distributions will convert to Class A shares on the same basis.
(Class B shares acquired in exchange for shares of another Morgan
Stanley Dean Witter Fund originally purchased 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 Portfolio shares that are subject to a CDSC. When
determining the length of time 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 a Portfolio 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 Portfolio 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 of each Portfolio 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.
47
<PAGE>
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 of each Portfolio 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:
- 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.
- 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.
- 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.
- Certain unit investment trusts sponsored by Dean Witter Reynolds.
- Certain other open-end investment companies whose shares are
distributed by the Fund's distributor.
- 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 certain 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 a Portfolio 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.
48
<PAGE>
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 of each Portfolio. The Plan allows each Portfolio to pay
distribution fees for the sale and distribution of these shares. It
also allows each Portfolio to pay for services to shareholders of
Class A, Class B and Class C shares. Because these fees are paid out of
each Portfolio'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.
49
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Portfolio's financial performance over the life of each Portfolio. Certain
information reflects financial results for a single Portfolio share. The total
returns in the table represent the rate an investor would have earned or lost on
an investment in a Portfolio (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
DOMESTIC PORTFOLIO
---------------------------------------
FOR THE PERIOD
FOR THE YEAR NOVEMBER 25, 1997*
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES++
- ------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.72 $10.00
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.46 0.21
Net realized and unrealized gain (loss) 1.93 (0.44)
------ ------
Total income (loss) from investment operations 2.39 (0.23)
- ------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.36) (0.05)
Net realized gain (0.21) --
------ ------
Total dividends and distributions (0.57) (0.05)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.54 $ 9.72
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 25.00% (2.33)%(1)
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(3)(4)(5)
- ------------------------------------------------------------------------------------------------------
Expenses 0.23% 0.22%(2)
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.92% 2.21%(2)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $1,097 $1,359
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 295% 227%(1)
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period November 25, 1997 (commencement of operations) through September
30, 1998.
++ The per share amounts were computed using an average number of shares outstanding
during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net asset
value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by the
Investment Manager, the annualized expense and net investment income ratios
would have been 0.67% and 3.48%, respectively, for the year ended September 30,
1999 and 1.15% and 1.28%, respectively, for the period ended September 30, 1998,
for Class A shares; 1.44% and 2.71%, respectively, for the year ended
September 30, 1999 and 1.90% and 0.53%, respectively, for the period ended
September 30, 1998, for Class B shares; 0.98% and 3.17%, respectively, for the
year ended September 30, 1999 and 1.90% and 0.53%, respectively, for the period
ended September 30, 1998, for Class C shares; and 0.44% and 3.71%,
respectively, for the year ended September 30, 1999 and 0.90% and 1.53%,
respectively, for the period ended September 30, 1998, for Class D shares.
(4) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC PORTFOLIO
-----------------------------------------
FOR THE PERIOD
FOR THE YEAR NOVEMBER 25, 1997*
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
CLASS B SHARES++
- --------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.67 $ 10.00
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.35 0.14
Net realized and unrealized gain (loss) 1.94 (0.42)
------- -------
Total income (loss) from investment operations 2.29 (0.28)
- --------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.29) (0.05)
Net realized gain (0.21) --
------- -------
Total dividends and distributions (0.50) (0.05)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.46 $ 9.67
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 23.96% (2.83)%(1)
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(3)(4)(5)
- --------------------------------------------------------------------------------------------------------
Expenses 1.00% 0.92%(2)
- --------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.15% 1.51%(2)
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------
Net assets, end of period, in millions $26,007 $24,338
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate $ 295 227%(1)
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period November 25, 1997 (commencement of operations) through September
30, 1998.
++ The per share amounts were computed using an average number of shares outstanding
during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net asset
value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by the
Investment Manager, the annualized expense and net investment income ratios
would have been 0.67% and 3.48%, respectively, for the year ended September 30,
1999 and 1.15% and 1.28%, respectively, for the period ended September 30, 1998,
for Class A shares; 1.44% and 2.71%, respectively, for the year ended
September 30, 1999 and 1.90% and 0.53%, respectively, for the period ended
September 30, 1998, for Class B shares; 0.98% and 3.17%, respectively, for the
year ended September 30, 1999 and 1.90% and 0.53%, respectively, for the period
ended September 30, 1998, for Class C shares; and 0.44% and 3.71%,
respectively, for the year ended September 30, 1999 and 0.90% and 1.53%,
respectively, for the period ended September 30, 1998, for Class D shares.
(4) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC PORTFOLIO
---------------------------------------
FOR THE PERIOD
FOR THE YEAR NOVEMBER 25, 1997*
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES++
- ------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.67 $10.00
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.40 0.13
Net realized and unrealized gain (loss) 1.94 (0.41)
------ ------
Total income (loss) from investment operations 2.34 (0.28)
- ------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.28) (0.05)
Net realized gain (0.21) --
------ ------
Total dividends and distributions (0.49) (0.05)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.52 $ 9.67
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 24.55% (2.83)%(1)
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(3)(4)(5)
- ------------------------------------------------------------------------------------------------------
Expenses 0.54% 0.92%(2)
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.61% 1.51%(2)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $1,364 $1,702
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 295% 227%(1)
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period November 25, 1997 (commencement of operations) through September
30, 1998.
++ The per share amounts were computed using an average number of shares outstanding
during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net asset
value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by the
Investment Manager, the annualized expense and net investment income ratios
would have been 0.67% and 3.48%, respectively, for the year ended September 30,
1999 and 1.15% and 1.28%, respectively, for the period ended September 30, 1998,
for Class A shares; 1.44% and 2.71%, respectively, for the year ended
September 30, 1999 and 1.90% and 0.53%, respectively, for the period ended
September 30, 1998, for Class B shares; 0.98% and 3.17%, respectively, for the
year ended September 30, 1999 and 1.90% and 0.53%, respectively, for the period
ended September 30, 1998, for Class C shares; and 0.44% and 3.71%,
respectively, for the year ended September 30, 1999 and 0.90% and 1.53%,
respectively, for the period ended September 30, 1998, for Class D shares.
(4) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC PORTFOLIO
---------------------------------------
FOR THE PERIOD
FOR THE YEAR NOVEMBER 25, 1997*
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
CLASS D SHARES++
- ------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.74 $10.00
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.46 0.22
Net realized and unrealized gain (loss) 1.96 (0.43)
------ ------
Total income (loss) from investment operations 2.42 (0.21)
- ------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.39) (0.05)
Net realized gain (0.21) --
------ ------
Total dividends and distributions (0.60) (0.05)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.56 $ 9.74
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 25.28% (2.13)%(1)
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(3)(4)(5)
- ------------------------------------------------------------------------------------------------------
Expenses -- --
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.15% 2.43%(2)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ 15 $ 12
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 295% 227%(1)
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period November 25, 1997 (commencement of operations) through September
30, 1998.
++ The per share amounts were computed using an average number of shares outstanding
during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net asset
value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by the
Investment Manager, the annualized expense and net investment income ratios
would have been 0.67% and 3.48%, respectively, for the year ended September 30,
1999 and 1.15% and 1.28%, respectively, for the period ended September 30, 1998,
for Class A shares; 1.44% and 2.71%, respectively, for the year ended
September 30, 1999 and 1.90% and 0.53%, respectively, for the period ended
September 30, 1998, for Class B shares; 0.98% and 3.17%, respectively, for the
year ended September 30, 1999 and 1.90% and 0.53%, respectively, for the period
ended September 30, 1998, for Class C shares; and 0.44% and 3.71%,
respectively, for the year ended September 30, 1999 and 0.90% and 1.53%,
respectively, for the period ended September 30, 1998, for Class D shares.
(4) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
53
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Portfolio's financial performance over the life of each Portfolio. Certain
information reflects financial results for a single Portfolio share. The total
returns in the table represent the rate an investor would have earned or lost on
an investment in a Portfolio (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
-----------------------------------------
FOR THE PERIOD
FOR THE YEAR NOVEMBER 25, 1997*
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
CLASS A SHARES++
- --------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.08 $10.00
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.10 0.05
Net realized and unrealized gain (loss) 3.56 (0.88)
------ ------
Total income (loss) from investment operations 3.66 (0.83)
- --------------------------------------------------------------------------------------------------------
Less dividends from net investment income -- (0.09)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.74 $ 9.08
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 40.31% (8.36)%(1)
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(3)(4)(5)
- --------------------------------------------------------------------------------------------------------
Expenses 0.24% 0.25%(2)
- --------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.91% 1.01%(2)
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $1,074 $596
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate 154% 135%(1)
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period November 25, 1997 (commencement of operations) through September
30, 1998.
++ The per share amounts were computed using an average number of shares outstanding
during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net asset
value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by the
Investment Manager, the annualized expense and net investment income (loss)
ratios would have been 1.34% and (0.19)%, respectively, for the year ended
September 30, 1999 and 6.16% and (4.90)%, respectively, for the period ended
September 30, 1998, for Class A shares; 2.10% and (0.95)%, respectively, for the
year ended September 30, 1999 and 6.91% and (5.65)%, respectively, for the
period ended September 30, 1998, for Class B shares; 1.87% and (0.72)%,
respectively, for the year ended September 30, 1999 and 6.91% and (5.65)%,
respectively, for the period ended September 30, 1998, for Class C shares; and
1.10% and 0.05%, respectively, for the year ended September 30, 1999 and 5.91%
and (4.65)%, respectively, for the period ended September 30, 1998, for Class D
shares.
(4) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
-----------------------------------------
FOR THE PERIOD
FOR THE YEAR NOVEMBER 25, 1997*
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
CLASS B SHARES++
- --------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.03 $10.00
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.03
Net realized and unrealized gain (loss) 3.51 (0.91)
------ ------
Total income (loss) from investment operations 3.53 (0.88)
- --------------------------------------------------------------------------------------------------------
Less dividends from net investment income -- (0.09)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.56 $ 9.03
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 39.09% (8.87)%(1)
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(3)(4)(5)
- --------------------------------------------------------------------------------------------------------
Expenses 1.00% 0.94%(2)
- --------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.15% 0.32%(2)
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------
Net assets, end of period, in millions $6,615 $3,241
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate 154% 135%(1)
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period November 25, 1997 (commencement of operations) through September
30, 1998.
++ The per share amounts were computed using an average number of shares outstanding
during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net asset
value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by the
Investment Manager, the annualized expense and net investment income (loss)
ratios would have been 1.34% and (0.19)%, respectively, for the year ended
September 30, 1999 and 6.16% and (4.90)%, respectively, for the period ended
September 30, 1998, for Class A shares; 2.10% and (0.95)%, respectively, for the
year ended September 30, 1999 and 6.91% and (5.65)%, respectively, for the
period ended September 30, 1998, for Class B shares; 1.87% and (0.72)%,
respectively, for the year ended September 30, 1999 and 6.91% and (5.65)%,
respectively, for the period ended September 30, 1998, for Class C shares; and
1.10% and 0.05%, respectively, for the year ended September 30, 1999 and 5.91%
and (4.65)%, respectively, for the period ended September 30, 1998, for Class D
shares.
(4) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
---------------------------------------
FOR THE PERIOD
FOR THE YEAR NOVEMBER 25, 1997*
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES++
- ------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.03 $10.00
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.07 0.04
Net realized and unrealized gain (loss) 3.51 (0.92)
------ ------
Total income (loss) from investment operations 3.58 (0.88)
- ------------------------------------------------------------------------------------------------------
Less dividends from net investment income -- (0.09)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.61 $ 9.03
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 39.65% (8.87)%(1)
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(3)(4)(5)
- ------------------------------------------------------------------------------------------------------
Expenses 0.77% 0.92%(2)
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.38% 0.34%(2)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $442 $105
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 154% 135%(1)
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period November 25, 1997 (commencement of operations) through September
30, 1998.
++ The per share amounts were computed using an average number of shares outstanding
during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net asset
value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by the
Investment Manager, the annualized expense and net investment income (loss)
ratios would have been 1.34% and (0.19)%, respectively, for the year ended
September 30, 1999 and 6.16% and (4.90)%, respectively, for the period ended
September 30, 1998, for Class A shares; 2.10% and (0.95)%, respectively, for the
year ended September 30, 1999 and 6.91% and (5.65)%, respectively, for the
period ended September 30, 1998, for Class B shares; 1.87% and (0.72)%,
respectively, for the year ended September 30, 1999 and 6.91% and (5.65)%,
respectively, for the period ended September 30, 1998, for Class C shares; and
1.10% and 0.05%, respectively, for the year ended September 30, 1999 and 5.91%
and (4.65)%, respectively, for the period ended September 30, 1998, for Class D
shares.
(4) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
---------------------------------------
FOR THE PERIOD
FOR THE YEAR NOVEMBER 25, 1997*
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
CLASS D SHARES++
- ------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.09 $10.00
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.23 0.14
Net realized and unrealized gain (loss) 3.46 (0.96)
------ ------
Total income (loss) from investment operations 3.69 (0.82)
- ------------------------------------------------------------------------------------------------------
Less dividends from net investment income -- (0.09)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.78 $ 9.09
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 40.59% (8.26)%(1)
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(3)(4)(5)
- ------------------------------------------------------------------------------------------------------
Expenses -- --
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.15% 1.26%(2)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ 564 $ 11
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 154% 135%(1)
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period November 25, 1997 (commencement of operations) through September
30, 1998.
++ The per share amounts were computed using an average number of shares outstanding
during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net asset
value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by the
Investment Manager, the annualized expense and net investment income (loss)
ratios would have been 1.34% and (0.19)%, respectively, for the year ended
September 30, 1999 and 6.16% and (4.90)%, respectively, for the period ended
September 30, 1998, for Class A shares; 2.10% and (0.95)%, respectively, for the
year ended September 30, 1999 and 6.91% and (5.65)%, respectively, for the
period ended September 30, 1998, for Class B shares; 1.87% and (0.72)%,
respectively, for the year ended September 30, 1999 and 6.91% and (5.65)%,
respectively, for the period ended September 30, 1998, for Class C shares; and
1.10% and 0.05%, respectively, for the year ended September 30, 1999 and 5.91%
and (4.65)%, respectively, for the period ended September 30, 1998, for Class D
shares.
(4) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
57
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60
<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!
- --------------------------------------------------------------------------------
GROWTH FUNDS
- ---------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
Next Generation Trust
Small Cap Growth Fund
Special Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas" Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
Strategic Fund
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUNDS
- ---------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Equity Fund
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Market Index Fund
Total Return Trust
Value Fund
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
- --------------------------------------------------------------------------------
INCOME FUNDS
- ---------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust (FSC)
Limited Term Municipal Trust (NL)
Multi-State Municipal Series Trust (FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
- ---------------------------------
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund (MM)
U.S. Government Money Market Trust (MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust (MM)
N.Y. Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)
There may be Funds created after this PROSPECTUS was published. Please consult
the inside back cover of a new Fund's prospectus for its designation, 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 - NOVEMBER 29, 1999
Additional information about each Portfolio'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 each Portfolio's performance during its
last fiscal year. The Fund's STATEMENT OF ADDITIONAL INFORMATION also provides
additional information about each Portfolio and 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.msdw.com/individual/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
email address: [email protected] or by writing the Public Reference Section of
the SEC, Washington, DC 20549-0102.
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-8283)
Morgan Stanley Dean Witter
FUND OF FUNDS
DOMESTIC PORTFOLIO AND
INTERNATIONAL PORTFOLIO
[BACK COVER PHOTO]
A MUTUAL FUND THAT CONSISTS OF
TWO SEPARATE PORTFOLIOS
THE DOMESTIC PORTFOLIO SEEKS TO
MAXIMIZE TOTAL INVESTMENT RETURN
THE INTERNATIONAL PORTFOLIO SEEKS
LONG-TERM CAPITAL APPRECIATION
