MORGAN STANLEY DEAN WITTER EQUITY FUND, 497, 1999-10-07

MORGAN STANLEY DEAN WITTER EQUITY FUND
497, 1999-10-07

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<PAGE> 1

PROSPECTUS - SEPTEMBER 28, 1999

MORGAN STANLEY DEAN WITTER

EQUITY FUND

[PHOTO]

A MUTUAL FUND THAT SEEKS TOTAL RETURN

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
<PAGE> 2
CONTENTS

<TABLE>
<S> <C> <C>
The Fund Investment Objective .................................. 1

Principal Investment Strategies ....................... 1

Principal Risks ....................................... 1

Fees and Expenses ..................................... 3

Additional Investment Strategy Information ............ 4

Additional Risk Information ........................... 5

Fund Management ....................................... 6

Shareholder Information Pricing Fund Shares ................................... 8

How to Buy Shares ..................................... 8

How to Exchange Shares ................................ 10

How to Sell Shares .................................... 12

Distributions ......................................... 13

Tax Consequences ...................................... 14

Share Class Arrangements .............................. 15

Financial Highlights ....................................................... 23

Our Family of Funds ....................................................... Inside Back Cover
</TABLE>

This Prospectus contains important information
about the Fund. Please read it carefully and
keep it for future reference.
<PAGE> 3
THE FUND

[TARGET GRAPHIC] INVESTMENT OBJECTIVE

Morgan Stanley Dean Witter Equity Fund seeks total return.

[CHESS GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES

The Fund will normally invest at least 65% of its total assets
in common stock and other equity securities. The Fund's
"Sub-Adviser," Miller Anderson & Sherrerd, invests the Fund's
assets by pursuing an investing strategy that combines both
value and growth styles. The Fund has two teams of portfolio
managers: a value team and a growth team. Each manager works
independently within the style of his or her specific team.
Each team has a team leader who participates in administering
the value/growth style-tilt of the portfolio and monitors
certain other oversight functions.

TOTAL RETURN

AN INVESTMENT OBJECTIVE HAVING THE GOAL OF SELECTING
SECURITIES WITH THE POTENTIAL TO RISE IN PRICE AND PAY OUT
INCOME.

The Sub-Adviser's investment process is designed to identify
growing companies whose stock in the Sub-Adviser's opinion is
attractively valued and has low but rising expectations, and
to diversify holdings across all market sectors. Individual
securities are selected based on, among other things,
quantitative screens and fundamental research by in-house
industry analysts.

Common stock is a share ownership or equity interest in a
corporation. It may or may not pay dividends, as some
companies reinvest all of their profits back into their
businesses, while others pay out some of their profits to
shareholders as dividends. A depository receipt is generally
issued by a bank or financial institution and represents an
ownership interest in the common Stock or other equity
securities of a foreign company.

In addition, the Fund may invest up to 25% of its total assets
in foreign securities. This percentage limitation, however,
does not apply to securities of foreign companies (including
depository receipts) that are listed in the U.S. on a national
securities exchange. The Fund also may invest in convertible
and fixed-income securities.

In pursuing the Fund's investment objective, the Sub-Adviser
has considerable leeway in deciding which investments it buys,
holds or sells on a day-to-day basis -- and which trading
strategies it uses. For example, the Sub-Adviser in its
discretion may determine to use some permitted trading
strategies while not using others.

[SCALE GRAPHIC] PRINCIPAL RISKS

There is no assurance that the Fund will achieve its
investment objective. The Fund's share price will fluctuate
with changes in the market value of the Fund's portfolio
securities. When you sell Fund shares, they may be worth less
than what you paid for them and, accordingly, you can lose
money investing in this Fund.

COMMON STOCKS. A principal risk of investing in the Fund is
associated with its common stock investments. In general,
stock values fluctuate in response to activi-

1
<PAGE> 4
ties specific to the company as well as general market,
economic and political conditions. Stock prices can fluctuate
widely in response to these factors.

FOREIGN SECURITIES. The Fund's investments in foreign
securities (including depository receipts) may involve risks
in addition to the risks associated with domestic securities.
One additional risk is currency risk. While the price of Fund
shares is quoted in U.S. dollars, the Fund generally converts
U.S. dollars to a foreign market's local currency to purchase
a security in that market. If the value of that local currency
falls relative to the U.S. dollar, the U.S. dollar value of
the foreign security will decrease. This is true even if the
foreign security's local price remains unchanged.

Foreign securities also have risks related to economic and
political developments abroad, including expropriations,
confiscatory taxation, exchange control regulation,
limitations on the use or transfer of Fund assets and any
effects of foreign social, economic or political instability.
Foreign companies, in general, are not subject to the
regulatory requirements of U.S. companies and, as such, there
may be less publicly available information about these
companies. Moreover, foreign accounting, auditing and
financial reporting standards generally are different from
those applicable to U.S. companies. Finally, in the event of a
default of any foreign debt obligations, it may be more
difficult for the Fund to obtain or enforce a judgment against
the issuers of the securities.

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 the Fund's trades effected in those markets
and could result in losses to the Fund due to subsequent
declines in the value of the securities subject to the trades.

Many European countries have adopted or are in the process of
adopting a single European currency, referred to as the
"euro." The consequences of the euro conversion for foreign
exchange rates, interest rates and the value of European
securities the Fund may purchase are presently unclear. The
consequences may adversely affect the value and/or increase
the volatility of securities held by the Fund.

OTHER RISKS. The performance of the Fund also will depend on
whether the Sub-Adviser is successful in pursuing the Fund's
investment strategy. The Fund is subject to other risks from
its permissible investments including the risks associated
with convertible and fixed-income securities. For more
information about these risks, see the "Additional Risk
Information" section.

Shares of the Fund are not bank deposits and are not
guaranteed or insured by the FDIC or any other government
agency.

2
<PAGE> 5
[MONEY GRAPHIC] FEES AND EXPENSES

The table below briefly describes the fees and expenses that
you may pay if you buy and hold shares of the Fund. The Fund
offers four classes of shares: Classes A, B, C and D. Each
Class has a different combination of fees, expenses and other
features. The Fund does not charge account or exchange fees.
See the "Share Class Arrangements" section for further fee and
expense information.

SHAREHOLDER FEES

THESE FEES ARE PAID DIRECTLY FROM YOUR INVESTMENT.

ANNUAL FUND OPERATING EXPENSES

THESE EXPENSES ARE DEDUCTED FROM THE FUND'S ASSETS AND ARE
BASED ON EXPENSES PAID FOR THE PERIOD JULY 29, 1998 THROUGH
MAY 31, 1999.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
- ----------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.25%(1) None None None
- ----------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering
price or net asset value at redemption) None(2) 5.00%(3) 1.00%(4) None
- ----------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- ----------------------------------------------------------------------------------------------------
Management fee 0.85% 0.85% 0.85% 0.85%
- ----------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25% 1.00% 0.78% None
- ----------------------------------------------------------------------------------------------------
Other expenses(5) 0.28% 0.28% 0.28% 0.28%
- ----------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.38% 2.13% 1.91% 1.13%
- ----------------------------------------------------------------------------------------------------
</TABLE>

1 Reduced for purchases of $25,000 and over.

2 Investments that are not subject to any sales charge at the time of
purchase are subject to a contingent deferred sales charge ("CDSC") of
1.00% that will be imposed if you sell your shares within one year
after purchase, except for certain specific circumstances.

3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of
the CDSC.

4 Only applicable if you sell your shares within one year after purchase.

5 "Other Expenses" are estimated based on expenses anticipated for the
first complete fiscal year of the Fund.

EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, the tables below show your costs at
the end of each period based on these assumptions depending upon whether or not
you sell your shares at the end of each period.

3
<PAGE> 6
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
----------------------------------------- -----------------------------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
- ----------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C>
CLASS A $658 $939 $658 $939
- ----------------------------------------------------- -----------------------------------------
CLASS B $716 $967 $216 $667
- ----------------------------------------------------- -----------------------------------------
CLASS C $294 $601 $194 $601
- ----------------------------------------------------- -----------------------------------------
CLASS D $115 $360 $115 $360
- ----------------------------------------------------- -----------------------------------------
</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.

[CHESS GRAPHIC] ADDITIONAL INVESTMENT STRATEGY INFORMATION

This section provides additional information relating to the
Fund's principal strategies.

CONVERTIBLE AND FIXED-INCOME SECURITIES. The Fund may invest
up to 35% of its total assets in (i) convertible securities
(which may be rated below investment grade commonly known as
"junk bonds"), (ii) investment grade fixed-income securities
of domestic and foreign companies and governments and
international organizations, and (iii) U.S. government
securities.

DEFENSIVE INVESTING. The Fund may take temporary "defensive"
positions in attempting to respond to adverse market
conditions. The Fund may invest any amount of its total 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
Fund from an anticipated market downturn, it could have the
effect of reducing the benefit from any upswing in the market.
When the Fund takes a defensive position, it may not achieve
its investment objective.

PORTFOLIO TURNOVER. The Fund may engage in active and frequent
trading of portfolio securities to achieve its principal
investment strategies. The portfolio turnover rate is not
expected to exceed 200% annually under normal circumstances. A
high turnover rate, such as 200%, will increase Fund brokerage
costs. It also may increase the Fund's capital gains, which
are passed along to Fund shareholders as distributions. This,
in turn, may increase your tax liability as a Fund
shareholder. See the sections on "Distributions" and "Tax
Consequences."

The percentage limitations relating to the composition of the
Fund's portfolio apply at the time the Fund acquires an
investment and refer to the Fund's net assets unless otherwise
noted. Subsequent percentage changes that result from market
fluctuations will not require the Fund to sell any portfolio
security. The Fund may change its principal investment
strategies without shareholder approval; however, you would be
notified of any changes.

4
<PAGE> 7
[SCALES GRAPHIC] ADDITIONAL RISK INFORMATION

This section provides additional information relating to the
principal risks of investing in the Fund.

CONVERTIBLE SECURITIES. The Fund's investments in convertible
securities subject the Fund to the risks associated with both
fixed-income securities and common stocks. To the extent that
a convertible security's investment value is greater than its
conversion value, its price will likely increase when interest
rates fall and decrease when interest rates rise, as with a
fixed-income security. If the conversion value exceeds the
investment value, the price of the convertible security will
tend to fluctuate directly with the price of the underlying
equity security. The convertible securities in which the Fund
may invest may be below investment grade. Securities below
investment grade are commonly known as "junk bonds" and have
speculative characteristics.

FIXED-INCOME SECURITIES. All fixed-income securities are
subject to two types of risk: credit risk and interest rate
risk. Credit risk refers to the possibility that the issuer of
a security will be unable to make interest payments and/or
repay the principal on its debt. While the Fund invests in
investment grade fixed-income securities, certain of these
securities have speculative characteristics.

Interest rate risk refers to fluctuations in the value of a
fixed-income security resulting from changes in the general
level of interest rates. When the general level of interest
rate goes up, the prices of most fixed-income securities goes
down. When the general level of interest rates goes down, the
prices of most fixed-income securities goes 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.

YEAR 2000. The Fund could be adversely affected if the
computer systems necessary for the efficient operation of the
Fund's "Investment Manager," Morgan Stanley Dean Witter
Advisors, Inc., the Sub-Adviser, the Fund's other service
providers and the markets and corporate and governmental
issuers in which the Fund invests do not properly process and
calculate date-related information from and after January 1,
2000. While year 2000-related computer problems could have a
negative effect on the Fund, the Investment Manager, the
Sub-Adviser and their affiliates are working hard to avoid any
problems and to obtain assurances from their service providers
that they are taking similar steps.

In addition, it is possible that the markets for securities in
which the Fund invests may be detrimentally affected by
computer failures throughout the financial services industry
beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity
issues. In addition, corporate and

5
<PAGE> 8
governmental data processing errors also may result in
production problems for individual companies and overall
economic uncertainties. Earnings of individual issuers will be
affected by remediation costs, which may be substantial and
may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be
adversely affected.

[FACES GRAPHIC] FUND MANAGEMENT

The Fund has retained the Investment Manager -- Morgan Stanley
Dean Witter Advisors Inc. -- to provide administrative
services and manage its business affairs. The Investment
Manager has, in turn, contracted with the Sub-Adviser --
Miller Anderson & Sherrerd, LLP - to invest the Fund's assets,
including the placing of orders for the purchase and sale of
portfolio securities. The Investment Manager is a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co., a preeminent
global financial services firm that maintains leading market
positions in each of its three primary businesses: securities,
asset management and credit services. Its main business office
is located at Two World Trade Center, New York, New York
10048.

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, HAS
MORE THAN $136 BILLION IN ASSETS UNDER MANAGEMENT OR
ADMINISTRATION AS OF AUGUST 31, 1999.

The Sub-Adviser manages assets of approximately $62.4 billion
as of March 31, 1999 for investment companies, employee
benefit plans, endowments, foundation and other institutional
investors. The Sub-Adviser is an indirect subsidiary of Morgan
Stanley Dean Witter & Co. The Sub-Adviser's address is One
Tower Bridge, West Conshohocken, Pennsylvania.

The portfolio managers, currently six in total, are divided
into two teams: a value team and a growth team. Each team has
three members: one member of each team serves as the
designated team leader. The value team includes Nicholas J.
Kovich, James Jolinger and Robert J. Marcin. The growth team
includes Arden C. Armstrong, Brian Kramp and Gary G.
Schlarbaum. Mr. Kovich and Mr. Kramp are the respective team
leaders. Ms. Armstrong, Mr. Kovich, Mr. Marcin and Mr.
Schlarbaum are Managing Directors of the Sub-Adviser and have
been managing portfolios for the Sub-Adviser for over five
years. Mr. Jolinger is a Principal of the Sub-Adviser and the
Director of Research; he has been associated with the
Sub-Adviser since 1994 and prior to that was an equity analyst
with Oppenheimer Capital (1987-1994). Mr. Kramp is a Vice
President of the Sub-Adviser and has been affiliated with the
Sub-Adviser since 1997; prior to that he was an
analyst/portfolio manager with Meridian Investment Company
(1984-1997).

6
<PAGE> 9
The Fund pays the Investment Manager a monthly management fee
as full compensation for the services and facilities furnished
to the Fund, and for Fund expenses assumed by the Investment
Manager. The fee is calculated at the annual rate of 0.85%.
The Investment Manager pays the Sub-Adviser compensation equal
to 40% of its compensation for services and facilities
furnished to the Fund.

7
<PAGE> 10
SHAREHOLDER INFORMATION

[DOLLAR GRAPHIC] PRICING FUND SHARES

The price of Fund shares (excluding sales charges), called
"net asset value," is based on the value of the Fund's
portfolio securities. While the assets of each Class are
invested in a single portfolio of securities, the net asset
value of each Class will differ because the Classes have
different ongoing distribution fees.

The net asset value per share of the Fund is determined once
daily at 4:00 p.m. Eastern time, on each day that the New York
Stock Exchange is open (or, on days when the New York Stock
Exchange closes prior to 4:00 p.m., at such earlier time).
Shares will not be priced on days that the New York Stock
Exchange is closed.

The value of the Fund's portfolio securities is based on the
securities' market price when available. When a market price
is not readily available, including circumstances under which
the Investment Manager and/or Sub-Adviser determine that a
security's market price is not accurate, a portfolio security
is valued at its fair value, as determined under procedures
established by the Fund's Board of Trustees. In these cases,
the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price. In
addition, if the Fund holds securities primarily listed on
foreign exchanges, the value of the Fund's portfolio
securities may change on days when you will not be able to
purchase or sell your shares.

An exception to the Fund's general policy of using market
prices concerns its short-term debt portfolio securities. Debt
securities with remaining maturities of sixty days or less at
the time of purchase are valued at amortized cost. However, if
the cost does not reflect the securities' market value, these
securities will be valued at their fair value.

[HAND GRAPHIC] HOW TO BUY SHARES

You may open a new account to buy Fund shares or buy
additional Fund shares for an existing account by contacting
your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative. Your Financial Advisor
will assist you, step-by-step, with the procedures to invest
in the Fund. You may also purchase shares directly by calling
the Fund's transfer agent and requesting an application.

Because every investor has different immediate financial needs
and long-term investment goals, the Fund offers investors four
Classes of shares: Classes A, B, C and D. Class D shares are
only offered to a limited group of investors. Each Class of
shares offers a distinct structure of sales charges,
distribution and service fees, and other features that are
designed to address a variety of needs. Your Financial Advisor
or other authorized financial

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
(800) THE-DEAN FOR THE TELEPHONE NUMBER OF THE MORGAN STANLEY
DEAN WITTER OFFICE NEAREST YOU. YOU MAY ALSO ACCESS OUR OFFICE
LOCATOR ON OUR INTERNET SITE AT: WWW.MSDW.COM/INDIVIDUAL/FUNDS

8
<PAGE> 11
representative can help you decide which Class may be most
appropriate for you. When purchasing Fund shares, you must
specify which Class of shares you wish to purchase.

When you buy Fund shares, the shares are purchased at the next
share price calculated, less any applicable front-end sales
charge, after we receive your purchase order. Your payment is
due on the third business day after you place your purchase
order. We reserve the right to reject any order for the
purchase of Fund shares.

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.

<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
- -----------------------------------------------------------------------
MINIMUM INVESTMENT
----------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
- -----------------------------------------------------------------------
<S> <C> <C>
Regular Accounts $1,000 $ 100
- -----------------------------------------------------------------------
Individual Retirement
Accounts: Regular IRAs $1,000 $ 100

Education IRAs $ 500 $ 100
- -----------------------------------------------------------------------
EasyInvest(SM) (Automatically from
your checking or
savings account or
Money Market Fund) $ 100* $ 100*
- -----------------------------------------------------------------------
</TABLE>

* Provided your schedule of investments totals $1,000 in twelve months.

There is no minimum investment amount if you purchase Fund
shares through: (1) the Investment Manager's mutual fund asset
allocation plan, (2) a program, approved by the Fund's
distributor, in which you pay an asset-based fee for advisory,
administrative and/or brokerage services, or (3)
employer-sponsored employee benefit plan accounts.

INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER
INVESTORS/CLASS D SHARES. To be eligible to purchase Class D
shares, you must qualify under one of the investor categories
specified in the "Share Class Arrangements" section of this
Prospectus.

SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition
to buying additional Fund shares for an existing account by
contacting your Morgan Stanley Dean Witter Financial Advisor,
you may send a check directly to the Fund. To buy additional
shares in this manner:

- Write a "letter of instruction" to the Fund
specifying the name(s) on the account, the account
number, the social security or tax identification
number, the Class of shares you wish to purchase, and
the investment amount (which would include any
applicable front-end sales charge). The letter must
be signed by the account owner(s).

9
<PAGE> 12
- Make out a check for the total amount payable to:
Morgan Stanley Dean Witter Equity Fund.

- Mail the letter and check to Morgan Stanley Dean
Witter Trust FSB at P.O. Box 1040, Jersey City, NJ
07303.

[ARROWS GRAPHIC] HOW TO EXCHANGE SHARES

PERMISSIBLE FUND EXCHANGES. You may exchange shares of any
Class of the Fund for the same Class of any other continuously
offered Multi-Class Fund, or for shares of a No-Load Fund,
Money Market Fund, North American Government Income Trust or
Short-Term U.S. Treasury Trust, without the imposition of an
exchange fee. See the inside back cover of this Prospectus for
each Morgan Stanley Dean Witter Fund's designation as a
Multi-Class Fund, No-Load Fund or Money Market Fund. If a
Morgan Stanley Dean Witter Fund is not listed, consult the
inside back cover of that Fund's Prospectus for its
designation. For purposes of exchanges, shares of FSC Funds
(subject to a front-end sales charge) are treated as Class A
shares of a Multi-Class Fund.

Exchanges may be made after shares of the Fund acquired by
purchase have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or
dividend reinvestment. The current prospectus for each fund
describes its investment objective(s), policies and investment
minimum, 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 Morgan Stanley Dean Witter Fund
are not being offered for purchase.

EXCHANGE PROCEDURES. You can process an exchange by contacting
your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative. Otherwise, you must
forward an exchange privilege authorization form to the Fund's
transfer agent -- Morgan Stanley Dean Witter Trust FSB -- and
then write the transfer agent or call (800) 869-NEWS to place
an exchange order. You can obtain an exchange privilege
authorization form by contacting your Financial Advisor or
other authorized financial representative or by calling (800)
869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share
certificates.

An exchange to any Morgan Stanley Dean Witter Fund (except a
Money Market Fund) is made on the basis of the next calculated
net asset values of the Funds involved after the exchange
instructions are accepted. When exchanging into a Money Market
Fund, the Fund's shares are sold at their next calculated net
asset value and the Money Market Fund's shares are purchased
at their net asset value on the following business day.

10
<PAGE> 13

The Fund may terminate or revise the exchange privilege upon
required notice. The check writing privilege is not available
for Money Market Fund shares you acquire in an exchange.

TELEPHONE EXCHANGES. For your protection when calling Morgan
Stanley Dean Witter Trust FSB, we will employ reasonable
procedures to confirm that exchange instructions communicated
over the telephone are genuine. These procedures may include
requiring various forms of personal identification such as
name, mailing address, social security or other tax
identification number. Telephone instructions also may be
recorded.

Telephone instructions will be accepted if received by the
Fund's transfer agent between 9:00 a.m. and 4:00 p.m. Eastern
time, on any day the New York Stock Exchange is open for
business. During periods of drastic economic or market
changes, it is possible that the telephone exchange procedures
may be difficult to implement, although this has not been the
case with the Fund in the past.

MARGIN ACCOUNTS. If you have pledged your Fund shares in a
margin account, contact your Morgan Stanley Dean Witter
Financial Advisor or other authorized financial representative
regarding restrictions on the exchange of such shares.

TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of the
Fund for shares of another Morgan Stanley Dean Witter Fund
there are important tax considerations. For tax purposes, the
exchange out of the Fund is considered a sale of the Fund's
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.

FREQUENT EXCHANGES. A pattern of frequent exchanges may result
in the Fund limiting or prohibiting, at its discretion,
additional purchases and/or exchanges. The Fund will notify
you in advance of limiting your exchange privileges.

CDSC CALCULATIONS ON EXCHANGES. See the "Share Class
Arrangements" section of this Prospectus for a discussion of
how applicable contingent deferred sales charges (CDSCs) are
calculated for shares of one Morgan Stanley Dean Witter Fund
that are exchanged for shares of another.

For further information regarding exchange privileges, you
should contact your Morgan Stanley Dean Witter Financial
Advisor or call (800) 869-NEWS.

11
<PAGE> 14
[HAND GRAPHIC] HOW TO SELL SHARES

You can sell some or all of your Fund shares at any time. If
you sell Class A, Class B or Class C shares, your net sale
proceeds are reduced by the amount of any applicable CDSC.
Your shares will be sold at the next price calculated after we
receive your order to sell as described below.

<TABLE>
<CAPTION>
OPTIONS PROCEDURES
- -------------------------------------------------------------------------------------------------
<S> <C>
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter
Financial Advisor or Financial Advisor other authorized financial
representative.
----------------------------------------------------------------------
Payment will be sent to the address to which the account is registered
[PHONE GRAPHIC] or deposited in your brokerage account.
- -------------------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction"
[LETTER GRAPHIC] that includes:

- your account number;

- the dollar amount or the number of shares you wish to sell;

- 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, New Jersey 07303. If you hold share certificates,
you must return the certificates, along with the letter and any
required additional documentation.
----------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account
is registered, or otherwise according to your instructions.
----------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter Family
Withdrawal Plan of Funds has a total market value of at least $10,000, you may elect
[ARROW GRAPHIC] 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>

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,

12
<PAGE> 15
payment of the sale proceeds may be delayed for the minimum
time needed to verify that the check has been honored (not
more than fifteen days from the time we receive the check).

TAX CONSIDERATIONS. Normally, your sale of Fund shares is
subject to federal and state income tax. You should review the
"Tax Consequences" section of this Prospectus and consult your
own tax professional about the tax consequences of a sale.

REINSTATEMENT PRIVILEGE. If you sell Fund shares and have not
previously exercised the reinstatement privilege, you may,
within 35 days after the date of sale, invest any portion of
the proceeds in the same Class of Fund shares at their net
asset value and receive a pro rata credit for any CDSC paid in
connection with the sale.

INVOLUNTARY SALES. The Fund reserves the right, on sixty days'
notice, to sell the shares of any shareholder (other than
shares held in an IRA or 403(b) Custodial Account) whose
shares, due to sales by the shareholder, have a value below
$100, or in the case of an account opened through
EasyInvest(SM), if after 12 months the shareholder has
invested less than $1,000 in the account.

However, before the Fund sells your shares in this manner, we
will notify you and allow you sixty days to make an additional
investment in an amount that will increase the value of your
account to at least the required amount before the sale is
processed. No CDSC will be imposed on any involuntary sale.

[CHECK GRAPHIC] DISTRIBUTIONS

The Fund passes substantially all of its earnings from income
and capital gains along to its investors as "distributions."
The Fund earns income from stocks and interest from
fixed-income investments. These amounts are passed along to
Fund shareholders as "income dividend distributions." The Fund
realizes capital gains whenever it sells securities for a
higher price than it paid for them. These amounts may be
passed along as "capital gain distributions."

The Fund declares income dividends separately for each Class.
Distributions paid on Class A and Class D shares will be
higher than for Class B and Class C because distribution fees
that Class B and Class C pay are higher. Normally, income
dividends are distributed annually. Capital gains, if any, are
usually distributed in December.

TARGETED DIVIDENDS(SM)

YOU MAY SELECT TO HAVE YOUR FUND DISTRIBUTIONS AUTOMATICALLY
INVESTED IN OTHER CLASSES OF FUND SHARES OR CLASSES OF ANOTHER
MORGAN STANLEY DEAN WITTER FUND THAT YOU OWN. CONTACT YOUR
MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR FOR FURTHER
INFORMATION ABOUT THIS SERVICE.

13
<PAGE> 16
The Fund, however, may retain and reinvest any long-term
capital gains. The Fund may at times make payments from
sources other than income or capital gains that represent a
return of a portion of your investment.

Distributions are reinvested automatically in additional
shares of the same Class and automatically credited to your
account, unless you request in writing that all distributions
be paid in cash. If you elect the cash option, the Fund will
mail a check to you no later than seven business days after
the distribution is declared. 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.

[1040 GRAPHIC] TAX CONSEQUENCES

As with any investment, you should consider how your Fund
investment will be taxed. The tax information in this
Prospectus is provided as general information. You should
consult your own tax professional about the tax consequences
of an investment in the Fund.

Unless your investment in the Fund is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need to
be aware of the possible tax consequences when:

- The Fund makes distributions; and

- You sell Fund shares, including an exchange to another
Morgan Stanley Dean Witter Fund.

TAXES ON DISTRIBUTIONS. Your distributions are normally
subject to federal and state income tax when they are paid,
whether you take them in cash or reinvest them in Fund shares.
A distribution also may be subject to local income tax. Any
income dividend distributions and any short-term capital gain
distributions are taxable to you as ordinary income. Any
long-term capital gain distributions are taxable as long-term
capital gains, no matter how long you have owned shares in the
Fund.

Every January, you will be sent a statement (IRS Form
1099-DIV) showing the taxable distributions paid to you in the
previous year. The statement provides full information on your
dividends and capital gains for tax purposes.

TAXES ON SALES. Your sale of Fund shares normally is subject
to federal and state income tax and may result in a taxable
gain or loss to you. A sale also may be subject to local
income tax. Your exchange of Fund shares for shares of another
Morgan Stanley Dean Witter Fund is treated for tax purposes
like a sale of your original shares and

14
<PAGE> 17
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.

[ABCD GRAPHIC] SHARE CLASS ARRANGEMENTS

The Fund offers several Classes of shares having different
distribution arrangements designed to provide you with
different purchase options according to your investment needs.
Your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative can help you decide which
Class may be appropriate for you.

The general public is offered three Classes: Class A shares,
Class B shares and Class C shares, which differ principally in
terms of sales charges and ongoing expenses. A fourth Class,
Class D shares, is offered only to a limited category of
investors. Shares that you acquire through reinvested
distributions will not be subject to any front-end sales
charge or CDSC -- contingent deferred sales charge. Sales
personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class
provide for the distribution financing of shares of that
Class.

The chart below compares the sales charge and the maximum
annual 12b-1 fees applicable to each Class:

<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1 FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
A Maximum 5.25% initial sales charge reduced for purchase of
$25,000 or more; shares sold without an initial sales charge are
generally subject to a 1.0% CDSC during first year. 0.25%
- --------------------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to 0%
after six years. 1.0%
- --------------------------------------------------------------------------------------------------
C 1.0% CDSC during first year 1.0%
- --------------------------------------------------------------------------------------------------
D None None
- --------------------------------------------------------------------------------------------------
</TABLE>

CLASS A SHARES Class A shares are sold at net asset value plus
an initial sales charge of up to 5.25%. The initial sales
charge is reduced for purchases of $25,000 or more according
to the schedule below. Investments of $1 million or more are
not subject to an initial sales charge, but are generally
subject to a contingent deferred sales charge, or CDSC, of
1.0% on sales made within one year after the last day of the
month of purchase. The CDSC will be assessed in the same
manner and with the same CDSC waivers as with Class B shares.
Class A shares are also subject to a distribution (12b-1) fee
of up to 0.25% of the average daily net assets of the Class.

15
<PAGE> 18
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:

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.

<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
----------------------------------------------
PERCENTAGE OF APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION PUBLIC OFFERING PRICE OF AMOUNT INVESTED
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.25% 5.54%
- ----------------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
- ----------------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
- ----------------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
- ----------------------------------------------------------------------------------------------
$250,000 but less than $1 million 2.00% 2.04%
- ----------------------------------------------------------------------------------------------
$1 million and over 0 0
- ----------------------------------------------------------------------------------------------
</TABLE>

The reduced sales charge schedule is applicable to purchases
of Class A shares in a single transaction by:

- A single account (including an individual, trust or
fiduciary account).

- Family member accounts (limited to husband, wife and
children under the age of 21).

- Pension, profit sharing or other employee benefit plans of
companies and their affiliates.

- Tax-exempt organizations.

- Groups organized for a purpose other than to buy mutual fund
shares.

COMBINED PURCHASE PRIVILEGE. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares
of the Fund in a single transaction with purchases of Class A
shares of other Multi-Class Funds and shares of FSC Funds.

RIGHT OF ACCUMULATION. You also may benefit from a reduction
of sales charges, if the cumulative net asset value of Class A
shares of the Fund purchased in a single transaction, together
with shares of other Funds you currently own which were
previously purchased at a price including a front-end sales
charge (including shares acquired through reinvestment of
distributions), amounts to $25,000 or more. Also, if you have
a cumulative net asset value of all your Class A and Class D
shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase
Class D shares of any Fund subject to the Fund's minimum
initial investment requirement.

You must notify your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative, (or
Morgan Stanley Dean Witter Trust FSB if you

16
<PAGE> 19
purchase directly through the Fund) at the time a purchase
order is placed, that the purchase qualifies for the reduced
charge under the Right of Accumulation. Similar notification
must be made in writing when an order is placed by mail. The
reduced sales charge will not be granted if: (i) notification
is not furnished at the time of the order; or (ii) a review of
the records of Dean Witter Reynolds or other authorized dealer
of Fund shares or the Fund's transfer agent does not confirm
your represented holdings.

LETTER OF INTENT. The schedule of reduced sales charges for
larger purchases also will be available to you if you enter
into a written "letter of intent." A letter of intent provides
for the purchase of Class A shares of the Fund or other
Multi-Class Funds or shares of FSC Funds within a
thirteen-month period. The initial purchase under a letter of
intent must be at least 5% of the stated investment goal. To
determine the applicable sales charge reduction, you may also
include: (1) the cost of shares of other Morgan Stanley Dean
Witter Funds which were previously purchased at a price
including a front-end sales charge during the 90-day period
prior to the distributor receiving the letter of intent, and
(2) the cost of shares of other Funds you currently own
acquired in exchange for shares of Funds purchased during that
period at a price including a front-end sales charge. You can
obtain a letter of intent by contacting your Morgan Stanley
Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not
achieve the stated investment goal within the thirteen-month
period, you are required to pay the difference between the
sales charges otherwise applicable and sales charges actually
paid, which may be deducted from your investment.

OTHER SALES CHARGE WAIVERS. In addition to investments of $1
million or more, your purchase of Class A shares is not
subject to a front-end sales charge (or a CDSC upon sale) if
your account qualifies under one of the following categories:

- 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
mandatory sale or transfer restrictions on termination)
approved by the Fund's distributor pursuant to which they
pay an asset based fee for investment advisory,
administrative and/or brokerage services.

- Employer-sponsored employee benefit plans, whether or not
qualified under the Internal Revenue Code, for which Morgan
Stanley Dean Witter Trust FSB serves as trustee or Dean
Witter Reynolds' Retirement Plan Services serves as
recordkeeper under a written Recordkeeping Services
Agreement ("MSDW Eligible Plans") which have at least 200
eligible employees.

- A MSDW Eligible Plan whose Class B shares have converted to
Class A shares, regardless of the plan's asset size or
number of eligible employees.

17
<PAGE> 20
- A client of a Morgan Stanley Dean Witter Financial Advisor
who joined us from another investment firm within six months
prior to the date of purchase of Fund shares, and you used
the proceeds from the sale of shares of a proprietary mutual
fund of that Financial Advisor's previous firm that imposed
either a front-end or deferred sales charge to purchase
Class A shares, provided that: (1) you sold the shares not
more than 60 days prior to purchase, 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 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.

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.

<TABLE>
<CAPTION>
YEAR SINCE PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- --------------------------------------------------------------------------------------------
<S> <C>
First 5.0%
- --------------------------------------------------------------------------------------------
Second 4.0%
- --------------------------------------------------------------------------------------------
Third 3.0%
- --------------------------------------------------------------------------------------------
Fourth 2.0%
- --------------------------------------------------------------------------------------------
Fifth 2.0%
- --------------------------------------------------------------------------------------------
Sixth 1.0%
- --------------------------------------------------------------------------------------------
Seventh and thereafter None
- --------------------------------------------------------------------------------------------
</TABLE>

Each time you place an order to sell or exchange shares,
shares with no CDSC will be sold or exchanged first, then
shares with the lowest CDSC will be sold or exchanged next.
For any shares subject to a CDSC, the CDSC will be assessed on
an amount equal to the lesser of the current market value or
the cost of the shares being sold.

CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived
in the case of:

- Sales of shares held at the time you die or become disabled
(within the definition in Section 72(m)(7) of the Internal
Revenue Code which relates to the ability to engage in
gainful employment), if the shares are: (i) registered
either in your name

18
<PAGE> 21
(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 591/2); (ii)
distributions from an IRA or 403(b) Custodial Account
following attainment of age 591/2; 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 a 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.

All waivers will be granted only following the Fund's
distributor receiving confirmation of your entitlement. If you
believe you are eligible for a CDSC waiver, please contact
your Financial Advisor or call (800) 869-NEWS.

DISTRIBUTION FEE. Class B shares are subject to an annual
12b-1 fee of 1.0% of the net assets of Class B.

CONVERSION FEATURE. After ten (10) years, Class B shares will
convert automatically to Class A shares of the Fund with no
initial sales charge. The ten year period runs from the last
day of the month in which the shares were purchased, or in the
case of Class B shares acquired through an exchange, from the
last day of the month in which the original Class B shares
were purchased; the shares will convert to Class A shares
based on their relative net asset values in the month
following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically
reinvested distributions will convert to Class A shares on the
same basis. (Class B shares 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.)

19
<PAGE> 22
In the case of Class B shares held in a MSDW Eligible Plan,
the plan is treated as a single investor and all Class B
shares will convert to Class A shares on the conversion date
of the Class B shares of a Morgan Stanley Dean Witter Fund
purchased by that plan.

Currently, the Class B share conversion is not a taxable
event; the conversion feature may be cancelled if it is deemed
a taxable event in the future by the Internal Revenue Service.

If you exchange your Class B shares for shares of a Money
Market Fund, a No-Load Fund, North American Government Income
Trust or Short-Term U.S. Treasury Trust, the holding period
for conversion is frozen as of the last day of the month of
the exchange and resumes on the last day of the month you
exchange back into Class B shares.

EXCHANGING SHARES SUBJECT TO A CDSC. There are special
considerations when you exchange Fund shares that are subject
to a CDSC. When determining the length of time you held the
shares and the corresponding CDSC rate, any period (starting
at the end of the month) during which you held shares of a
fund that does not charge a CDSC will not be counted. Thus, in
effect the "holding period" for purposes of calculating the
CDSC is frozen upon exchanging into a fund that does not
charge a CDSC.

For example, if you held Class B shares of the Fund for one
year, exchanged to Class B of another Morgan Stanley Dean
Witter Multi-Class Fund for another year, then sold your
shares, a CDSC rate of 4% would be imposed on the shares based
on a two year holding period - one year for each Fund.
However, if you had exchanged the shares of the Fund for a
Money Market Fund (which does not charge a CDSC) instead of
the Multi-Class Fund, then sold your shares, a CDSC rate of 5%
would be imposed on the shares based on a one year holding
period. The one year in the Money Market Fund would not be
counted. Nevertheless, if shares subject to a CDSC are
exchanged for a fund that does not charge a CDSC, you will
receive a credit when you sell the shares equal to the
distribution (12b-1) fees you paid on those shares while in
that Fund up to the amount of any applicable CDSC.

In addition, shares that are exchanged into or from a Morgan
Stanley Dean Witter Fund subject to a higher CDSC rate will be
subject to the higher rate, even if the shares are
re-exchanged into a Fund with a lower CDSC rate.

CLASS C SHARES Class C shares are sold at net asset value with
no initial sales charge but are subject to a CDSC of 1.0% on
sales made within one year after the last day of the month of
purchase. The CDSC will be assessed in the same manner and
with the same CDSC waivers as with Class B shares.

20
<PAGE> 23
DISTRIBUTION FEE. Class C shares are subject to an annual
distribution (12b-1) fee of up to 1.0% of the average daily
net assets of that Class. The Class C shares' distribution fee
may cause that Class to have higher expenses and pay lower
dividends than Class A or Class D shares. Unlike Class B
shares, Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares may be
subject to distribution (12b-1) fees applicable to Class C
shares for an indefinite period.

CLASS D SHARES Class D shares are offered without any sales
charge on purchases or sales and without any distribution
(12b-1) fee. Class D shares are offered only to investors
meeting an initial investment minimum of $5 million ($25
million for MSDW Eligible Plans) and the following categories
of investors:

- Investors participating in the Investment Manager's mutual
fund asset allocation program (subject to all of its terms
and conditions, including mandatory sale or transfer
restrictions on termination) pursuant to which they pay an
asset-based fee.

- Employee benefit plans maintained by Morgan Stanley Dean
Witter & Co. or any of its subsidiaries for the benefit of
certain employees of Morgan Stanley Dean Witter & Co. and
its subsidiaries.

- Certain unit investment trusts sponsored by Dean Witter
Reynolds.

- Certain other open-end investment companies whose shares are
distributed by the Fund's distributor.

- Investors who were shareholders of the Dean Witter
Retirement Series on September 11, 1998 for additional
purchases for their former Dean Witter Retirement Series
accounts.

MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million
($25 million for MSDW Eligible Plans) initial investment to
qualify to purchase Class D shares you may combine: (1)
purchases in a single transaction of Class D shares of the
Fund and other Morgan Stanley Dean Witter Multi-Class Funds
and/or (2) previous purchases of Class A and Class D shares of
Multi-Class Funds and shares of FSC Funds you currently own,
along with shares of Morgan Stanley Dean Witter Funds you
currently own that you acquired in exchange for those shares.

21
<PAGE> 24
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you
receive a cash payment representing an income dividend or
capital gain and you reinvest that amount in the applicable
Class of shares by returning the check within 30 days of the
payment date, the purchased shares would not be subject to an
initial sales charge or CDSC.

PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a
Plan of Distribution in accordance with Rule 12b-1 under the
Investment Company Act of 1940 with respect to the
distribution of Class A, Class B and Class C shares. The Plan
allows the Fund to pay distribution fees for the sale and
distribution of these shares. It also allows the Fund to pay
for services to shareholders of Class A, Class B and Class C
shares. Because these fees are paid out of the Fund's assets
on an ongoing basis, over time these fees will increase the
cost of your investment in these Classes and may cost you more
than paying other types of sales charges.

22
<PAGE> 25
Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the period July 29, 1998 through May 31, 1999. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost on
an investment in the Fund (assuming reinvestment of all dividends and
distributions).

This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report, which is available upon request.

Class B
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE PERIOD JULY 29, 1998*
THROUGH MAY 31, 1999
- --------------------------------------------------------------------------------
<S> <C>
SELECTED PER-SHARE DATA++:
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00
================================================================================
Income (loss) from investment operations:
Net investment income (loss) (0.07)
Net realized and unrealized gain 1.76
- --------------------------------------------------------------------------------
Total income from investment operations 1.69
- --------------------------------------------------------------------------------
Net asset value, end of period $ 11.69
================================================================================
TOTAL RETURN (1) 16.90%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- --------------------------------------------------------------------------------
Expenses 2.13%
- --------------------------------------------------------------------------------
Net investment income (loss) (0.68)%
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------
Net assets, end of period, in thousands $ 273,345
- --------------------------------------------------------------------------------
Portfolio turnover rate(1) 80%
- --------------------------------------------------------------------------------
</TABLE>

* Commencement of operations.

++ The per share amounts were computed using an average number of shares
outstanding.

+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

23
<PAGE> 26
Class A
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE PERIOD JULY 29, 1998*
THROUGH MAY 31, 1999
- --------------------------------------------------------------------------------
<S> <C>
SELECTED PER-SHARE DATA++:
- --------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
================================================================================
Income (loss) from investment operations:
Net investment income (loss) 0.01
Net realized and unrealized gain 1.75
- --------------------------------------------------------------------------------
Total income from investment operations 1.76
- --------------------------------------------------------------------------------
Net asset value, end of period $11.76
================================================================================
TOTAL RETURN (1) 17.60%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- --------------------------------------------------------------------------------
Expenses 1.38%
- --------------------------------------------------------------------------------
Net investment income (loss) 0.07%
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------
Net assets, end of period, in thousands $7,933
- --------------------------------------------------------------------------------
Portfolio turnover rate(1) 80%
- --------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.

++ The per share amounts were computed using an average number of shares
outstanding.

+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

24
<PAGE> 27
Class C
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE PERIOD JULY 29, 1998*
THROUGH MAY 31, 1999
- --------------------------------------------------------------------------------
<S> <C>
SELECTED PER-SHARE DATA++:
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00
================================================================================
Income (loss) from investment operations:
Net investment income (loss) (0.04)
Net realized and unrealized gain 1.74
Total income from investment operations 1.70
Net asset value, end of period $ 11.70
================================================================================
TOTAL RETURN (1) 17.10%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- --------------------------------------------------------------------------------
Expenses 1.91%
- --------------------------------------------------------------------------------
Net investment income (loss) (0.46)%
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------
Net assets, end of period, in thousands $ 15,744
- --------------------------------------------------------------------------------
Portfolio turnover rate(1) 80%
- --------------------------------------------------------------------------------
</TABLE>

* Commencement of operations.

++ The per share amounts were computed using an average number of shares
outstanding.

+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

25
<PAGE> 28
Class D
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE PERIOD JULY 29, 1998*
THROUGH MAY 31, 1999
- --------------------------------------------------------------------------------
<S> <C>
SELECTED PER-SHARE DATA++:
- --------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
================================================================================
Income (loss) from investment operations:
Net investment income (loss) 0.03
Net realized and unrealized gain 1.76
- --------------------------------------------------------------------------------
Total income from investment operations 1.79
- --------------------------------------------------------------------------------
Net asset value, end of period $11.79
================================================================================
TOTAL RETURN (1) 17.90%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- --------------------------------------------------------------------------------
Expenses 1.13%
- --------------------------------------------------------------------------------
Net investment income (loss) 0.32%
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------
Net assets, end of period, in thousands $69
- --------------------------------------------------------------------------------
Portfolio turnover rate(1) 80%
- --------------------------------------------------------------------------------
</TABLE>

* Commencement of operations.

++ The per share amounts were computed using an average number of shares
outstanding.

+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

26
<PAGE> 29
Notes

27
<PAGE> 30
Notes

28
<PAGE> 31
Morgan Stanley Dean Witter
Family of Funds

The Morgan Stanley Dean Witter Family of Funds offers investors a
wide range of investment choices. Come on in and meet the family!

<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
GROWTH FUNDS GROWTH FUNDS Information Fund
Aggressive Equity Fund Natural Resource Development Securities
American Opportunities Fund Precious Metals and Minerals Trust
Capital Growth Securities
Developing Growth Securities GLOBAL/INTERNATIONAL FUNDS
Growth Fund Competitive Edge Fund - "Best Ideas" Portfolio
Market Leader Trust European Growth Fund
Mid-Cap Equity Trust Fund of Funds - International Portfolio
Small Cap Growth Fund International Fund
Special Value Fund International SmallCap Fund
Japan Fund
THEME FUNDS Latin American Growth Fund
Financial Services Pacific Growth Fund
Trust Health Sciences Trust

- ---------------------------------------------------------------------------------------------------------------
GROWTH & INCOME FUNDS Balanced Growth Fund Total Market Index Fund
Balanced Income Fund Total Return Trust
Convertible Securities Trust Value Fund
Dividend Growth Securities Value-Added Market Series/Equity Portfolio
Equity Fund
Fund of Funds - Domestic Portfolio THEME FUNDS
Income Builder Fund Global Utilities Fund
Mid-Cap Dividend Growth Securities Real Estate Fund
S&P 500 Index Fund Utilities Fund
S&P 500 Select Fund
Strategist Fund GLOBAL FUNDS
Global Dividend Growth Securities

- ---------------------------------------------------------------------------------------------------------------
INCOME FUNDS GOVERNMENT INCOME FUNDS GLOBAL INCOME FUNDS
Federal Securities Trust North American Government Income Trust
Short-Term U.S. Treasury Trust World Wide Income Trust
U.S. Government Securities Trust
TAX-FREE INCOME FUNDS
DIVERSIFIED INCOME FUNDS California Tax-Free Income Fund
Diversified Income Trust Hawaii Municipal Trust(FSC)
CORPORATE INCOME FUNDS Limited Term Municipal Trust(NL)
High Yield Securities Multi-State Municipal Series Trust(FSC)
Intermediate Income Securities New York Tax-Free Income Fund
Short-Term Bond Fund(NL) Tax-Exempt Securities Trust

- ---------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Liquid Asset Fund(MM) California Tax-Free Daily Income Trust(MM)
U.S. Government Money Market Trust(MM) New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
</TABLE>

There may be Funds created after this Prospectus was published. Please consult
the inside back cover of a new Fund's prospectus for its designations, e.g.,
Multi-Class Fund or Money Market Fund.

Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
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> 32

PROSPECTUS - SEPTEMBER 28, 1999

Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's Statement of Additional Information also provides additional information
about the Fund. The Statement of Additional Information is incorporated herein
by reference (legally is part of this Prospectus). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:

(800) 869-NEWS

You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:

WWW.MSDW.COM/INDIVIDUAL/FUNDS

Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov), and copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC, Washington,
DC 20549-6009.

(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-49585)

MORGAN STANLEY DEAN WITTER

EQUITY FUND

[PHOTO]

A MUTUAL FUND THAT
SEEKS TOTAL RETURN

<PAGE> 33

<TABLE>
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY
DEAN WITTER
SEPTEMBER 28, 1999 EQUITY FUND
</TABLE>

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

This Statement of Additional Information is not a Prospectus. The
Prospectus (dated September 28, 1999) for the Morgan Stanley Dean Witter Equity
Fund may be obtained without charge from the Fund at its address or telephone
number listed below or from Dean Witter Reynolds at any of its branch offices.

Morgan Stanley Dean Witter
Equity Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE> 34

TABLE OF CONTENTS

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

<TABLE>
<S> <C> <C>
I. Fund History................................................ 4
II. Description of the Fund and Its Investments and Risks....... 4
A. Classification..................................... 4
B. Investment Strategies and Risks.................... 4
C. Fund Policies/Investment Restrictions.............. 13
III. Management of the Fund...................................... 14
A. Board of Trustees.................................. 14
B. Management Information............................. 14
C. Compensation....................................... 20
IV. Control Persons and Principal Holders of Securities......... 22
V. Investment Management and Other Services.................... 22
A. Investment Manager and Sub-Adviser................. 22
B. Principal Underwriter.............................. 23
C. Services Provided by the Investment Manager and the
Sub-Adviser and Fund
Expenses Paid by Third Parties..................... 23
D. Dealer Reallowances................................ 24
E. Rule 12b-1 Plan.................................... 25
F. Other Service Providers............................ 28
VI. Brokerage Allocation and Other Practices.................... 29
A. Brokerage Transactions............................. 29
B. Commissions........................................ 29
C. Brokerage Selection................................ 30
D. Directed Brokerage................................. 31
E. Regular Broker-Dealers............................. 31
VII. Capital Stock and Other Securities.......................... 31
VIII. Purchase, Redemption and Pricing of Shares.................. 32
A. Purchase/Redemption of Shares...................... 32
B. Offering Price..................................... 32
IX. Taxation of the Fund and Shareholders....................... 33
X. Underwriters................................................ 35
XI. Calculation of Performance Data............................. 35
XII. Financial Statements........................................ 36
</TABLE>

2
<PAGE> 35

GLOSSARY OF SELECTED DEFINED TERMS

The terms defined in this glossary are frequently used in this Statement of
Additional Information (other terms used occasionally are defined in the text of
the document).

"Custodian"--The Bank of New York.

"Dean Witter Reynolds"--Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.

"Distributor"--Morgan Stanley Dean Witter Distributors Inc., a wholly-owned
broker-dealer subsidiary of MSDW.

"Financial Advisors"--Morgan Stanley Dean Witter authorized financial
services representatives.

"Fund"--Morgan Stanley Dean Witter Equity Fund, a registered open-end
investment company.

"Investment Manager"--Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW.

"Independent Trustees"--Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.

"Morgan Stanley & Co."--Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.

"Morgan Stanley Dean Witter Funds"--Registered investment companies (i) for
which the Investment Manager serves as the investment advisor; and (ii) that
hold themselves out to investors as related companies for investment and
investor services.

"MSDW"--Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.

"MSDW Services Company"--Morgan Stanley Dean Witter Services Company Inc.,
a wholly-owned fund services subsidiary of the Investment Manager.

"Sub-Adviser"--Miller Anderson & Sherrerd, LLP, an indirect subsidiary of
MSDW.

"Transfer Agent"--Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.

"Trustees"--The Board of Trustees of the Fund.

3
<PAGE> 36

I. FUND HISTORY
- --------------------------------------------------------------------------------

The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on April 6, 1998.

II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------

A. CLASSIFICATION

The Fund is an open-end management investment company whose investment
objective is total return.

B. INVESTMENT STRATEGIES AND RISKS

The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information" and "Additional Risk Information."

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") as a hedge
against fluctuations in future foreign exchange rates. The Fund may conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large, commercial and investment banks) and their
customers. Forward contracts only will be entered into with United States banks
and their foreign branches, insurance companies and other dealers whose assets
total $1 billion or more, or foreign banks whose assets total $1 billion or
more. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.

The Sub-Adviser also may from time to time utilize forward contracts to
hedge a foreign security held in the portfolio or a security which pays out
principal tied to an exchange rate between the U.S. dollar and a foreign
currency, against a decline in value of the applicable foreign currency. They
also may be used to lock in the current exchange rate of the currency in which
those securities anticipated to be purchased are denominated. At times, the Fund
may enter into "cross-currency" hedging transactions involving currencies other
than those in which securities are held or proposed to be purchased are
denominated.

The Fund will not enter into forward currency contracts or maintain a net
exposure to these contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's portfolio securities.

Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will, however, do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the spread
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.

The Fund may be limited in its ability to enter into hedging transactions
involving forward contracts by the Internal Revenue Code requirements relating
to qualification as a regulated investment company.

Forward currency contracts may limit gains on portfolio securities that
could otherwise be realized had they not been utilized and could result in
losses. The contracts also may increase the Fund's volatility and may involve a
significant amount of risk relative to the investment of cash.

4
<PAGE> 37

OPTIONS AND FUTURES TRANSACTIONS. The Fund may engage in transactions in
listed and OTC options on eligible portfolio securities and stock indexes.
Listed options are issued or guaranteed by the exchange on which they are traded
or by a clearing corporation such as the Options Clearing Corporation ("OCC").
Ownership of a listed call option gives the Fund the right to buy from the OCC
(in the U.S.) or other clearing corporation or exchange, the underlying security
or currency covered by the option at the stated exercise price (the price per
unit of the underlying security) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then have
the obligation to sell to the OCC (in the U.S.) or other clearing corporation or
exchange, the underlying security or currency at that exercise price prior to
the expiration date of the option, regardless of its then current market price.
Ownership of a listed put option would give the Fund the right to sell the
underlying security or currency to the OCC (in the U.S.) or other clearing
corporation or exchange, at the stated exercise price. Upon notice of exercise
of the put option, the writer of the put would have the obligation to purchase
the underlying security or currency from the OCC (in the U.S.) or other clearing
corporation or exchange, at the exercise price.

Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities and on the U.S. dollar and foreign currencies in which
they are denominated, without limit.

The Fund will receive from the purchaser, in return for a call it has
written, a "premium;" i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (or currencies) alone.
Moreover, the premium received will offset a portion of the potential loss
incurred by the Fund if the securities (or currencies) underlying the option
decline in value.

The Fund may be required, at any time during the option period, to deliver
the underlying security (or currency) against payment of the exercise price on
any calls it has written. This obligation is terminated upon the expiration of
the option period or at such earlier time when the writer effects a closing
purchase transaction. A closing purchase transaction is accomplished by
purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.

A call option is "covered" if the Fund owns the underlying security subject
to the option or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional consideration (in cash,
Treasury bills or other liquid portfolio securities) held in a segregated
account on the Fund's books) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund holds a call on
the same security as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written or (ii)
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, Treasury bills or other liquid portfolio
securities in a segregated account on the Fund's books.

Options written by the Fund normally have expiration dates of from up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.

Purchasing Call and Put Options. The Fund may purchase listed and OTC call
and put options in amounts equaling up to 5% of its total assets. The purchase
of a call option would enable the Fund, in return for the premium paid to lock
in a purchase price for a security or currency during the term of the option.
The purchase of a put option would enable the Fund, in return for a premium
paid, to lock in a price at which it may sell a security or currency during the
term of the option.

Options on Foreign Currencies. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts.

OTC Options. OTC options are purchased from or sold (written) to dealers
or financial institutions which have entered into direct agreements with the
Fund. With OTC options, such variables as expiration date, exercise price and
premium will be agreed upon between the Fund and the transacting dealer, without
the intermediation of a third party such as the OCC. The Fund will engage in OTC
option

5
<PAGE> 38

transactions only with member banks of the Federal Reserve Bank System or
primary dealers in U.S. Government securities or with affiliates of such banks
or dealers.

Stock Index Options. The Fund may invest in options on stock indexes.
Options on stock indexes are similar to options on stock except that, rather
than the right to take or make delivery of stock at a specified price, an option
on a stock index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the stock index upon which the
option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount.

Risks of Options Transactions. The successful use of options depends on
the ability of the Sub-Adviser to forecast correctly interest rates, currency
exchange rates and/or market movements. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, the Fund may receive a lower total return
from the portion of its portfolio upon which calls have been written than it
would have had such calls not been written. During the option period, the
covered call writer has, in return for the premium on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security (or the value of its denominated currency)
increase, but has retained the risk of loss should the price of the underlying
security (or the value of its denominated currency) decline. The covered put
writer also retains the risk of loss should the market value of the underlying
security decline below the exercise price of the option less the premium
received on the sale of the option. In both cases, the writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. Prior to exercise or expiration, an option position can only be
terminated by entering into a closing purchase or sale transaction. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price.

The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. In the case of OTC
options, if the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, due to insolvency or otherwise, the Fund would lose the premium
paid for the option as well as any anticipated benefit of the transaction.

Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security which may be
written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.

The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.

The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market.

There can be no assurance that a liquid secondary market will exist for a
particular option at any specific time.
6
<PAGE> 39

The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.

Futures Contracts. The Fund may purchase and sell interest rate, currency
and index futures contracts that are traded on U.S. and foreign commodity
exchanges on such underlying securities as U.S. Treasury bonds, notes, bills and
GNMA Certificates and/or any foreign government fixed-income security, on
various currencies and on such indexes of U.S. and foreign securities as may
exist or come into existence.

A futures contract purchaser incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified time
in the future for a specified price. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price. The purchase of a futures
contract enables the Fund, during the term of the contract, to lock in a price
at which it may purchase a security or currency and protect against a rise in
prices pending purchase of portfolio securities. The sale of a futures contract
enables the Fund to lock in a price at which it may sell a security or currency
and protect against declines in the value of portfolio securities.

Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Index futures contracts provide for
the delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the open or close of the last trading day
of the contract and the futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Fund will be able to enter into a closing
transaction.

Margin. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities or
other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges on
which futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required by
the exchanges.

Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make

7
<PAGE> 40

subsequent deposits of cash or U.S. Government securities, called "variation
margin," which are reflective of price fluctuations in the futures contract.

Options on Futures Contracts. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect to
such options to terminate an existing position. An option on a futures contract
gives the purchaser the right (in return for the premium paid), and the writer
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option is accompanied by delivery of the accumulated balance in
the writer's futures margin account, which represents the amount by which the
market price of the futures contract at the time of exercise exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.

The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an option
on a futures contract are included in initial margin deposits.

Limitations on Futures Contracts and Options on Futures. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's net
assets which may be subject to a hedge position.

Risks of Transactions in Futures Contracts and Related Options. The prices
of securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Fund's portfolio securities (and the currencies in which they are
denominated). Also, prices of futures contracts may not move in tandem with the
changes in prevailing interest rates, market movements and/or currency exchange
rates against which the Fund seeks a hedge. A correlation may also be distorted
(a) temporarily, by short-term traders' seeking to profit from the difference
between a contract or security price objective and their cost of borrowed funds;
(b) by investors in futures contracts electing to close out their contracts
through offsetting transactions rather than meet margin deposit requirements;
(c) by investors in futures contracts opting to make or take delivery of
underlying securities rather than engage in closing transactions, thereby
reducing liquidity of the futures market; and (d) temporarily, by speculators
who view the deposit requirements in the futures markets as less onerous than
margin requirements in the cash market. Due to the possibility of price
distortion in the futures market and because of the possible imperfect
correlation between movements in the prices of securities and movements in the
prices of futures contracts, a correct forecast of interest rate, currency
exchange rate and/or market movement trends by the Investment Manager may still
not result in a successful hedging transaction.

There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Fund may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position and, in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel or prevent the Fund from closing out a contract which may
result in reduced gain or increased loss to the Fund. The absence of a liquid
market in futures contracts might cause the Fund to make or take delivery of the
underlying securities (currencies) at a time when it may be disadvantageous to
do so.

Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
8
<PAGE> 41

would continue to be required to make daily cash payments of variation margin on
open futures positions. In these situations, if the Fund has insufficient cash,
it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition, the
Fund may be required to take or make delivery of the instruments underlying
interest rate futures contracts it holds at a time when it is disadvantageous to
do so. The inability to close out options and futures positions could also have
an adverse impact on the Fund's ability to effectively hedge its portfolio.

Futures contracts and options thereon which are purchased or sold on
foreign commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of the Fund's transactions effected on foreign exchanges.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.

If the Fund maintains a short position in a futures contract or has sold a
call option in a futures contract, it will cover this position by holding, in a
segregated account maintained on the books of the Fund, cash, U.S. government
securities or other liquid portfolio securities equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the option.
Such a position may also be covered by owning the securities underlying the
futures contract (in the case of a stock index futures contract a portfolio of
securities substantially replicating the relevant index), or by holding a call
option permitting the Fund to purchase the same contract at a price no higher
than the price at which the short position was established.

In addition, if the Fund holds a long position in a futures contract or has
sold a put option on a futures contract, it will hold cash, U.S. government
securities or other liquid portfolio securities equal to the purchase price of
the contract or the exercise price of the put option (less the amount of initial
or variation margin on deposit) in a segregated account maintained on the books
of the Fund. Alternatively, the Fund could cover its long position by purchasing
a put option on the same futures contract with an exercise price as high or
higher than the price of the contract held by the Fund.

MONEY MARKET SECURITIES. The Fund may invest in various money market securities
for cash management purposes or when assuming a temporary defensive position,
which among others may include commercial paper, bank acceptances, bank
obligations, corporate debt securities, certificates of deposit, U.S. Government
securities, obligations of savings institutions and repurchase agreements. Such
securities are limited to:

U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;

Bank Obligations. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;

Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;

9
<PAGE> 42

Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;

Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the FDIC), limited to $100,000 principal amount per certificate and to 15% or
less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate; and

Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the highest grade by Moody's Investors
Service, Inc. ("Moody's") or, if not rated, issued by a company having an
outstanding debt issue rated at least AAA by S&P or Aaa by Moody's; and

Repurchase Agreements. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although this
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.

While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager and/or Sub-Adviser subject to procedures established by the Trustees. In
addition, as described above, the value of the collateral underlying the
repurchase agreement will be at least equal to the repurchase price, including
any accrued interest earned on the repurchase agreement. In the event of a
default or bankruptcy by a selling financial institution, the Fund will seek to
liquidate such collateral. However, the exercising of the Fund's right to
liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss. It
is the current policy of the Fund not to invest in repurchase agreements that do
not mature within seven days if any such investment, together with any other
illiquid assets held by the Fund, amounts to more than 15% of its net assets.

INVESTMENT COMPANIES. Any 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 Fund
also would be exposed to the risk of investing in common stocks. In addition,
the Fund would bear its share of the investment company's fees and expenses.

SPDRS. The Fund may invest in 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.

SPDRs have 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 Fund invests in SPDRs, it would, in addition to its own
expenses, indirectly bear its ratable share of the SPDRs' expenses.

10
<PAGE> 43

ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive their
full value at maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at a
constant rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received on interest-paying securities if prevailing interest rates
rise.

A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.

LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to brokers, dealers and other financial institutions, provided that the loans
are callable at any time by the Fund, and are at all times secured by cash or
cash equivalents, which are maintained in a segregated account pursuant to
applicable regulations and that are equal to at least 100% of the market value,
determined daily, of the loaned securities. The advantage of these loans is that
the Fund continues to receive the income on the loaned securities while at the
same time earning interest on the cash amounts deposited as collateral, which
will be invested in short-term obligations. The Fund will not lend more than 25%
of the value of its total assets.

As with any extensions of credit, there are risks of delay in recovery and,
in some cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Fund's management to be creditworthy and
when the income which can be earned from such loans justifies the attendant
risks. Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund.

When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of the rights
if the matters involved would have a material effect on the Fund's investment in
the loaned securities. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time the Fund may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment basis.
When these transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the settlement
date, if it is deemed advisable. The securities so purchased or sold are subject
to market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date.

At the time the Fund makes the commitment to purchase or sell securities on
a when-issued, delayed delivery or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase securities
on a when-issued, delayed delivery or forward commitment basis.

11
<PAGE> 44

WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Sub-Adviser determines that issuance of the security is probable. At that
time, the Fund will record the transaction and, in determining its net asset
value, will reflect the value of the security daily. At that time, the Fund will
also establish a segregated account on the Fund's books in which it will
maintain cash or cash equivalents, U.S. Government securities or other liquid
portfolio securities equal in value to recognized commitments for such
securities.

An increase in the percentage of the Fund's total assets committed to the
purchase of securities on a "when, as and if issued" basis may increase the
volatility of its net asset value. The Fund may also sell securities on a "when,
as and if issued" basis provided that the issuance of the security will result
automatically from the exchange or conversion of a security owned by the Fund at
the time of sale.

PRIVATE PLACEMENTS. The Fund may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for resale
pursuant to Rule 144A under the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of these
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering the securities for resale and the risk of
substantial delays in effecting the registration.

Rule 144A permits the Fund to sell restricted securities to qualified
institutional buyers without limitation. The Sub-Adviser, pursuant to procedures
adopted by the Trustees, will make a determination as to the liquidity of each
restricted security purchased by the Fund. If a restricted security is
determined to be "liquid," the security will not be included within the category
"illiquid securities," which may not exceed 15% of the Fund's net assets.
However, investing in Rule 144A securities could have the effect of increasing
the level of Fund illiquidity to the extent the Fund, at a particular point in
time, may be unable to find qualified institutional buyers interested in
purchasing such securities.

WARRANTS AND SUBSCRIPTION RIGHTS. The Fund may invest in warrants and
subscription rights. Warrants are, in effect, an option to purchase equity
securities at a specific price, generally valid for a specific period of time,
and have no voting rights, pay no dividends and have no rights with respect to
the corporations issuing them. The Fund may acquire warrants attached to other
securities without reference to the foregoing limitations.

A subscription right is a privilege granted to existing shareholders of a
corporation to subscribe to shares of a new issue of common stock before it is
offered to the public. A subscription right normally has a life of two to four
weeks and a subscription price lower than the current market value of the common
stock.

YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the Sub-Adviser and the services provided to shareholders
by the Distributor and the Transfer Agent depend on the smooth functioning of
their computer systems. Many computer software systems in use today cannot
recognize the year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services. The Investment Manager, the Sub-Adviser, the Distributor and the
Transfer Agent have been actively working on necessary changes to their own
computer systems to prepare for the year 2000 and expect that their systems will
be adapted before that date, but there can be no assurance that they will be
successful, or that interaction with other non-complying computer systems will
not impair their services at that time.

12
<PAGE> 45

Improperly functioning trading systems may result in settlement problems and
liquidity issues. In addition, corporate and governmental data processing errors
may result in production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Fund's investments may be
adversely affected.

C. FUND POLICIES/INVESTMENT RESTRICTIONS

The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund.
The Investment Company Act defines a majority as the lesser of (a) 67% or more
of the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions: (i) all percentage limitations apply immediately after a purchase
or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.

The Fund will:

1. Seek total return.

The Fund may not:

1. As to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any one issuer (other than
obligations issued, or guaranteed by, the United States government, its
agencies or instrumentalities) except that the Fund may seek to achieve its
investment objective by investing all or substantially all of its assets in
another investment company having substantially the same investment
objective and policies as the Fund (a "Qualifying Portfolio").

2. As to 75% of its total assets, purchase more than 10% of all
outstanding voting securities or any class of securities of any one issuer,
except that the Fund may invest all or substantially all of its assets in a
Qualifying Portfolio.

3. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities.

4. Purchase or sell real estate or interests therein although the Fund
may purchase securities of issuers which engage in real estate operations
and securities secured by real estate or interests therein.

5. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.

6. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).

7. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. For the purpose of this restriction,
collateral arrangements the writing of options by the Fund and collateral
arrangements with respect to initial or variation margin for futures are
not deemed to be pledges of assets.

8. Issue senior securities as defined in the Investment Company Act
except insofar as the Fund may be deemed to have issued a senior security
by reason of (a) entering into any repurchase agreement; (b) borrowing
money; or (c) lending portfolio securities.
13
<PAGE> 46

9. Make loans of money or securities, except by investment in
repurchase agreements. (For the purpose of this restriction, lending of
portfolio securities by the Fund is not deemed to be a loan.)

10. Purchase or sell commodities or commodities contracts except that
the Fund may purchase or sell interest rate, currency and stock and bond
index futures contracts or options thereon.

11. Make short sales of securities or maintain a short position,
unless at all times when a short position is open it either owns an equal
amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities
of the same issue as, and equal in amount to, the securities sold short.

12. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts is not considered the purchase of a security on margin.

13. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act in disposing of
a portfolio security.

14. Invest for the purpose of exercising control or management of any
other issuer.

In addition, as a non-fundamental policy, the Fund will not invest in other
investment companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or
12(d)(1)(J) of the Investment Company Act.

III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------

A. BOARD OF TRUSTEES

The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided to
the Fund in a satisfactory manner.

Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's own
interest or the interest of another person or organization. A Trustee satisfies
his or her duty of care by acting in good faith with the care of an ordinarily
prudent person and in a manner the Trustee reasonably believes to be in the best
interest of the Fund and its shareholders.

B. MANAGEMENT INFORMATION

TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any of
its affiliated persons and do not own any stock or other securities issued by
the Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other two Trustees (the "management Trustees") are
affiliated with the Investment Manager. All of the Trustees also serve as
Trustees of "Discover Brokerage Index Series," a mutual fund for which the
Investment Manager is the investment advisor.

14
<PAGE> 47

The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the 91 Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series are shown below.

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Michael Bozic (58) Vice Chairman of Kmart Corporation (since December,
Trustee 1998); Director or Trustee of the Morgan Stanley
c/o Kmart Corporation Dean Witter Funds and Discover Brokerage Index
3100 West Big Beaver Road Series; formerly Chairman and Chief Executive
Troy, Michigan Officer of Levitz Furniture Corporation (November,
1995-November, 1998) and President and Chief
Executive Officer of Hills Department Stores (May,
1991-July, 1995); formerly variously Chairman,
Chief Executive Officer, President and Chief
Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.;
Director of Eaglemark Financial Services, Inc. and
Weirton Steel Corporation.

Charles A. Fiumefreddo* (66) Chairman, Director or Trustee and Chief Executive
Chairman of the Board, Chief Executive Officer and Trustee Officer of the Morgan Stanley Dean Witter Funds and
Two World Trade Center Discover Brokerage Index Series; formerly Chairman,
New York, New York Chief Executive Officer and Director of the
Investment Manager, the Distributor and MSDW
Services Company; Executive Vice President and
Director of Dean Witter Reynolds; Chairman and
Director of the Transfer Agent; formerly Director
and/or officer of various MSDW subsidiaries (until
June, 1998).

Edwin J. Garn (66) Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds and Discover Brokerage Index Series;
c/o Huntsman Corporation formerly United States Senator (R-Utah)(1974-1992)
500 Huntsman Way Salt Lake City, Utah and Chairman, Senate Banking Committee (1980-1986);
formerly Mayor of Salt Lake City, Utah (1971-1974);
formerly Astronaut, Space Shuttle Discovery (April
12-19, 1985); Vice Chairman, Huntsman Corporation
(chemical company); Director of Franklin Covey
(time management systems), BMW Bank of North
America, Inc. (industrial loan corporation), United
Space Alliance (joint venture between Lockheed
Martin and the Boeing Company) and Nuskin Asia
Pacific (multilevel marketing); member of the board
of various civic and charitable organizations.

</TABLE>

15
<PAGE> 48

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Wayne E. Hedien (65) Retired; Director or Trustee of the Morgan Stanley
Trustee Series; Director of The PMI Group, Inc. (private
Mayer, Brown & Platt Counsel to the Independent Trustees mortgage insurance); Trustee and Vice Chairman of
1675 Broadway The Field Museum of Natural History; formerly
New York, New York associated with the Allstate Companies (1966-1994),
most recently as Chairman of The Allstate
Corporation (March,1993-December, 1994) and
Chairman and Chief Executive Officer of its
wholly-owned subsidiary, Allstate Insurance Company
(July, 1989-December, 1994); director of various
other business and charitable organizations.

Dr. Manuel H. Johnson (50) Senior Partner, Johnson Smick International, Inc.,
Trustee c/o Johnson Smick International, Inc. a consulting firm; Co-Chairman and a founder of the
1133 Connecticut Avenue, N.W. Group of Seven Council (G7C), an international
Washington, D.C. economic commission; Chairman of the Audit
Committee and Director or Trustee of the Morgan
Stanley Dean Witter Funds and Discover Brokerage
Index Series; Director of Greenwich Capital
Markets, Inc. (broker-dealer) and NVR, Inc. (home
construction); Chairman and Trustee of the
Financial Accounting Foundation (oversight
organization of the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System (1986-1990)
and Assistant Secretary of the U.S. Treasury.

Michael E. Nugent (63) General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan
237 Park Avenue Stanley Dean Witter Funds and Discover Brokerage
New York, New York Index Series; formerly Vice President, Bankers
Trust Company and BT Capital Corporation (1984-
1988); director of various business organizations.

Philip J. Purcell* (56) Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds and
1585 Broadway Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds and Discover Brokerage
Index Series; Director and/or officer of various
MSDW subsidiaries.

</TABLE>

16
<PAGE> 49

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
John L. Schroeder (69) Retired; Chairman of the Derivatives Committee and
Trustee Director or Trustee of the Morgan Stanley Dean
Mayer, Brown & Platt Witter Funds and Discover Brokerage Index Series;
Counsel to the Independent Trustees Director of Citizens Utilities Company
1675 Broadway (telecommunications, gas, electric and water
New York, New York utilities company); formerly Executive Vice
President and Chief Investment Officer of the Home
Insurance Company (August, 1991 September, 1995).

Mitchell M. Merin (46) President and Chief Operating Officer of Asset
President Management of MSDW (since December, 1998);
Two World Trade Center President and Director (since April, 1997) and
New York, New York Chief Executive Officer (since June, 1998) of the
Investment Manager and MSDW Services Company;
Chairman, Chief Executive Officer and Director of
the Distributor (since June, 1998); Chairman and
Chief Executive Officer (since June, 1998) and
Director (since January, 1998) of the Transfer
Agent; Director of various MSDW subsidiaries;
President of the Morgan Stanley Dean Witter Funds
and Discover Brokerage Index Series (since May,
1999); previously Chief Strategic Officer of the
Investment Manager and MSDW Services Company and
Executive Vice President of the Distributor (April,
1997-June, 1998), Vice President of the Morgan
Stanley Dean Witter Funds and Discover Brokerage
Index Series (May, 1997-April, 1999), and Executive
Vice President of Dean Witter, Discover & Co.

</TABLE>

17
<PAGE> 50

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------------------------- ---------------------------------------------------
<S> <C>
Barry Fink (44) Senior Vice President (since March, 1997) and
Vice President, Secretary and General Counsel (since February,
Secretary and General Counsel 1997) and Director (since July, 1998) of the
Two World Trade Center Investment Manager and MSDW Services Company;
New York, New York Senior Vice President (since March, 1997) and
Assistant Secretary and Assistant General Counsel
(since February, 1997) of the Distributor;
Assistant Secretary of Dean Witter Reynolds (since
August, 1996); Vice President, Secretary and
General Counsel of the Morgan Stanley Dean Witter
Funds (since February, 1997); Vice President,
Secretary and General Counsel of Discover Brokerage
Index Series; previously First Vice President
(June, 1993-February, 1997), Vice President and
Assistant Secretary and Assistant General Counsel
of the Investment Manager and MSDW Services Company
and Assistant Secretary of the Morgan Stanley Dean
Witter Funds.

Thomas F. Caloia (53) First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW
Two World Trade Center Services Company; Treasurer of the Morgan Stanley
New York, New York Dean Witter Funds and Discover Brokerage Index
Series

</TABLE>

- ------------------------------
* A Trustee who is an "interested person" of the Fund, as defined in the
Investment Company Act.

18
<PAGE> 51

In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, Robert S. Giambrone, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer Agent,
are Vice Presidents of the Fund.

In addition, Marilyn K. Cranney, Lou Anne D. McInnis, Carsten Otto and Ruth
Rossi, First Vice Presidents and Assistant General Counsels of the Investment
Manager and MSDW Services Company, and Todd Lebo, Vice President and Assistant
General Counsel of the Investment Manager and MSDW Services Company, are
Assistant Secretaries of the Fund.

INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The Morgan
Stanley Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; these are people whose advice and counsel are in demand by others and
for whom there is often competition. To accept a position on the Funds' Boards,
such individuals may reject other attractive assignments because the Funds make
substantial demands on their time. All of the Independent Trustees serve as
members of the Audit Committee. In addition, three of the Trustees, including
two Independent Trustees, serve as members of the Derivatives Committee and the
Insurance Committee.

The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill any
Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1 plan
of distribution. Most of the Morgan Stanley Dean Witter Funds have a Rule 12b-1
plan.

The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.

The Board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.

Finally, the Board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL
MORGAN STANLEY DEAN WITTER FUNDS. The Independent Trustees and the Funds'
management believe that having the same Independent Trustees for each of the
Morgan Stanley Dean Witter Funds avoids the duplication of effort that would
arise from having different groups of individuals serving as Independent
Trustees for each of the Funds or even of sub-groups of Funds. They believe that
having the same individuals serve as Independent Trustees of all the Funds tends
to increase their knowledge and expertise regarding matters which affect the
Fund complex generally and enhances their ability to negotiate on behalf of each
Fund with the Fund's service providers. This arrangement also precludes the
possibility of separate groups of Independent Trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to obtain,
at modest cost to each separate Fund, the services of Independent Trustees, of
the caliber, experience

19
<PAGE> 52

and business acumen of the individuals who serve as Independent Trustees of the
Morgan Stanley Dean Witter Funds.

TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties. It
also provides that all third persons shall look solely to the Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.

C. COMPENSATION

The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Trustees are paid a single
meeting fee by the Fund. The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by the
Investment Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund for their services as Trustee. Dr. Johnson serves as
Chairman of the Audit Committee.

At such time as the Fund has been in operation and has paid fees to the
Independent Trustees for a full fiscal year, and assuming that during such
fiscal year the Fund holds the same number of meetings of the Board, the
Independent Trustees and the Committees as were held by the other Morgan Stanley
Dean Witter Funds during the calendar year ended December 31, 1998, it is
estimated that the compensation paid to each Independent Trustee during such
fiscal year will be the amount shown in the following table.

FUND COMPENSATION (ESTIMATED)

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- --------------
<S> <C>
Michael Bozic............................................... $1,650
Edwin J. Garn............................................... 1,650
Wayne E. Hedien............................................. 1,650
Dr. Manuel H. Johnson....................................... 2,400
Michael E. Nugent........................................... 2,150
John L. Schroeder........................................... 2,150
</TABLE>

20
<PAGE> 53

The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 90 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1998. No compensation was paid to the Fund's Independent Trustees by
Discover Brokerage Index Series for the calendar year ended December 31, 1998.

CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS

<TABLE>
<CAPTION>
TOTAL CASH COMPENSATION
FOR SERVICES TO 90
MORGAN STANLEY
NAME OF INDEPENDENT TRUSTEE DEAN WITTER FUNDS
--------------------------- -----------------------
<S> <C>
Michael Bozic........................................... $120,150
Edwin J. Garn........................................... 132,450
Wayne E. Hedien......................................... 132,350
Dr. Manuel H. Johnson................................... 155,681
Michael E. Nugent....................................... 159,731
John L. Schroeder....................................... 160,731
</TABLE>

As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds, not including the Fund, have adopted a
retirement program under which an Independent Trustee who retires after serving
for at least five years (or such lesser period as may be determined by the
Board) as an Independent Director or Trustee of any Morgan Stanley Dean Witter
Fund that has adopted the retirement program (each such Fund referred to as an
"Adopting Fund" and each such Trustee referred to as an "Eligible Trustee") is
entitled to retirement payments upon reaching the eligible retirement age
(normally, after attaining age 72). Annual payments are based upon length of
service.

Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years up
to a maximum of 60.44% after ten years of service. The foregoing percentages may
be changed by the Board(1). "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are accrued as expenses on the books of
the Adopting Funds. Such funds not secured or funded by the Adopting Funds.

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

(1) An Eligible Trustee may elect alternative payments of his or her retirement
benefits based upon the combined life expectancy of the Eligible Trustee and
his or her spouse on the date of such Eligible Trustee's retirement. In
addition, the Eligible Trustee may elect that the surviving spouse's
periodic payment of benefits will be equal to a lower percentage of the
periodic amount when both spouses were alive. The amount estimated to be
payable under this method, through the remainder of the later of the lives
of the Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit.
21
<PAGE> 54

The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) for the calendar year ended December 31, 1998, and the
estimated retirement benefits for the Independent Trustees, to commence upon
their retirement, from the 55 Morgan Stanley Dean Witter Funds as of the
calendar year ended December 31, 1998.

RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS

<TABLE>
<CAPTION>
RETIREMENT ESTIMATED
BENEFITS ANNUAL
ESTIMATED ACCRUED AS BENEFITS UPON
CREDITED YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
--------------------------- -------------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Michael Bozic................................ 10 60.44% $22,377 $52,250
Edwin J. Garn................................ 10 60.44 35,225 52,250
Wayne E. Hedien.............................. 9 51.37 41,979 44,413
Dr. Manuel H. Johnson........................ 10 60.44 14,047 52,250
Michael E. Nugent............................ 10 60.44 25,336 52,250
John L. Schroeder............................ 8 50.37 45,117 44,343
</TABLE>

- ---------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------

The following owned more than 5% of the outstanding shares of Class A of
the Fund on September 14, 1999; Dean Witter Reynolds custodian for Joseph
Sirotkin, 2001 Tonnelle Avenue, North Bergen, NJ 07047-1559--7.87% and Mr.
Walter A. Sherman, 145 Sherry Avenue, Park Falls, WI 54552-1440--6.80%. The
following owned more than 5% of the outstanding shares of Class D of the Fund on
September 14, 1999: The Barr Trust, Mary A. Barr Trustee, 6302 W. Harrison
Avenue, Milwaukee, WI 53219-2668--27.29%; Morgan Stanley Dean Witter Advisors
Inc., Attn: Maurice Bendrihem, 2 World Trade Center, New York, NY
10048-0203--25.20%; William R. Blood & Inez Blood, 6511 T-Bar-M Boulevard,
Houston, TX 77068-1210--11.10%; Dean Witter Reynolds custodian for Mary Juras,
854 N. Brewster Road, Vineland, NJ 08361-3015--7.76%; Dean Witter Reynolds
custodian for Luther D. Schlauch, 1008 Howell Street, Philadelphia, PA
19149-3616--6.24%; Dean Witter Reynolds custodian for Ms. Lawson I Hickox, 5420
Brown Gap Road, Knoxville, TN 37918-9106--5.14% and Dean Witter Reynolds
custodian for James B Rimpau, SE 760 Ridgeview, Pullman, WA 99163-25436--5.03%.

As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1% of the Fund's shares of beneficial
interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------

A. INVESTMENT MANAGER AND SUB-ADVISER

The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New York,
New York 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.

The Sub-Adviser is Miller Anderson & Sherrerd, LLP, a Pennsylvania limited
liability partnership founded in 1969, and is wholly owned by indirect
subsidiaries of Morgan Stanley Dean Witter & Co. The Sub-Adviser is located at
One Tower Bridge, West Conshohocken, Pennsylvania 19428.

22
<PAGE> 55

Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the Investment Manager to
provide administrative services and manage the business affairs of the Fund. The
Fund pays the Investment Manager monthly compensation calculated daily by
applying the annual rate of 0.85% to the Fund's average daily net assets. The
management fee is allocated among the Classes pro rata based on the net assets
of the Fund attributable to each Class. For the period July 29, 1998 through May
31, 1999, the Investment Manager accrued total compensation under the Management
Agreement in the amount of $1,692,914.

Pursuant to a sub-advisory agreement (the "Sub-Advisory Agreement") between
the Investment Manager and the Sub-Adviser, the Sub-Adviser has been retained,
subject to the overall supervision of the Investment Manager and the Trustees of
the Fund, to continuously furnish investment advice concerning individual
security selections, asset allocations and overall economic trends and to manage
the Fund's portfolio. As compensation for its service, the Investment Manager
pays the Sub-Adviser compensation equal to 40% of its monthly compensation. For
the period July 29, 1998 through May 31, 1999, the Sub-Adviser accrued total
compensation under the Sub-Advisory Agreement in the amount of $677,165.

The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.

B. PRINCIPAL UNDERWRITER

The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.

The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. These expenses include the payment of commissions
for sales of the Fund's shares and incentive compensation to Financial Advisors.
The Distributor also pays certain expenses in connection with the distribution
of the Fund's shares, including the costs of preparing, printing and
distributing advertising or promotional materials, and the costs of printing and
distributing prospectuses and supplements thereto used in connection with the
offering and sale of the Fund's shares. The Fund bears the costs of initial
typesetting, printing and distribution of prospectuses and supplements thereto
to shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws and pays filing fees in
accordance with state securities laws.

The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.

C. SERVICES PROVIDED BY THE INVESTMENT MANAGER AND THE SUB-ADVISER AND FUND
EXPENSES PAID BY THIRD PARTIES

The Investment Manager manages the Fund's business affairs and supervises
the investment of the Fund's assets. The Sub-Adviser manages the investment of
the Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Sub-Adviser obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.

23
<PAGE> 56

Under the terms of the Management Agreement, the Investment Manager
maintains certain of the Fund's books and records and furnishes, at its own
expense, the office space, facilities, equipment, clerical help, bookkeeping and
certain legal services as the Fund may reasonably require in the conduct of its
business, including the preparation of prospectuses, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). In addition, the Investment Manager pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone service, heat,
light, power and other utilities provided to the Fund.

Expenses not expressly assumed by the Investment Manager under the
Management Agreement, the Sub-Adviser under the Sub-Advisory Agreement or the
Distributor, will be paid by the Fund. These expenses will be allocated among
the four Classes of shares pro rata based on the net assets of the Fund
attributable to each Class, except as described below. Such expenses include,
but are not limited to: expenses of the Plan of Distribution pursuant to Rule
12b-1; charges and expenses of any registrar, custodian, stock transfer and
dividend disbursing agent; brokerage commissions; taxes; engraving and printing
share certificates; registration costs of the Fund and its shares under federal
and state securities laws; the cost and expense of printing, including
typesetting, and distributing prospectuses of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and Trustees' meetings
and of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any outside
service used for pricing of the Fund's shares; fees and expenses of legal
counsel, including counsel to the Trustees who are not interested persons of the
Fund or of the Investment Manager or the Sub-Adviser (not including compensation
or expenses of attorneys who are employees of the Investment Manager or the
Sub-Adviser); fees and expenses of the Fund's independent accountants;
membership dues of industry associations; interest on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Fund which inure to its benefit; extraordinary expenses (including, but not
limited to, legal claims and liabilities and litigation costs and any
indemnification relating thereto); and all other costs of the Fund's operation.
The 12b-1 fees relating to a particular Class will be allocated directly to that
Class. In addition, other expenses associated with a particular Class (except
advisory or custodial fees) may be allocated directly to that Class, provided
that such expenses are reasonably identified as specifically attributable to
that Class and the direct allocation to that Class is approved by the Trustees.

The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.

The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees.

D. DEALER REALLOWANCES

Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is defined
in the Securities Act.

24
<PAGE> 57

E. RULE 12B-1 PLAN

The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act (the "Plan") pursuant to which each Class, other than
Class D, pays the Distributor compensation accrued daily and payable monthly at
the following annual rates: 0.25%, 1.0% and 1.0% of the average daily net assets
of Class A, Class B and Class C, respectively.

The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the period July 29, 1998
through May 31, 1999 in approximate amounts as provided in the table below (the
Distributor did not retain any of these amounts).

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 29, 1998
THROUGH
MAY 31, 1999
-----------------------------
<S> <C> <C>
Class A..................................................... FSCs:(1) $ 49,580
CDSCs: $ 1,059
Class B..................................................... CDSCs: $531,731
Class C..................................................... CDSCs: $ 19,126
</TABLE>

- ---------------
(1) FSCs apply to Class A only.

The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.

Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. For the period July 29, 1998 through May 31,
1999 Class A, Class B and Class C shares of the Fund accrued payments under the
Plan amounting to $14,950, $1,820,482 and $86,747, respectively, which amounts
are equal to 0.25%, 1.00% and 0.78% of the average daily net assets of Class A,
Class B and Class C, respectively, for the fiscal period.

The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.

With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value of
the respective accounts for which they are the Financial Advisors or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by employer-sponsored employee benefit
plans, whether or not qualified under the Internal Revenue Code, for which the
Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement ("MSDW Eligible Plans"), the Investment Manager compensates Financial
Advisors by paying them, from its own funds, a gross sales credit of 1.0% of the
amount sold.

25
<PAGE> 58

With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.

With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.

With respect to Class D shares other than shares held by participants in
the Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds's Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the amount paid if the Class D shares are redeemed in the first year and
a chargeback of 50% of the amount paid if the Class D shares are redeemed in the
second year after purchase. The Investment Manager also compensates Dean Witter
Reynolds's Financial Advisors by paying them, from its own funds, an annual
residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund asset
allocation program).

The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds's
Fund-associated distribution-related expenses, including sales compensation, and
overhead and other branch office distribution-related expenses including (a) the
expenses of operating Dean Witter Reynolds's branch offices in connection with
the sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares; and (d) other expenses relating to branch
promotion of Fund sales.

The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on behalf
of the Fund and, in the case of Class B shares, opportunity costs, such as the
gross sales credit and an assumed interest charge thereon ("carrying charge").
In the Distributor's reporting of the distribution expenses to the Fund, in the
case of Class B shares, such assumed interest (computed at the "broker's call
rate") has been calculated on the gross credit as it is reduced by amounts
received by the Distributor under the Plan and any contingent deferred sales
charges received by the Distributor upon redemption of shares of the Fund. No
other interest charge is included as a distribution expense in the Distributor's
calculation of its distribution costs for this purpose. The broker's call rate
is the interest rate charged to securities brokers on loans secured by
exchange-listed securities.

The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 1.0%, in the case of Class C, of the average net assets of the respective
Class during the month. No interest or other financing charges, if any, incurred
on any distribution expenses on behalf of Class A and Class C will be
reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to Financial Advisors and other authorized financial
representatives, such amounts shall be determined at the beginning of each
calendar quarter by the Trustees, including, a majority of the Independent
Trustees. Expenses representing the service fee (for Class A) or a gross sales
credit or a residual to Financial Advisors and other

26
<PAGE> 59

authorized financial representatives (for Class C) may be reimbursed without
prior determination. In the event that the Distributor proposes that monies
shall be reimbursed for other than such expenses, then in making quarterly
determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund, together
with a report explaining the purposes and anticipated benefits of incurring such
expenses. The Trustees will determine which particular expenses, and the
portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.

Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the period July 29, 1998 through May 31, 1999 to the Distributor.
The Distributor and Dean Witter Reynolds estimate that they have spent, pursuant
to the Plan, $14,505,777 on behalf of Class B since the inception of the Plan.
It is estimated that this amount was spent in approximately the following ways:
(i) 12.69% ($1,840,969)--advertising and promotional expenses; (ii) 0.64%
($92,912)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 86.67% ($12,571,896)--other expenses, including the
gross sales credit and the carrying charge, of which 3.39% ($426,109) represents
carrying charges, 40.00% ($5,028,356) represents commission credits to Dean
Witter Reynolds branch offices and other selected broker-dealers for payments of
commissions to Financial Advisors and other authorized financial
representatives, and 56.61% ($7,117,431) represents overhead and other branch
office distribution-related expenses. The amounts accrued by Class A and a
portion of the amounts accrued by Class C under the Plan during the fiscal year
ended May 31, 1999 were service fees. The remainder of the amounts accrued by
Class C were for expenses which relate to compensation of sales personnel and
associated overhead expenses.

In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $12,174,612 as of December 31, 1998 (the end of
the calendar year), which was equal to 4.45% of the net assets of Class B on
such date. Because there is no requirement under the Plan that the Distributor
be reimbursed for all distribution expenses with respect to Class B shares or
any requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan and the proceeds of CDSCs paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees or
CDSCs, may or may not be recovered through future distribution fees or CDSCs.

In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales commission credited to Morgan Stanley Dean Witter Financial
Advisors and other authorized financial representatives at the time of sale may
be reimbursed in the subsequent calendar year. The Distributor has advised the
Fund that unreimbursed expenses representing a gross sales commission credited
to Morgan Stanley Dean Witter Financial Advisors and other authorized financial
representatives at the time of sale totaled $91,876 in the case of Class C at
December 31, 1998 (the end of the calendar year), which amount was equal to
0.67% of the net assets of Class C on such date, and that there were no such
expenses that may be reimbursed in the subsequent year in the case of Class A on
such date. No interest or other financing charges will be incurred on any Class
A or

27
<PAGE> 60

Class C distribution expenses incurred by the Distributor under the Plan or on
any unreimbursed expenses due to the Distributor pursuant to the Plan.

No interested person of the Fund nor any Independent Trustee has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, the Investment Manager, Dean Witter Reynolds, MSDW Services Company
or certain of their employees may be deemed to have such an interest as a result
of benefits derived from the successful operation of the Plan or as a result of
receiving a portion of the amounts expended thereunder by the Fund.

On an annual basis the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtaining and would be likely to obtain
under the Plan, including that: (a) the Plan is essential in order to give Fund
investors a choice of alternatives for payment of distribution and service
charges and to enable the Fund to continue to grow and avoid a pattern of net
redemptions which, in turn, are essential for effective investment management;
and (b) without the compensation to individual brokers and the reimbursement of
distribution and account maintenance expenses of Dean Witter Reynolds's branch
offices made possible by the 12b-1 fees, Dean Witter Reynolds could not
establish and maintain an effective system for distribution, servicing of Fund
shareholders and maintenance of shareholder accounts; and (3) what services had
been provided and were continuing to be provided under the Plan to the Fund and
its shareholders. Based upon their review, the Trustees, including each of the
Independent Trustees, determined that continuation of the Plan would be in the
best interest of the Fund and would have a reasonable likelihood of continuing
to benefit the Fund and its shareholders. In the Trustees' quarterly review of
the Plan, they will consider its continued appropriateness and the level of
compensation provided therein.

The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.

F. OTHER SERVICE PROVIDERS

(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT

Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans. The principal business address of the Transfer Agent is Harborside
Financial Center, Plaza Two, Jersey City, New Jersey 07311.

(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS

The Bank of New York, 100 Church Street, New York, New York 10286, is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.

PricewaterhouseCoopers LLP serves as the independent accountants of the
Fund. The independent accountants are responsible for auditing the annual
financial statements of the Fund.

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<PAGE> 61

(3) AFFILIATED PERSONS

The Transfer Agent is an affiliate of the Investment Manager, the
Sub-Adviser and of the Distributor. As Transfer Agent and Dividend Disbursing
Agent, the Transfer Agent's responsibilities include maintaining shareholder
accounts, disbursing cash dividends and reinvesting dividends, processing
account registration changes, handling purchase and redemption transactions,
mailing prospectuses and reports, mailing and tabulating proxies, processing
share certificate transactions, and maintaining shareholder records and lists.
For these services, the Transfer Agent receives a per shareholder account fee
from the Fund and is reimbursed for its out-of-pocket expenses in connection
with such services.

VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------

A. BROKERAGE TRANSACTIONS

Subject to the general supervision of the Trustees, the Investment Manager
and the Sub-Adviser are responsible for decisions to buy and sell securities for
the Fund, the selection of brokers and dealers to effect the transactions, and
the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer. The Fund also expects that securities will be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession or
discount. On occasion, the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or discounts
are paid.

For the period July 29, 1998 through May 31, 1999, the Fund paid a total of
$585,960 in brokerage commissions.

B. COMMISSIONS

Pursuant to an order of the SEC, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds. The Fund will
limit its transactions with Dean Witter Reynolds to U.S. Government and
government agency securities, bank money instruments (i.e., certificates of
deposit and bankers' acceptances) and commercial paper. The transactions will be
effected with Dean Witter Reynolds only when the price available from Dean
Witter Reynolds is better than that available from other dealers.

During the period July 29, 1998 through May 31, 1999, the Fund did not
effect any principal transactions with Dean Witter Reynolds.

Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds, Morgan
Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an exchange during a comparable period of time. This standard would allow the
affiliated broker or dealer to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Trustees, including the Independent
Trustees, have adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to an affiliated broker or
dealer are consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by any amount of the brokerage
commissions it may pay to an affiliated broker or dealer.

During the period July 29, 1998 through May 31, 1999, the Fund paid a total
of $0 in brokerage commissions to Dean Witter Reynolds. During the period July
29, 1998 through May 31, 1999, the brokerage commissions paid to Dean Witter
Reynolds represented approximately 0% of the total

29
<PAGE> 62

brokerage commissions paid by the Fund during the year and were paid on account
of transactions having an aggregate dollar value equal to approximately 0% of
the aggregate dollar value of all portfolio transactions of the Fund during the
year for which commissions were paid.

During the period July 29, 1998 through May 31, 1999, the brokerage
commissions paid to Morgan Stanley & Co. represented approximately 0% of the
total brokerage commissions paid by the Fund for this period and were paid on
account of transactions having an aggregate dollar value equal to approximately
0% of the aggregate dollar value of all portfolio transactions of the Fund
during the period for which commissions were paid.

C. BROKERAGE SELECTION

The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager and/or the Sub-Adviser from
obtaining a high quality of brokerage and research services. In seeking to
determine the reasonableness of brokerage commissions paid in any transaction,
the Investment Manager and/or the Sub-Adviser rely upon its experience and
knowledge regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. These determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.

The Fund anticipates that certain of its transactions involving foreign
securities will be effected on foreign securities exchanges. Fixed commissions
on such transactions are generally higher than negotiated commissions on
domestic transactions. There is also generally less government supervision and
regulation of foreign securities exchanges and brokers than in the United
States.

In seeking to implement the Fund's policies, the Investment Manager and/or
the Sub-Adviser effect transactions with those brokers and dealers who the
Investment Manager and/or the Sub-Adviser believe provide the most favorable
prices and are capable of providing efficient executions. If the Investment
Manager and/or the Sub-Adviser believe the prices and executions are obtainable
from more than one broker or dealer, it may give consideration to placing
portfolio transactions with those brokers and dealers who also furnish research
and other services to the Fund or the Investment Manager or the Sub-Adviser. The
services may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities. The information
and services received by the Investment Manager and the Sub-Adviser from brokers
and dealers may be of benefit to them in the management of accounts of some of
their other clients and may not in all cases benefit the Fund directly.

The Investment Manager and the Sub-Adviser currently serve as investment
manager to a number of clients, including other investment companies, and may in
the future act as investment manager or advisor to others. It is the practice of
the Investment Manager and the Sub-Adviser to cause purchase and sale
transactions to be allocated among the Fund and others whose assets it manages
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, various factors may be considered, including the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
In the case of certain initial and secondary public offerings, the Investment
Manager and the Sub-Adviser utilize a pro rata allocation process based on the
size of the client funds involved and the number of shares available from the
public offering.

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<PAGE> 63

D. DIRECTED BROKERAGE

During the period July 29, 1998 through May 31, 1999, the Fund paid $0 in
brokerage commissions in connection with transactions in the aggregate amount of
$0 to brokers because of research services provided.

E. REGULAR BROKER-DEALERS

During the period July 29, 1998 through May 31, 1999, the Fund did not
purchase securities issued by brokers or dealers that were among the ten brokers
or the ten dealers that executed transactions for or with the Fund in the
largest dollar amounts during the year. At May 31, 1999, the Fund did not own
any securities issued by any of these issuers.

VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------

The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. All shares of beneficial interest of
the Fund are of $0.01 par value and are equal as to earnings, assets and voting
privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses, if such
proposal is submitted separately to Class A shareholders. Also, Class A, Class B
and Class C bear expenses related to the distribution of their respective
shares.

The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
Prospectus.

The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances the Trustees may be removed by action of the
Trustees. The shareholders also have the right under certain circumstances to
remove the Trustees in accordance with the provisions of Section 16(c) of the
Investment Company Act. The voting rights of shareholders are not cumulative, so
that holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being selected, while the holders of the remaining shares
would be unable to elect any Trustees.

Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.

The Trustees themselves have the power to alter the number and the terms of
office of the Trustees (as provided for in the Declaration of Trust), and they
may at any time lengthen or shorten their own terms or make their terms of
unlimited duration and appoint their own successors, provided that always at
least a majority of the Trustees has been elected by the shareholders of the
Fund. Under certain circumstances the Trustees may be removed by action of the
Trustees. The shareholders also have the right under certain circumstances to
remove the Trustees in accordance with the provisions of Section

31
<PAGE> 64

16(c) of the Investment Company Act of 1940. The voting rights of shareholders
are not cumulative, so that holders of more than 50 percent of the shares voting
can, if they choose, elect all Trustees being selected, while the holders of the
remaining shares would be unable to elect any Trustees.

VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------

A. PURCHASE/REDEMPTION OF SHARES

Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.

TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.

The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
Morgan Stanley Dean Witter Fund and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transactions pursuant to the exchange
privilege.

TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
Fund shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to a CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving
less than all of the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares
bear to the total shares in the account immediately prior to the transfer). The
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.

B. OFFERING PRICE

The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's Distributor, Dean
Witter Reynolds and other authorized dealers as described in Section "V.
Investment Management and Other Services--E. Rule 12b-1 Plan."

The price of Fund shares, called "net asset value," is based on the value
of the Fund's portfolio securities. Net asset value per share of each Class is
calculated by dividing the value of the portion of the Fund's securities and
other assets attributable to that Class, less the liabilities attributable to
that Class, by the number of shares of that Class outstanding. The assets of
each Class of shares are invested in a single portfolio. The net asset value of
each Class, however, will differ because the Classes have different ongoing
fees.

In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange, prior to the
time when assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where a security is traded on more than
one exchange, the security is valued on the exchange designated as the primary
market pursuant to procedures adopted by the Trustees); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price. When market quotations are not
readily available, including circumstances under which it is determined by the
Investment Manager and/or the Sub-

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<PAGE> 65

Adviser that sale or bid prices are not reflective of a security's market value,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Fund's
Trustees. For valuation purposes, quotations of foreign portfolio securities,
other assets and liabilities and forward contracts stated in foreign currency
are translated into U.S. dollar equivalents at the prevailing market rates prior
to the close of the New York Stock Exchange.

Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.

Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events which may affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the New York Stock Exchange and will therefore not be reflected in the
computation of the Fund's net asset value. If events that may affect the value
of such securities occur during such period, then these securities may be valued
at their fair value as determined in good faith under procedures established by
and under the supervision of the Trustees.

Listed options on debt securities are valued at the latest sale price on
the exchange on which they are listed unless no sales of such options have taken
place that day, in which case, they will be valued at the mean between their
closing bid and asked prices. Unlisted options on debt securities are valued at
the mean between their latest bid and asked price. Futures are valued at the
latest sale price on the commodities exchange on which they trade unless the
Board of Trustees determines that such price does not reflect their fair value,
in which case they will be valued at their fair market value as determined by
the Board of Trustees. All other securities and other assets are valued at their
fair value as determined in good faith under procedures established by and under
the supervision of the Board of Trustees.

IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------

The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the Fund
are not generally a consideration for shareholders such as tax exempt entities
and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
Shareholders are urged to consult their own tax professionals regarding specific
questions as to federal, state or local taxes.

INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.

The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.

Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more than
one year. Gains or losses on the sale of securities with a tax holding period of
one year or less will be short-term gains or losses.

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<PAGE> 66

Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund.

Under certain tax rules, the Fund may be required to accrue a portion of
any discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year. To
the extent that the Fund invests in such securities, it would be required to pay
out such accrued discount as an income distribution in each year in order to
avoid taxation at the Fund level. Such distributions will be made from the
available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.

TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have
to pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income or
short-term capital gains, are taxable to the shareholder as ordinary income
regardless of whether the shareholder receives such payments in additional
shares or in cash.

Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. The maximum tax on long-term capital gains
applicable to individuals is 20%.

Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.

Subject to certain exceptions, a corporate shareholder may be eligible for
a 70% dividends received deduction to the extent that the Fund earns and
distributes qualifying dividends from its investments. Distributions of net
capital gains by the Fund will not be eligible for the dividends received
deduction.

Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short term capital
gains.

After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the amount of any dividends eligible for the federal
dividends received deduction for corporations.

PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment company
will have the effect of reducing the net asset value of the shareholder's stock
in that company by the exact amount of the dividend or capital gains
distribution. Furthermore, such dividends and capital gains distributions are
subject to federal income taxes. If the net asset value of the shares should be
reduced below a shareholder's cost as a result of the payment of dividends or
the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.

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<PAGE> 67

In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Any loss realized by shareholders upon a redemption of shares within
six months of the date of their purchase will be treated as a long-term capital
loss to the extent of any distributions of net long-term capital gains with
respect to such shares during the six-month period.

Gain or loss on the sale or redemption of shares in the Fund is measured by
the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the tax
basis of their shares. Under certain circumstances a shareholder may compute and
use an average cost basis in determining the gain or loss on the sale or
redemption of shares.

Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.

If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.

X. UNDERWRITERS
- --------------------------------------------------------------------------------

The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plans."

XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------

From time to time, the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The Fund's "average annual total return"
represents an annualization of the Fund's total return over a particular period
and is computed by finding the annual percentage rate which will result in the
ending redeemable value of a hypothetical $1,000 investment made at the
beginning of a one, five or ten year period, or for the period from the date of
commencement of operations, if shorter than any of the foregoing.

For periods of less than one year, the Fund quotes its total return on a
non-annualized basis. Accordingly, the Fund may compute its aggregate total
return for each Class for specified periods by determining the aggregate
percentage rate which will result in the ending value of a hypothetical $1,000
investment made at the beginning of the period. For the purpose of this
calculation, it is assumed that all dividends and distribution are reinvested.
The formula for computing aggregate total return involves a percentage obtained
by dividing the ending value (without reduction for any sale charge) by the
initial $1,000 investment and subtracting 1 from the result. Based on the
foregoing calculation, the total returns of Class A, Class B, Class C and Class
D for the period July 29, 1998 (commencement of operations) through May 31, 1999
was 17.60%, 16.90%, 17.10% and 17.90%, respectively.

The Fund may also advertise the growth of hypothetical investment of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1 to
the Fund's aggregate total return to date (expressed as a decimal and without
taking into account the effect of any applicable CDSC) and multiplying by
$9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 in each Class of shares of the Fund by adding 1 to the
Fund's aggregate total return to

35
<PAGE> 68

date (expressed as a decimal and without taking into account the effect of any
applicable CDSC) and multiplying by $9,475, $48,000 and $97,000 in the case of
Class A (investments of $10,000, $50,000 and $100,000 adjusted for the initial
sales charge) or by $10,000, $50,000 and $100,000 in the case of each of Class
B, Class C and Class D, as the case may be. Investments of $10,000, $50,000 and
$100,000 in each Class at inception of the Class would have grown to the
following amounts at May 31, 1999:

<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ----------------------------
CLASS DATE: $10,000 $50,000 $100,000
----- --------- ------- ------- --------
<S> <C> <C> <C> <C>
Class A............................................ 7/29/98 $11,143 $56,448 $114,072
Class B............................................ 7/29/98 11,690 58,450 116,900
Class C............................................ 7/29/98 11,710 58,550 117,100
Class D............................................ 7/29/98 11,790 58,950 117,900
</TABLE>

The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by recognized organizations.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

EXPERTS. The financial statements of the Fund for the period July 29, 1998
through May 31, 1999 are included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, and on the authority of
that firm as experts in auditing and accounting.

* * * * *

This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from the
SEC.

36
<PAGE> 69

MORGAN STANLEY DEAN WITTER EQUITY FUND

PORTFOLIO OF INVESTMENTS May 31, 1999

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (95.7%)
Accident & Health Insurance (1.0%)
53,100 UNUM Corp. .................. $ 2,857,444
------------

Airlines (0.4%)
20,400 AMR Corp.*................... 1,327,275
------------
Alcoholic Beverages (0.7%)
28,500 Anheuser-Busch Companies,
Inc......................... 2,082,281
------------
Auto Parts: O.E.M. (0.9%)
31,400 Dana Corp. .................. 1,621,025
56,404 Delphi Automotive Systems
Corp.*...................... 1,106,922
------------
2,727,947
------------
Beverages - Non-Alcoholic (1.2%)
36,600 Coca Cola Co. ............... 2,500,237
31,400 PepsiCo, Inc. ............... 1,124,512
------------
3,624,749
------------
Broadcasting (1.5%)
31,900 Clear Channel Communications,
Inc.*....................... 2,107,394
88,800 Infinity Broadcasting Corp.
(Series A)*................. 2,269,950
------------
4,377,344
------------
Building Materials (1.7%)
127,500 Owens Corning................ 5,020,312
------------

Building Materials/DIY Chains (0.5%)
27,700 Lowe's Companies, Inc. ...... 1,438,669
------------

Building Products (1.0%)
71,100 York International Corp. .... 2,999,531
------------

Cable Television (0.9%)
36,400 MediaOne Group Inc.*......... 2,689,050
------------

Cellular Telephone (1.3%)
29,000 AirTouch Communications,
Inc.*....................... 2,914,500
18,350 Sprint Corp. (PCS Group)*.... 825,750
------------
3,740,250
------------
Computer Communications (1.8%)
49,550 Cisco Systems, Inc.*......... 5,397,853
------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>

Computer Hardware (2.6%)
47,300 Compaq Computer Corp. ....... $ 1,120,419
25,600 Dell Computer Corp.*......... 880,000
17,600 Hewlett-Packard Co. ......... 1,659,900
34,000 International Business
Machines Corp. ............. 3,954,625
------------
7,614,944
------------
Computer/Video Chains (1.3%)
48,300 Tandy Corp. ................. 3,984,750
------------

Computer Software (4.3%)
159,400 Microsoft Corp.*............. 12,861,587
------------

Construction/Agricultural Equipment/ Trucks
(2.3%)
85,200 Case Corp. .................. 4,004,400
55,800 Cummins Engine Co., Inc. .... 2,824,875
------------
6,829,275
------------
Discount Chains (2.9%)
44,500 Consolidated Stores Corp.*... 1,529,687
28,400 Dayton Hudson Corp. ......... 1,789,200
53,650 Dollar General Corp. ........ 1,425,078
90,600 Wal-Mart Stores, Inc. ....... 3,861,825
------------
8,605,790
------------

Diversified Financial Services (0.8%)
35,350 Citigroup Inc. .............. 2,341,937
------------

Drugstore Chains (0.9%)
60,900 CVS Corp. ................... 2,801,400
------------

Electric Utilities (1.5%)
37,700 Carolina Power & Light
Co. ........................ 1,649,375
47,600 Energy East Corp. ........... 1,320,900
33,200 PECO Energy Co. ............. 1,624,725
------------
4,595,000
------------
Electronic Data Processing (0.7%)
57,000 Unisys Corp.*................ 2,162,437
------------

Environmental Services (1.8%)
54,700 Allied Waste Industries,
Inc.* 1,018,787
81,400 Waste Management, Inc. ...... 4,304,025
------------
5,322,812
------------
Finance Companies (1.2%)
80,400 Household International,
Inc. ....................... 3,487,350
------------

Fluid Controls (0.6%)
43,400 Parker-Hannifin Corp. ....... 1,896,037
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE> 70
MORGAN STANLEY DEAN WITTER EQUITY FUND

PORTFOLIO OF INVESTMENTS May 31, 1999, continued

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Food Chains (1.2%)
27,100 Kroger Co.*.................. $ 1,587,044
39,500 Safeway Inc.*................ 1,836,750
------------
3,423,794
------------
Generic Drugs (0.4%)
44,600 Mylan Laboratories, Inc. .... 1,131,725
------------
Hospital/Nursing Management (0.3%)
75,200 Health Management Associates,
Inc. (Class A)*............. 977,600
------------

Insurance Brokers/Services (0.7%)
48,300 Aon Corp. ................... 2,076,900
------------

Integrated Oil Companies (3.4%)
21,700 Atlantic Richfield Co. ...... 1,816,019
12,000 Chevron Corp. ............... 1,112,250
104,700 Royal Dutch Petroleum Co.
(ADR) (Netherlands)......... 5,922,094
17,600 Texaco, Inc. ................ 1,152,800
------------
10,003,163
------------
Internet Services (2.2%)
30,300 America Online, Inc.*........ 3,617,062
12,800 At Home Corp. (Series A)*.... 1,621,600
9,500 Excite, Inc.*................ 1,262,312
------------
6,500,974
------------
Major Banks (5.2%)
74,400 Bank of America Corp. ....... 4,812,750
60,100 Bank One Corp. .............. 3,399,406
45,100 BankBoston Corp. ............ 2,136,612
43,300 KeyCorp...................... 1,504,675
24,200 PNC Bank Corp. .............. 1,385,450
54,500 Wells Fargo & Co. ........... 2,180,000
------------
15,418,893
------------
Major Chemicals (1.3%)
68,700 Rohm & Haas Co. ............. 2,756,587
52,800 Solutia, Inc. ............... 1,184,700
------------
3,941,287
------------
Major Pharmaceuticals (5.9%)
40,600 Abbott Laboratories.......... 1,834,612
44,000 Baxter International,
Inc. ....................... 2,840,750
44,700 Bristol-Myers Squibb Co. .... 3,067,537
22,900 Lilly (Eli) & Co. ........... 1,635,919
61,000 Merck & Co., Inc. ........... 4,117,500
17,700 Pfizer, Inc. ................ 1,893,900
33,300 Warner-Lambert Co. .......... 2,064,600
------------
17,454,818
------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Major U.S. Telecommunications (7.8%)
41,500 Ameritech Corp. ............. $ 2,731,219
80,259 AT&T Corp. .................. 4,454,374
112,502 MCI WorldCom, Inc.*.......... 9,710,329
47,700 SBC Communications, Inc. .... 2,438,663
33,700 Sprint Corp. (FON Group)..... 3,799,675
------------
23,134,260
------------
Managed Health Care (1.2%)
37,900 Aetna Inc. .................. 3,441,794
------------

Media Conglomerates (2.7%)
54,548 AT&T Corp. - Liberty Media
Group (Class A)*............ 3,624,033
72,400 Fox Entertainment Group
(Class A)*.................. 1,846,200
37,800 Time Warner, Inc. ........... 2,572,763
------------
8,042,996
------------
Medical/Nursing Services (0.5%)
56,600 Lincare Holdings, Inc.*...... 1,386,700
------------

Military/Gov't/Technical (0.2%)
39,500 Loral Space & Communications
Ltd. (Bermuda)*............. 656,688
------------

Motor Vehicles (3.0%)
59,900 Ford Motor Co. .............. 3,418,044
80,700 General Motors Corp. ........ 5,568,300
------------
8,986,344
------------
Multi-Line Insurance (1.1%)
86,900 Allstate Corp. .............. 3,166,419
------------

Multi-Sector Companies (0.1%)
14,500 Tenneco, Inc. ............... 338,031
------------

Oil Refining/Marketing (1.6%)
52,300 Tosco Corp. ................. 1,336,919
57,100 Total S.A. (ADR) (France).... 3,472,394
------------
4,809,313
------------
Oil/Gas Transmission (1.4%)
106,000 Coastal Corp. ............... 4,087,625
------------

Oilfield Services/Equipment (0.8%)
36,700 BJ Services Co.*............. 1,011,544
30,900 Halliburton Co. ............. 1,278,488
------------
2,290,032
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE> 71
MORGAN STANLEY DEAN WITTER EQUITY FUND

PORTFOLIO OF INVESTMENTS May 31, 1999, continued

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Package Goods/Cosmetics (1.4%)
52,300 Gillette Co. ................ $ 2,667,300
17,300 Procter & Gamble Co. ........ 1,615,388
------------
4,282,688
------------
Packaged Foods (0.7%)
26,100 General Mills, Inc. ......... 2,097,788
------------
Property - Casualty Insurers (2.0%)
55,800 Everest Reinsurance Holdings,
Inc. ....................... 1,834,425
105,400 Travelers Property Casualty
Corp. (Class A)............. 4,163,300
------------
5,997,725
------------
Railroads (0.5%)
50,400 Burlington Northern Santa Fe
Corp. ...................... 1,562,400
------------

Rental/Leasing Companies (0.9%)
58,900 Ryder System, Inc. .......... 1,413,600
43,400 United Rentals, Inc. ........ 1,302,000
------------
2,715,600
------------
Retail - Specialty (0.5%)
4,100 Best Buy Co., Inc.*.......... 186,550
60,100 Office Depot, Inc.*.......... 1,254,588
------------
1,441,138
------------
Semiconductors (1.3%)
69,200 Intel Corp. ................. 3,758,425
------------

Specialty Chemicals (2.7%)
52,800 Air Products & Chemicals,
Inc......................... 2,164,800
148,200 Engelhard Corp. ............. 3,001,050
163,400 Grace (W. R.) & Co.*......... 2,910,563
------------
8,076,413
------------
Specialty Insurers (4.1%)
69,800 Ace, Ltd. (Bermuda).......... 2,128,900
52,800 Ambac Financial Group,
Inc. ....................... 3,078,900
60,100 MBIA, Inc. .................. 4,105,581
48,200 XL Capital Ltd. (Class A).... 2,931,163
------------
12,244,544
------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Telecommunications Equipment (5.7%)
34,800 ADC Telecommunications,
Inc.*....................... $ 1,696,500
48,100 General Instrument Corp.*.... 1,860,869
45,200 Motorola, Inc. .............. 3,743,125
26,000 Nortel Networks Corp. ....... 1,950,000
43,800 QUALCOMM Inc.*............... 4,256,813
56,600 Tellabs, Inc.*............... 3,311,100
------------
16,818,407
------------
Tobacco (1.1%)
101,700 RJR Nabisco Holdings
Corp. ...................... 3,146,344
------------

TOTAL COMMON STOCKS
(Identified Cost
$240,898,764)................ 284,196,852
------------

PREFERRED STOCK (0.8%)
Media Conglomerates
81,500 News Corporation Ltd. (The)
(ADR) (Australia)
(Identified Cost
$2,480,656)................. 2,480,656
------------
PRINCIPAL
AMOUNT IN
THOUSANDS
- --------
SHORT-TERM INVESTMENT (3.8%)
REPURCHASE AGREEMENT
$ 11,382 The Bank of New York 4.50%
due 06/01/99 (dated
05/28/99; proceeds
$11,388,081) (a)
(Identified Cost
$11,382,389) 11,382,389
------------
</TABLE>

TOTAL INVESTMENTS
(Identified Cost $254,761,809)
(b).............................. 100.3% 298,059,897

LIABILITIES IN EXCESS
OF OTHER ASSETS.................. (0.3) (969,714)
------ ------------

NET ASSETS....................... 100.0% $297,090,183
------ ============
------
</TABLE>

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

<TABLE>
<C> <S>
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $9,052,686 U.S. Treasury Bond
8.75% due 05/15/17 valued at $11,611,176.
(b) The aggregate cost for federal income tax
purposes approximates identified cost. The
aggregate gross unrealized appreciation is
$49,170,398 and the aggregate gross unrealized
depreciation is $5,872,310, resulting in net
unrealized appreciation of $43,298,088.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE> 72

MORGAN STANLEY DEAN WITTER EQUITY FUND

FINANCIAL STATEMENTS

<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $254,761,809)............................. $298,059,897
Receivable for:
Investments sold........................................ 1,765,473
Shares of beneficial interest sold...................... 856,858
Dividends............................................... 294,828
Deferred offering costs..................................... 17,458
Prepaid expenses and other assets........................... 82,320
------------
TOTAL ASSETS............................................ 301,076,834
------------
LIABILITIES:
Payable for:
Investments purchased................................... 3,328,726
Plan of distribution fee................................ 247,154
Investment management fee............................... 214,019
Shares of beneficial interest repurchased............... 61,105
Offering costs.............................................. 14,820
Accrued expenses............................................ 120,827
------------
TOTAL LIABILITIES....................................... 3,986,651
------------
NET ASSETS.............................................. $297,090,183
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $252,460,556
Net unrealized appreciation................................. 43,298,088
Undistributed net realized gain............................. 1,331,539
------------
NET ASSETS.............................................. $297,090,183
============
CLASS A SHARES:
Net Assets.................................................. $7,932,667
Shares Outstanding (unlimited authorized, $.01 par value)... 674,526
NET ASSET VALUE PER SHARE............................... $11.76
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $12.41
============
CLASS B SHARES:
Net Assets.................................................. $273,344,542
Shares Outstanding (unlimited authorized, $.01 par value)... 23,389,925
NET ASSET VALUE PER SHARE............................... $11.69
============
CLASS C SHARES:
Net Assets.................................................. $15,744,308
Shares Outstanding (unlimited authorized, $.01 par value)... 1,345,094
NET ASSET VALUE PER SHARE............................... $11.70
============
CLASS D SHARES:
Net Assets.................................................. $68,666
Shares Outstanding (unlimited authorized, $.01 par value)... 5,826
NET ASSET VALUE PER SHARE............................... $11.79
============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE> 73

MORGAN STANLEY DEAN WITTER EQUITY FUND

FINANCIAL STATEMENTS, continued

<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the period July 29, 1998* through May 31, 1999
NET INVESTMENT LOSS:
INCOME
Dividends (net of $25,641 foreign withholding tax).......... $ 2,339,522
Interest.................................................... 542,741
-----------

TOTAL INCOME............................................ 2,882,263
-----------

EXPENSES
Plan of distribution fee (Class A shares)................... 14,950
Plan of distribution fee (Class B shares)................... 1,820,482
Plan of distribution fee (Class C shares)................... 86,747
Investment management fee................................... 1,692,914
Transfer agent fees and expenses............................ 246,712
Offering costs.............................................. 108,387
Registration fees........................................... 90,876
Professional fees........................................... 56,842
Custodian fees.............................................. 29,075
Shareholder reports and notices............................. 15,692
Trustees' fees and expenses................................. 9,910
Other....................................................... 2,904
-----------

TOTAL EXPENSES.......................................... 4,175,491
-----------

NET INVESTMENT LOSS..................................... (1,293,228)
-----------

NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 2,324,956
Net unrealized appreciation................................. 43,298,088
-----------

NET GAIN................................................ 45,623,044
-----------

NET INCREASE................................................ $44,329,816
===========
</TABLE>

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

* Commencement of operations.

SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE> 74

MORGAN STANLEY DEAN WITTER EQUITY FUND

FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
<S> <C>
FOR THE PERIOD
JULY 29, 1998*
THROUGH
MAY 31, 1999

<CAPTION>
- ----------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (1,293,228)
Net realized gain........................................... 2,324,956
Net unrealized appreciation................................. 43,298,088
------------

NET INCREASE............................................ 44,329,816

Net increase from transactions in shares of beneficial
interest................................................... 252,660,367
------------

NET INCREASE............................................ 296,990,183

NET ASSETS:
Beginning of period......................................... 100,000
------------

END OF PERIOD........................................... $297,090,183
============
</TABLE>

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

* Commencement of operations.

SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE> 75

MORGAN STANLEY DEAN WITTER EQUITY FUND

NOTES TO FINANCIAL STATEMENTS May 31, 1999

1. ORGANIZATION AND ACCOUNTING POLICIES

Morgan Stanley Dean Witter Equity Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is total
return. The Fund seeks to achieve its objective by investing at least 65% of its
total assets in equity securities. The Fund was organized as a Massachusetts
business trust on April 6, 1998 and had no operations other than those relating
to organizational matters and the issuance of 2,500 shares of beneficial
interest by each class for $25,000 of each class to Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), to effect the Fund's initial
capitalization. The Fund commenced operations on July 29, 1998.

The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.

The following is a summary of significant accounting policies:

A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price;
(2) all other portfolio securities for which over-the-counter market quotations
are readily available are valued at the latest available bid price prior to the
time of valuation; (3) when market quotations are not readily available,
including circumstances under which it is determined by the Investment Manager
or Miller Anderson & Sherrerd, LLP (the "Sub-Advisor"), an affiliate of the
Investment Manager, that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Trustees (valuation of debt securities for which market quotations are
not readily available may be based upon current market prices of securities
which are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); and (4) short-term debt securities

43
<PAGE> 76
MORGAN STANLEY DEAN WITTER EQUITY FUND

NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued

having a maturity date of more than sixty days at time of purchase are valued on
a mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.

C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.

D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.

E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.

F. OFFERING COSTS -- The Investment Manager incurred offering costs on behalf of
the Fund in the amount of approximately $126,000 which will be reimbursed for
the full amount thereof. Such expenses were deferred and are being amortized by
the Fund on the straight-line method over the period of benefit of approximately
one year or less from the commencement of operations.

44
<PAGE> 77
MORGAN STANLEY DEAN WITTER EQUITY FUND

NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued

2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS

Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.85% to the net assets of the Fund determined as of the close of
each business day.

Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.

Under a Sub-Advisory Agreement between the Sub-Advisor and the Investment
Manager, the
Sub-Advisor provides the Fund with investment advice and portfolio management
relating to the Fund's investments in securities, subject to the overall
supervision of the Investment Manager. As compensation for its services provided
pursuant to the Sub-Advisory Agreement, the Investment Manager pays the
Sub-Advisor compensation equal to 40% of its monthly compensation.

3. PLAN OF DISTRIBUTION

Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
average daily net assets of Class B; and (iii) Class C -- up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts paid
under the Plan are paid to the Distributor for services provided. In the case of
Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for (1) services provided and the expenses borne by it and others in
the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors and others who engage
in or support distribution of the shares or who service shareholder accounts,
including overhead and telephone expenses; (2) printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and (3) preparation, printing and distribution
of sales

45
<PAGE> 78
MORGAN STANLEY DEAN WITTER EQUITY FUND

NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued

literature and advertising materials. In addition, the Distributor may utilize
fees paid pursuant to the Plan, in the case of Class B shares, to compensate
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other selected broker-dealers for their opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses.

In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $12,174,612 at May 31, 1999.

In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the period ended May 31, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
0.78%, respectively.

The Distributor has informed the Fund that for the period ended May 31, 1999, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $1,059, $531,731 and
$19,126, respectively and received $49,580 in front-end sales charges from sales
of the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the period ended May 31, 1999 aggregated
$422,810,841 and $181,765,046, respectively.

46
<PAGE> 79
MORGAN STANLEY DEAN WITTER EQUITY FUND

NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued

Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At May 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $2,300.

5. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 29, 1998*
THROUGH
MAY 31, 1999
-------------------------
SHARES AMOUNT
---------- ------------
<S> <C> <C>
CLASS A SHARES
Sold........................................................ 986,023 $ 9,815,933
Redeemed.................................................... (313,997) (3,248,973)
---------- -----------
Net increase - Class A...................................... 672,026 6,566,960
---------- -----------
CLASS B SHARES
Sold........................................................ 26,743,761 266,671,820
Redeemed.................................................... (3,356,336) (33,876,428)
---------- -----------
Net increase - Class B...................................... 23,387,425 232,795,392
---------- -----------
CLASS C SHARES
Sold........................................................ 1,753,484 17,458,304
Redeemed.................................................... (410,890) (4,196,497)
---------- -----------
Net increase - Class C...................................... 1,342,594 13,261,807
---------- -----------
CLASS D SHARES
Sold........................................................ 3,326 36,208
---------- -----------
Net increase in Fund........................................ 25,405,371 $252,660,367
========== ===========
</TABLE>

- ---------------------
* Commencement of operations.

6. FEDERAL INCOME TAX STATUS

As of May 31, 1999, the Fund had permanent book/tax differences attributable to
a net operating loss and nondeductible expenses. To reflect reclassifications
arising from these differences, paid-in-capital was charged $299,811,
undistributed net realized gain was charged $993,417 and net investment loss was
credited $1,293,228.

47
<PAGE> 80

MORGAN STANLEY DEAN WITTER EQUITY FUND

FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a beneficial interest outstanding
throughout the period:

<TABLE>
<CAPTION>
FOR THE PERIOD JULY 29, 1998* THROUGH MAY 31, 1999
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
SHARES SHARES SHARES SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA++:
Net asset value, beginning of period........................ $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)............................... 0.01 (0.07) (0.04) 0.03
Net realized and unrealized gain........................... 1.75 1.76 1.74 1.76
------ ------ ------ ------
Total income from investment operations..................... 1.76 1.69 1.70 1.79
------ ------ ------ ------
Net asset value, end of period.............................. $11.76 $11.69 $11.70 $11.79
====== ====== ====== ======
TOTAL RETURN+(1)............................................ 17.60% 16.90% 17.10% 17.90%

RATIOS TO AVERAGE NET ASSETS(2)(3):
Expenses.................................................... 1.38% 2.13% 1.91% 1.13%
Net investment income (loss)................................ 0.07% (0.68)% (0.46)% 0.32%

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $7,933 $273,345 $15,744 $69
Portfolio turnover rate(1).................................. 80% 80% 80% 80%
</TABLE>

- ---------------------
* Commencement of operations.
++ The per share amounts were computed using an average number of shares
outstanding.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE> 81

MORGAN STANLEY DEAN WITTER EQUITY FUND

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER EQUITY FUND

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Equity
Fund (the "Fund") at May 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the period July 29,
1998 (commencement of operations) through May 31, 1999, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at May 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
July 6, 1999