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PROSPECTUS - NOVEMBER 30, 2000
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............ 14
Past Performance........... 19
Fees and Expenses.......... 20
Additional Risk
Information................ 23
The International
Portfolio.................... 25
Investment Objective....... 25
Principal Investment
Strategies................. 25
Principal Risks............ 28
Past Performance........... 32
Fees and Expenses.......... 33
Additional Risk
Information................ 34
Fund Management.............. 37
Shareholder Information Pricing Portfolio Shares..... 39
How to Buy Shares............ 39
How to Exchange Shares....... 41
How to Sell Shares........... 43
Distributions................ 44
Tax Consequences............. 45
Share Class Arrangements..... 46
Financial Highlights ............................. 54
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 this 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 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 net assets in Underlying Funds which
invest primarily in equity securities and between 0%-50% of its net
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 assets in
common stocks and other equity securities (which
may include convertible securities) of U.S. or
foreign companies that 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, 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 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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CAPITAL GROWTH SECURITIES
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INVESTMENT OBJECTIVE Long-term capital growth.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its 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 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 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
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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 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 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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EQUITY FUND
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INVESTMENT OBJECTIVE Total return.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its assets in
common stock and other equity securities,
including depository receipts. The fund's
"Sub-Advisor," Miller Anderson & Sherrerd, LLP,
invests the fund's assets
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by pursuing an investing strategy that combines
both value and growth styles. The Sub-Advisor's
investment process is designed to identify growing
companies whose stock in the Sub-Advisor's opinion
is attractively valued and has low but rising
expectations, and to diversify holdings across
market sectors. Individual securities are selected
based on, among other things, quantitative screens
and fundamental research by in-house industry
analysts. In addition, the fund may invest up to
25% of its assets in 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 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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GROWTH FUND
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INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its 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 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 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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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 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
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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 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 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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MARKET LEADER TRUST
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INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its 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
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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 EQUITY TRUST
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INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its 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 Investment Management Company, 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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NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
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INVESTMENT OBJECTIVE Capital growth.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its 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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NEXT GENERATION TRUST
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INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its assets in
common stocks of companies of any asset size which
manufacture products or provide services, or which
develop or assist in the development of products
and
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services, which, in the opinion of the Investment
Manager, may be used by, or appeal to, children,
teenagers and/or young adults. In addition, up to
35% of the fund's net assets may be invested in
foreign securities.
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REAL ESTATE FUND
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INVESTMENT OBJECTIVE High current income and long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its assets in
income producing common stocks and other equity
securities (which may include convertible
securities) of companies that are principally
engaged in the U.S. real estate industry. In
addition, the fund may invest up to 25% of its
assets in foreign 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 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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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 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,
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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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S&P 500 SELECT FUND
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INVESTMENT OBJECTIVE Total return (before expenses) that exceeds 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 assets in
common stocks of selected companies included in
the Standard & Poor's-Registered Trademark- 500
Composite Stock Price Index. In addition to common
stocks, the fund may invest in stock index futures
on the S&P 500 and Standard & Poor's Depository
Receipts ("SPDRs").
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SMALL CAP GROWTH FUND
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INVESTMENT OBJECTIVE Capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its assets in a
diversified portfolio of common stocks (including
depository receipts) and securities convertible
into common stocks of small companies with market
capitalizations, at the time of purchase, within
the capitalization range of securities comprising
the Standard & Poor's Small Cap 600 Index
(currently approximately $37 million to
$6 billion as of April 19, 2000). The fund's
"Sub-Advisor," TCW Investment Management Company,
invests in companies that it believes exhibit
superior earnings growth potential and attractive
stock market valuations. In addition, the fund
also may invest up to 35% of its net assets in
equity securities of medium-sized or large
companies, and up to 25% of its net assets in
foreign equity securities. The fund also may
invest in options and futures.
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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 assets in
common stocks of small capitalization companies
(generally between $100 million and $1.5 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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TOTAL MARKET INDEX FUND
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INVESTMENT OBJECTIVE Investment results that, before expenses,
correspond to the total return of the U.S. stock
market as measured by the Wilshire 5000 Total
Market Index.
PRINCIPAL INVESTMENT STRATEGY The fund will normally invest at least 80% of its
assets in stocks included in the Wilshire 5000
Total Market Index. Statistical sampling is used
in an attempt to recreate the Index in terms of
industry, size, dividend yield and other
characteristics. In addition, the fund may invest
in options and futures contracts and may make
temporary investments in money market instruments
to manage cash flows into and out of the fund.
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TOTAL RETURN TRUST
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INVESTMENT OBJECTIVE High total return from capital growth and income.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its assets in
common stocks and convertible securities of
domestic and foreign companies. In selecting
investments to buy, hold or sell, the fund's
"Sub-Advisor," TCW Investment Management Company,
typically uses a "top-down" investment process
that considers the overall economic outlook, the
development of industry/sector preferences, and,
lastly, specific stock selections. Generally, at
least 85% of the fund's assets will be invested in
companies that have a market capitalization of at
least $1 billion, and the
Sub-Advisor anticipates that such companies may
pay
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dividend or interest income. Up to 5% of the
fund's convertible securities investments may be
rated below investment grade. In addition, the
fund's investments may include fixed-income
securities.
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21st CENTURY TREND FUND
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INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its assets in
common stocks of companies of any asset size that,
in the opinion of the Investment Manager, are
expected to benefit from the development of a
modern worldwide economy which will be driven by
changing economic, demographic and social trends
in the new millennium. The fund's investments will
include companies in a broad range of enterprises
which are expected to experience growth that may
be generated by contemporary spending habits, the
information age explosion, technological advances
and a sizeable aging population. In seeking to
identify companies which may be potential
beneficiaries of such trends, the Investment
Manager will examine various worldwide changing
social attitudes, legislative actions,
demographics and economic factors to determine
underlying movements that shape the marketplace.
The Investment Manager will utilize fundamental
research to focus on industries and companies
that, as a result of these trends, are believed to
demonstrate potential for above-average long-term
growth in revenue and earnings.
In addition, up to 35% of the fund's net assets
may be invested in foreign securities, including
emerging market securities.
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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
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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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UTILITIES FUND
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INVESTMENT OBJECTIVE Capital appreciation and current income.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its 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 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
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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 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.
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.
SMALL AND MEDIUM COMPANIES. Certain Underlying Funds may invest in
stocks of small and medium-sized companies which include emerging
growth companies.
14
<PAGE>
Investing in securities of these companies involves greater risk than
is customarily associated with investing in larger, more established
companies. These companies may have limited product lines, markets,
distribution channels or financial resources and the management of
such companies may be dependent upon one or a few key people.
Additionally, the stocks of these companies may be more volatile and
less liquid than the stocks of more established companies and may be
subject to more abrupt and erratic price movements. These stocks may
also have returns that vary, sometimes significantly, from the
overall stock market. Often smaller and medium capitalization
companies and the industries in which they are focused are still
evolving and, while this may offer better growth potential than
larger, more established companies, it also may make them more
sensitive to changing market conditions.
FOREIGN SECURITIES. Certain Underlying Funds invest in foreign
securities 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 security's local price remains unchanged.
Foreign securities (including depository receipts) 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.
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.
15
<PAGE>
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. Accordingly, a rise in the general level of
interest rates may cause the price of the Fund's fixed-income
securities to fall substantially. 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. (Zero coupon securities are typically
subject to greater price fluctuations than comparable securities that
pay current interest.) As merely illustrative of the relationship
between fixed-income securities and interest rates, the following
table shows how interest rates affect bond prices.
<TABLE>
<CAPTION>
HOW INTEREST RATES AFFECT BOND PRICES
PRICE PER $1,000 OF A BOND IF INTEREST RATES:
--------------------------------------------------
INCREASE DECREASE
-----------------------------------------------------------------------------------------------------------------
---------------------- ----------------------
BOND MATURITY COUPON 1% 2% 1% 2%
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
1 year N/A $ 1,000 $ 1,000 $ 1,000 $ 1,000
-----------------------------------------------------------------------------------------------------------------
5 years 5.875% $ 951 $ 920 $ 1,018 $ 1,054
-----------------------------------------------------------------------------------------------------------------
10 years 6.00% $ 910 $ 853 $ 1,038 $ 1,110
-----------------------------------------------------------------------------------------------------------------
30 years 6.125% $ 841 $ 748 $ 1,093 $ 1,264
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Coupons reflect yields on Treasury securities as of December 31,
1999. The table is an illustration and does not represent expected
yields or share price changes of any Morgan Stanley Dean Witter
mutual fund.
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
16
<PAGE>
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 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
17
<PAGE>
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.
18
<PAGE>
[SIDEBAR]
ANNUAL TOTAL RETURNS
THIS CHART SHOWS HOW THE PERFORMANCE OF THE PORTFOLIO'S CLASS B SHARES HAS
VARIED FROM YEAR TO YEAR OVER THE PAST 2 CALENDAR YEARS.
AVERAGE ANNUAL
TOTAL RETURNS
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS WITH THOSE OF
BROAD MEASURES OF MARKET PERFORMANCE OVER TIME. 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 RETURNS - CALENDAR YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 11.21%
99 19.70%
</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, 2000 was 6.14%.
During the periods 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, 1999)
---------------------------------------------------------------------------------
LIFE OF PORTFOLIO
PAST 1 YEAR (SINCE 11/25/97)
<S> <C> <C>
---------------------------------------------------------------------------------
Class A 14.30% 13.42%
---------------------------------------------------------------------------------
Class B 14.70% 14.31%
---------------------------------------------------------------------------------
Class C 19.17% 15.78%
---------------------------------------------------------------------------------
Class D 20.88% 16.64%
---------------------------------------------------------------------------------
S&P 500 Index(1) 21.04% 24.86%
---------------------------------------------------------------------------------
Lehman Brothers U.S. Government/Credit
Index(2) -2.15% 3.90%
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(1) The Standard and Poor's 500 Index (S&P 500
-Registered Trademark-) is a broad-based index, the
performance of which is based on the perfomance of 500
widely-held common stocks chosen for market size, liquidity
and industry group representation. 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 U.S. Government/Credit Index (formerly
Lehman Brothers Government/Corporate Index) tracks the
performance of government and corporate obligations,
including U.S. government agency and Treasury securities and
corporate and Yankee bonds. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
</TABLE>
19
<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, 2000.
[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 0.24% 1.00% 1.00% None
---------------------------------------------------------------------------------------------------------
Other expenses(5) 0.43% 0.43% 0.43% 0.43%
---------------------------------------------------------------------------------------------------------
Total annual Portfolio operating expenses(5) 0.67% 1.43% 1.43% 0.43%
---------------------------------------------------------------------------------------------------------
</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 and has agreed to extend such expense assumption
through December 31, 2001. As a result of such assumption of
other expenses, for the fiscal period ended September 30,
2000, the actual "Other Expenses" amounted to 0.00% for each
Class of the Portfolio and "Total Fund Operating Expenses"
amounted to 0.24%, 1.00%, 1.00% and 0.00% for Class A, B, C
and D respectively of the Portfolio.
</TABLE>
20
<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.
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 $646 $752 $ 982 $1,713 $146 $452 $ 782 $1,713
------------------------------------------------------------------ -----------------------------------------
CLASS C $246 $452 $ 782 $1,713 $146 $452 $ 782 $1,713
------------------------------------------------------------------ -----------------------------------------
CLASS D $ 44 $138 $ 241 $ 542 $ 44 $138 $ 241 $ 542
------------------------------------------------------------------ -----------------------------------------
</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.
21
<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% 0.18% 0.93%
------------------------------------------------------------------------------------------------
American Opportunities Fund 0.46% 0.13% 0.59%
------------------------------------------------------------------------------------------------
Capital Growth Securities 0.64% 0.22% 0.86%
------------------------------------------------------------------------------------------------
Competitive Edge Fund -- "Best Ideas" Portfolio 0.64% 0.19% 0.83%
------------------------------------------------------------------------------------------------
Convertible Securities Trust 0.60% 0.20% 0.80%
------------------------------------------------------------------------------------------------
Developing Growth Securities Trust 0.49% 0.12% 0.61%
------------------------------------------------------------------------------------------------
Dividend Growth Securities 0.35% 0.08% 0.43%
------------------------------------------------------------------------------------------------
Equity Fund 0.85% 0.19% 1.04%
------------------------------------------------------------------------------------------------
Financial Services Trust 0.75% 0.21% 0.96%
------------------------------------------------------------------------------------------------
Growth Fund 0.79% 0.10% 0.89%
------------------------------------------------------------------------------------------------
Health Sciences Trust 1.00% 0.20% 1.20%
------------------------------------------------------------------------------------------------
High Yield Securities 0.39% 0.11% 0.50%
------------------------------------------------------------------------------------------------
Income Builder Fund 0.75% 0.22% 0.97%
------------------------------------------------------------------------------------------------
Information Fund 0.73% 0.16% 0.89%
------------------------------------------------------------------------------------------------
Intermediate Income Securities 0.60% 0.32% 0.92%
------------------------------------------------------------------------------------------------
Market Leader Trust 0.75% 0.18% 0.93%
------------------------------------------------------------------------------------------------
Mid-Cap Equity Trust 0.75% 0.18% 0.93%
------------------------------------------------------------------------------------------------
Natural Resource Development Securities 0.62% 0.27% 0.89%
------------------------------------------------------------------------------------------------
Next Generation Trust 0.75% 0.70% 1.45%
------------------------------------------------------------------------------------------------
Real Estate Fund 1.00% 0.56% 1.56%
------------------------------------------------------------------------------------------------
S&P 500 Index Fund 0.38% 0.12% 0.50%
------------------------------------------------------------------------------------------------
S&P 500 Select Fund 0.60% 0.37% 0.97%
------------------------------------------------------------------------------------------------
Short-Term Bond Fund 0.70% 0.20% 0.90%
------------------------------------------------------------------------------------------------
Small Cap Growth Fund 1.00% 0.18% 1.18%
------------------------------------------------------------------------------------------------
Special Value Fund 0.75% 0.25% 1.00%
------------------------------------------------------------------------------------------------
Total Market Index Fund 0.25% 0.25% 0.50%
------------------------------------------------------------------------------------------------
Total Return Trust 0.75% 0.18% 0.93%
------------------------------------------------------------------------------------------------
21st Century Trend Fund 0.75% 0.29% 1.04%
------------------------------------------------------------------------------------------------
U.S. Government Securities Trust 0.44% 0.10% 0.54%
------------------------------------------------------------------------------------------------
Utilities Fund 0.54% 0.11% 0.65%
------------------------------------------------------------------------------------------------
Value Fund 1.00% 0.34% 1.34%
------------------------------------------------------------------------------------------------
Value-Added Market Series -- Equity Portfolio 0.46% 0.13% 0.59%
------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
[ICON] ADDITIONAL RISK INFORMATION
--------------------------------------------------------------------------------
This section provides additional information relating to the
principal risks of investing in the Underlying Funds described above.
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.
23
<PAGE>
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.
24
<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
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 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>
25
<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 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 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 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>
26
<PAGE>
---------------------------------------------------------------------
LATIN AMERICAN GROWTH FUND
---------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY Normally invests at least 65% of its 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 Investment Management Company,
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 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
net 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
27
<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.
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 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 currency to purchase
a security
28
<PAGE>
in that market. If the value of that local currency falls relative to
the U.S. dollar, the U.S. dollar value of the foreign security will
decrease. This is true even if the foreign security's local price
remains unchanged.
Foreign securities (including depository receipts) 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.
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 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
29
<PAGE>
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.
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
30
<PAGE>
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.
31
<PAGE>
[SIDEBAR]
ANNUAL TOTAL RETURNS
THIS CHART SHOWS HOW THE PERFORMANCE OF THE PORTFOLIO'S CLASS B SHARES HAS
VARIED FROM YEAR TO YEAR OVER THE PAST 2 CALENDAR YEARS.
AVERAGE ANNUAL
TOTAL RETURNS
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS WITH THOSE OF A
BROAD MEASURE OF MARKET PERFORMANCE OVER TIME. 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 RETURNS - CALENDAR YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 7.92%
99 40.18%
</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, 2000 was -11.10%.
During the periods shown in the bar chart, the highest return for a
calendar quarter was 18.64% (quarter ended December 31, 1999) 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, 1999)
---------------------------------------------------------------------------------
LIFE OF PORTFOLIO
PAST 1 YEAR (SINCE 11/25/97)
<S> <C> <C>
---------------------------------------------------------------------------------
Class A 33.63% 19.22%
---------------------------------------------------------------------------------
Class B 35.18% 20.32%
---------------------------------------------------------------------------------
Class C 39.68% 21.69%
---------------------------------------------------------------------------------
Class D 41.53% 22.64%
---------------------------------------------------------------------------------
Morgan Stanley Capital International EAFE
Index(1) 26.96% 23.43%
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
1 The Morgan Stanley Capital International (MSCI) EAFE Index
measures the performance for a diverse range of global stock
markets within Europe, Australasia, and the Far East. The
performance of the Index is listed in U.S. dollars and
assumes reinvestment of net dividends. "Net dividends"
reflects a reduction in dividends after taking into account
withholding of taxes by certain foreign countries
represented in the Index. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
</TABLE>
32
<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, 2000.
[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% 1.00% None
---------------------------------------------------------------------------------------------------------
Other expenses(5) 0.36% 0.36% 0.36% 0.36%
---------------------------------------------------------------------------------------------------------
Total annual Portfolio operating expenses(5) 0.60% 1.36% 1.36% 0.36%
---------------------------------------------------------------------------------------------------------
</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 and has agreed to extend such expense assumption
through December 31, 2001. As a result of such assumption of
other expenses, for the fiscal period ended September 30,
2000, the actual "Other Expenses" amounted to 0.00% for each
Class of the Portfolio and "Total Fund Operating Expenses"
amounted to 0.24%, 1.00%, 1.00% and 0.00% for Class A, B, C
and D respectively of the 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.
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
33
<PAGE>
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 $583 $707 $842 $1,236 $583 $707 $842 $1,236
------------------------------------------------------------------ -----------------------------------------
CLASS B $638 $731 $945 $1,635 $138 $431 $745 $1,635
------------------------------------------------------------------ -----------------------------------------
CLASS C $238 $431 $745 $1,635 $138 $431 $745 $1,635
------------------------------------------------------------------ -----------------------------------------
CLASS D $ 37 $116 $202 $ 456 $ 37 $116 $202 $ 456
------------------------------------------------------------------ -----------------------------------------
</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% 0.22% 1.13%
------------------------------------------------------------------------------------------------
International SmallCap Fund 1.15% 0.71% 1.86%
------------------------------------------------------------------------------------------------
Japan Fund 0.95% 0.38% 1.33%
------------------------------------------------------------------------------------------------
Latin American Growth Fund 1.25% 0.81% 2.06%
------------------------------------------------------------------------------------------------
Pacific Growth Fund 0.95% 0.61% 1.56%
------------------------------------------------------------------------------------------------
</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 level of interest rates goes up, the
prices of most fixed-income securities go down. When the general
34
<PAGE>
level of interest rates goes down, the prices of most fixed-income
securities go up. Accordingly, a rise in the general level of
interest rates may cause the price of the Fund's fixed-income
securities to fall substantially. (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
35
<PAGE>
governments may default on their sovereign debt, which may require
holders of that 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.
36
<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 $155 BILLION IN ASSETS UNDER
MANAGEMENT AS OF OCTOBER 31, 2000.
[End Sidebar]
[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,
Pacific Growth Fund and Real Estate Fund. TCW Investment Management
Company ("TCW") serves as Sub-Advisor to Latin American Growth Fund,
Mid-Cap Equity Trust, Small Cap Growth Fund and Total Return Trust.
Miller Anderson & Sherrerd, LLP ("MAS") serves as Sub-Advisor to
Equity Fund and 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 manages more than $95 billion, as of
October 31, 2000, 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, Los
Angeles, CA 90017. As of August 31, 2000, TCW Investment Management
Company and its affiliates had approximately $80 billion under
management or committed to management.
MAS manages assets of approximately $80 billion, as of October 31,
2000, 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
37
<PAGE>
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.
38
<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.msdwadvice.com/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. With respect to Underlying Funds holding 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
39
<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, (3) the following programs approved by the
Fund's distributor: (i) qualified state tuition plans described in
Section 529 of the Internal Revenue Code and (ii) certain other
investment programs that do not charge an asset-based fee, or
(4) employer-sponsored employee benefit plan accounts.
INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER
INVESTORS/CLASS D SHARES. To be eligible to purchase Class D shares,
you must qualify under one of the investor categories specified in
the "Share Class Arrangements" section of this PROSPECTUS.
SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to
buying additional 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).
40
<PAGE>
- 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.
- 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. In
addition, Class A shares of the Fund may be exchanged for shares of
an FSC Fund (funds subject to a front-end sales charge). See the
inside back cover of this PROSPECTUS for each Morgan Stanley Dean
Witter Fund's designation as a Multi-Class Fund, No-Load Fund, Money
Market Fund or FSC Fund. If a Morgan Stanley Dean Witter Fund is not
listed, consult the inside back cover of that fund's prospectus for
its designation.
Exchanges may be made after shares of 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.
41
<PAGE>
The Fund may terminate or revise the exchange privilege upon required
notice. The check writing privilege is not available for Money Market
Fund shares you acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley
Dean Witter Trust FSB, we will employ reasonable procedures to
confirm that exchange instructions communicated over the telephone
are genuine. These procedures may include requiring various forms of
personal identification such as name, mailing address, social
security or other tax identification number. Telephone instructions
also may be recorded.
Telephone instructions will be accepted if received by the Fund's
transfer agent between 9:00 a.m. and 4:00 p.m. Eastern time on any
day the New York Stock Exchange is open for business. During periods
of drastic economic or market changes, it is possible that the
telephone exchange procedures may be difficult to implement, although
this has not been the case with the Fund in the past.
MARGIN ACCOUNTS. If you have pledged your 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 past exchanges and/or
purchase or sale transactions involving the Fund or other Morgan
Stanley Dean Witter Funds may result in the Fund limiting or
prohibiting, at its discretion, additional purchases and/or
exchanges. Determinations in this regard may be made based on the
frequency or dollar amount of the previous exchanges or purchase or
sale transactions. You will be notified in advance of limitations on
your exchange privileges.
CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements"
section of this PROSPECTUS for a 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.
42
<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>
43
<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."
44
<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. However,
if you purchase Portfolio shares through a Financial Advisor within
three business days prior to the record date for the distribution,
the distribution will automatically be paid to you in cash, even if
you did not request to receive all distributions in cash. No interest
will accrue on uncashed checks. If you wish to change how your
distributions are paid, your request should be received by the Fund's
transfer agent, Morgan Stanley Dean Witter Trust FSB, at least five
business days prior to the record date of the distributions.
[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 information on your dividends and capital
gains for tax purposes.
45
<PAGE>
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 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 annual 12b-1 fee
applicable to each Class of a Portfolio:
<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1 FEE
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------
A Maximum 5.25% initial sales charge reduced for
purchase of $25,000 or more; shares sold without an
initial sales charge are generally subject to a 1.0%
CDSC during the first year 0.25%
---------------------------------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to
0% after six years 1.00%
---------------------------------------------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.00%
---------------------------------------------------------------------------------------------------------------
D None None
---------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
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 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>
[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]
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
47
<PAGE>
you have a cumulative net asset value of all your Class A and
Class D shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase
Class D shares of any fund subject to the Fund's minimum initial
investment requirement.
You must notify your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative (or Morgan Stanley Dean
Witter Trust FSB if you purchase directly through a Portfolio), at
the time a purchase order is placed, that the purchase qualifies for
the reduced sales charge under the Right of Accumulation. Similar
notification must be made in writing when an order is placed by mail.
The reduced sales charge will not be granted if: (i) notification is
not furnished at the time of the order; or (ii) a review of the
records of Dean Witter Reynolds or other authorized dealer of Fund
shares or the Fund's transfer agent does not confirm your represented
holdings.
LETTER OF INTENT. The schedule of reduced sales charges for larger
purchases also will be available to you if you enter into a written
"letter of intent." A letter of intent provides for the purchase of
Class A shares of 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.
48
<PAGE>
- Qualified state tuition plans described in Section 529 of the
Internal Revenue Code (subject to all applicable terms and
conditions) and certain other investment programs that do not
charge an asset-based fee and have been approved by the Fund's
distributor.
- Employer-sponsored employee benefit plans, whether or not qualified
under the Internal Revenue Code, for which Morgan Stanley Dean
Witter Trust FSB serves as trustee or Morgan Stanley Dean Witter's
Retirement Plan Services serves as recordkeeper under a written
Recordkeeping Services Agreement ("MSDW Eligible Plans") which have
at least 200 eligible employees.
- An MSDW Eligible Plan whose Class B shares have converted to
Class A shares, regardless of the plan's asset size or number of
[Sidebar] eligible employees.
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>
49
<PAGE>
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 (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.
50
<PAGE>
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 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.
51
<PAGE>
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.
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.
- Certain investment programs that do not charge an asset-based fee
and have been approved by the Fund's distributor. However, Class D
shares are not offered for investments made through Section 529
plans (regardless of the size of the investment).
- 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.
52
<PAGE>
- 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.
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.
53
<PAGE>
FINANCIAL HIGHLIGHTS - DOMESTIC PORTFOLIO
The financial highlights table is intended to help you understand the Domestic
Portfolio's financial performance for the periods indicated. 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).
The information for the fiscal year ended September 30, 2000 has been audited by
Deloitte & Touche LLP, independent auditors, whose report, along with the Fund's
financial statements, is included in the annual report, which is available upon
request. The financial highlights for the fiscal year ended September 30, 1999
and all periods presented prior thereto have been audited by other independent
accountants.
<TABLE>
<CAPTION>
DOMESTIC PORTFOLIO++
------------------------------------
YEARS ENDED SEPTEMBER 30, 2000 1999 1998*
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
CLASS A SHARES
---------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.54 $ 9.72 $10.00
---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.38 0.46 0.21
Net realized and unrealized gain (loss) 1.83 1.93 (0.44)
------ ------ ------
Total from investment operations 2.21 2.39 (0.23)
---------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Dividends to shareholders (0.29) (0.36) (0.05)
Distributions to shareholders (1.09) (0.21) --
------ ------ ------
Total dividends and distributions (1.38) (0.57) (0.05)
---------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.37 $11.54 $ 9.72
---------------------------------------------------------------------------------------------------------
TOTAL RETURN(+) 20.16% 25.00% (2.33)%(1)
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (AFTER EXPENSES
WERE ASSUMED):(3)(4)
---------------------------------------------------------------------------------------------------------
Expenses 0.24% 0.23% 0.22 %(2)
---------------------------------------------------------------------------------------------------------
Net investment income 3.35% 3.92% 2.21 %(2)
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (BEFORE EXPENSES WERE
ASSUMED):(3)(4)
---------------------------------------------------------------------------------------------------------
Expenses 0.67% 0.67% 1.15 %(2)
---------------------------------------------------------------------------------------------------------
Net investment income 2.92% 3.48% 1.28 %(2)
---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $1,493 $1,097 $1,359
---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 434% 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) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC PORTFOLIO++
----------------------------------------
YEARS ENDED SEPTEMBER 30 2000 1999 1998*
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
CLASS B SHARES
-----------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.46 $ 9.67 $10.00
-----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.30 0.35 0.14
Net realized and unrealized gain (loss) 1.81 1.94 (0.42)
------- ------- -------
Total from investment operations 2.11 2.29 (0.28)
-----------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Dividends to shareholders (0.20) (0.29) (0.05)
Distributions to shareholders (1.09) (0.21) --
------- ------- -------
Total dividends and distributions (1.29) (0.50) (0.05)
-----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.28 $11.46 $ 9.67
-----------------------------------------------------------------------------------------------------------
TOTAL RETURN(+) 19.29% 23.96% (2.83)%(1)
-----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (AFTER EXPENSES WERE
ASSUMED):(3)(4)
-----------------------------------------------------------------------------------------------------------
Expenses 1.00% 1.00% 0.92 %(2)
-----------------------------------------------------------------------------------------------------------
Net investment income 2.59% 3.15% 1.51 %(2)
-----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (BEFORE EXPENSES WERE
ASSUMED):(3)(4)
-----------------------------------------------------------------------------------------------------------
Expenses 1.43% 1.44% 1.90 %(2)
-----------------------------------------------------------------------------------------------------------
Net investment income 2.16% 2.71% 0.53 %(2)
-----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $28,974 $26,007 $24,338
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 434% 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) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC PORTFOLIO++
--------------------------------------
YEARS ENDED SEPTEMBER 30 2000 1999 1998*
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
CLASS C SHARES
-----------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.52 $ 9.67 $10.00
-----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.31 0.40 0.13
Net realized and unrealized gain (loss) 1.80 1.94 (0.41)
------ ------ ------
Total from investment operations 2.11 2.34 (0.28)
-----------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Dividends to shareholders (0.25) (0.28) (0.05)
Distributions to shareholders (1.09) (0.21) --
------ ------ ------
Total dividends and distributions (1.34) (0.49) (0.05)
-----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.29 $11.52 $ 9.67
-----------------------------------------------------------------------------------------------------------
TOTAL RETURN(+) 19.23% 24.55% (2.83)%(1)
-----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (AFTER EXPENSES WERE
ASSUMED):(3)(4)
-----------------------------------------------------------------------------------------------------------
Expenses 1.00% 0.54% 0.92 %(2)
-----------------------------------------------------------------------------------------------------------
Net investment income 2.59% 3.61% 1.51 %(2)
-----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (BEFORE EXPENSES WERE
ASSUMED):(3)(4)
-----------------------------------------------------------------------------------------------------------
Expenses 1.43% 0.98% 1.90 %(2)
-----------------------------------------------------------------------------------------------------------
Net investment income 2.16% 3.17% 0.53 %(2)
-----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $1,954 $1,364 $1,702
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 434% 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) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC PORTFOLIO++
--------------------------------------
YEARS ENDED SEPTEMBER 30 2000 1999 1998*
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
CLASS D SHARES
-----------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.56 $ 9.74 $10.00
-----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.48 0.46 0.22
Net realized and unrealized gain (loss) 1.75 1.96 (0.43)
------ ------ ------
Total from investment operations 2.23 2.42 (0.21)
-----------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Dividends to shareholders (0.31) (0.39) (0.05)
Distributions to shareholders (1.09) (0.21) --
------ ------ ------
Total dividends and distributions (1.40) (0.60) (0.05)
-----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.39 $11.56 $ 9.74
-----------------------------------------------------------------------------------------------------------
TOTAL RETURN(+) 20.39% 25.28% (2.13)%(1)
-----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (AFTER EXPENSES WERE
ASSUMED):(3)(4)
-----------------------------------------------------------------------------------------------------------
Expenses -- -- --
-----------------------------------------------------------------------------------------------------------
Net investment income 3.59% 4.15% 2.43 %(2)
-----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (BEFORE EXPENSES WERE
ASSUMED):(3)(4)
-----------------------------------------------------------------------------------------------------------
Expenses 0.43% 0.44% 0.90 %(2)
-----------------------------------------------------------------------------------------------------------
Net investment income 3.16% 3.71% 1.53 %(2)
-----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $37 $15 $12
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 434% 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.
+ Calculated based on the net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
57
<PAGE>
FINANCIAL HIGHLIGHTS - INTERNATIONAL
PORTFOLIO
The financial highlights table is intended to help you understand the
International Portfolio's financial performance for the periods indicated.
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).
The information for the fiscal year ended September 30, 2000 has been audited by
Deloitte & Touche LLP, independent auditors, whose report, along with the Fund's
financial statements, is included in the annual report, which is available upon
request. The financial highlights for the fiscal year ended September 30, 1999
and all periods presented prior thereto have been audited by other independent
accountants.
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO++
------------------------------------
YEARS ENDED SEPTEMBER 30 2000 1999 1998*
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
CLASS A SHARES
---------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.74 $ 9.08 $10.00
---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.03 0.10 0.05
Net realized and unrealized gain (loss) 0.85 3.56 (0.88)
------ ------ ------
Total from investment operations 0.88 3.66 (0.83)
---------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Dividends to shareholders (0.04) -- (0.09)
Distributions to shareholders (0.99) -- --
------ ------ ------
Total dividends and distributions (1.03) -- (0.09)
---------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.59 $12.74 $ 9.08
---------------------------------------------------------------------------------------------------------
TOTAL RETURN(+) 6.19 % 40.31 % (8.36)%(1)
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (AFTER EXPENSES WERE
ASSUMED):(3)(4)
---------------------------------------------------------------------------------------------------------
Expenses 0.24 % 0.24 % 0.25 %(2)
---------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.12 % 0.91 % 1.01 %(2)
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (BEFORE EXPENSES WERE
ASSUMED):(3)(4)
---------------------------------------------------------------------------------------------------------
Expenses 0.60 % 1.34 % 6.16 %(2)
---------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.24)% (0.19)% (4.90)%(2)
---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $3,366 $1,074 $596
---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 85 % 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) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO++
------------------------------------
YEARS ENDED SEPTEMBER 30 2000 1999 1998*
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
CLASS B SHARES
---------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.56 $ 9.03 $10.00
---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.08) 0.02 0.03
Net realized and unrealized gain (loss) 0.86 3.51 (0.91)
------- ------ ------
Total from investment operations 0.78 3.53 (0.88)
---------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Dividends to shareholders (0.01) -- (0.09)
Distributions to shareholders (0.99) -- --
------- ------ ------
Total dividends and distributions (1.00) -- (0.09)
---------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.34 $12.56 $ 9.03
---------------------------------------------------------------------------------------------------------
TOTAL RETURN(+) 5.48 % 39.09 % (8.87)%(1)
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (AFTER EXPENSES WERE
ASSUMED):(3)(4)
---------------------------------------------------------------------------------------------------------
Expenses 1.00 % 1.00 % 0.94 %(2)
---------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.64)% 0.15 % 0.32 %(2)
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (BEFORE EXPENSES WERE
ASSUMED):(3)(4)
---------------------------------------------------------------------------------------------------------
Expenses 1.36 % 2.10 % 6.91 %(2)
---------------------------------------------------------------------------------------------------------
Net investment income (loss) (1.00)% (0.95)% (5.65)%(2)
---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $43,697 $6,615 $3,241
---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 85 % 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) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO++
------------------------------------
YEARS ENDED SEPTEMBER 30 2000 1999 1998*
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
CLASS C SHARES
---------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.61 $ 9.03 $10.00
---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.08) 0.07 0.04
Net realized and unrealized gain (loss) 0.86 3.51 (0.92)
------ ------ ------
Total from investment operations 0.78 3.58 (0.88)
---------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Dividends to shareholders (0.03) -- (0.09)
Distributions to shareholders (0.99) -- --
------ ------ ------
Total dividends and distributions (1.02) -- (0.09)
---------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.37 $12.61 $ 9.03
---------------------------------------------------------------------------------------------------------
TOTAL RETURN(+) 5.46 % 39.65 % (8.87)%(1)
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (AFTER EXPENSES WERE
ASSUMED):(3)(4)
---------------------------------------------------------------------------------------------------------
Expenses 1.00 % 0.77 % 0.92 %(2)
---------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.64)% 0.38 % 0.34 %(2)
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (BEFORE EXPENSES WERE
ASSUMED):(3)(4)
---------------------------------------------------------------------------------------------------------
Expenses 1.36 % 1.87 % 6.91 %(2)
---------------------------------------------------------------------------------------------------------
Net investment income (loss) (1.00)% (0.72)% (5.65)%(2)
---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $4,246 $442 $105
---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 85 % 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) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO++
-------------------------------------
YEARS ENDED SEPTEMBER 30 2000 1999 1998*
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
CLASS D SHARES
----------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.78 $ 9.09 $10.00
----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.04 0.23 0.14
Net realized and unrealized gain (loss) 0.89 3.46 (0.96)
------- ------ ------
Total from investment operations 0.93 3.69 (0.82)
----------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Dividends to shareholders (0.06) -- (0.09)
Distributions to shareholders (0.99) -- --
------- ------ ------
Total dividends and distributions (1.05) -- (0.09)
----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.66 $12.78 $ 9.09
----------------------------------------------------------------------------------------------------------
TOTAL RETURN(+) 6.56% 40.59% (8.26)%(1)
----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (AFTER EXPENSES WERE
ASSUMED):(3)(4)
----------------------------------------------------------------------------------------------------------
Expenses -- -- --
----------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.36% 1.15% 1.26 %(2)
----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (BEFORE EXPENSES WERE
ASSUMED):(3)(4)
----------------------------------------------------------------------------------------------------------
Expenses 0.36% 1.10% 5.91 %(2)
----------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.00% 0.05% (4.65)%(2)
----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
----------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $43,645 $564 $11
----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 85% 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.
+ Calculated based on the net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not include any expenses incurred as a result of investment in the
Underlying Funds.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
</TABLE>
61
<PAGE>
NOTES
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<PAGE>
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<PAGE>
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64
<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
New Discoveries Fund
Next Generation Trust
Small Cap Growth Fund
Special Value Fund
Tax-Managed Growth Fund
21st Century Trend Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Technology Fund
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
--------------------------------------------------------------------------------
GROWTH & INCOME FUNDS
---------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Equity Fund
Fund of Funds - Domestic Portfolio
Income Builder Fund
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
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
Global Utilities Fund
--------------------------------------------------------------------------------
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)
New York 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 30, 2000
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.msdwadvice.com/funds
Information about the Fund (including the STATEMENT OF ADDITIONAL INFORMATION)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (202) 942-8090. Reports and
other information about the Fund are available on the EDGAR Database on the
SEC's Internet site (www.sec.gov), and copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the following
Email address: [email protected], or by writing the Public Reference Section of
the SEC, Washington, DC 20549-0102.
TICKER SYMBOLS:
<TABLE>
<CAPTION>
DOMESTIC PORTFOLIO
------------------
<S> <C>
CLASS A: DOFAX CLASS C: DOFCX
--------------------- ---------------------
CLASS B: DOFBX CLASS D: DOFDX
--------------------- ---------------------
<CAPTION>
INTERNATIONAL PORTFOLIO
-----------------------
CLASS A: IOFAX CLASS C: IOFCX
<S> <C>
--------------------- ---------------------
CLASS B: IOFBX CLASS D: IOFDX
--------------------- ---------------------
</TABLE>
(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