<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 2000
FILE NOS.: 333-66203
811-09081
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 1 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 3 /X/
-------------------
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
STUART M. STRAUSS, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this registration statement
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
____ immediately upon filing pursuant to paragraph (b)
_X_ on February 3, 2000 pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on (date) pursuant to paragraph (a) of rule 485.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS - FEBRUARY 3, 2000
Morgan Stanley Dean Witter
INTERNATIONAL FUND
[COVER PHOTO]
A MUTUAL FUND THAT SEEKS LONG-TERM CAPITAL GROWTH
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon
the adequacy of this PROSPECTUS. Any representation to the contrary is a
criminal offense.
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
The Fund Investment Objective......... 1
Principal Investment
Strategies................... 1
Principal Risks.............. 2
Fees and Expenses............ 4
Additional Investment
Strategy Information......... 5
Additional Risk
Information.................. 6
Fund Management.............. 8
Shareholder Information Pricing Fund Shares.......... 9
How to Buy Shares............ 9
How to Exchange Shares....... 11
How to Sell Shares........... 12
Distributions................ 14
Tax Consequences............. 15
Share Class Arrangements..... 15
Our Family of Funds ............................. Inside Back Cover
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION
ABOUT THE FUND.
PLEASE READ IT CAREFULLY AND KEEP IT FOR FUTURE
REFERENCE.
</TABLE>
<PAGE>
[Sidebar]
CAPITAL GROWTH
AN INVESTMENT OBJECTIVE HAVING THE GOAL OF SELECTING SECURITIES WITH THE
POTENTIAL TO RISE IN PRICE RATHER THAN PAY OUT INCOME.
MSCI EAFE COUNTRIES
INCLUDE AUSTRALIA, JAPAN, NEW ZEALAND, MOST NATIONS IN WESTERN EUROPE, HONG KONG
AND SINGAPORE.
[End Sidebar]
THE FUND
[ICON] INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter International Fund seeks long-term capital
growth.
[ICON] PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund will normally invest at least 65% of its total assets in a
diversified portfolio of international common stocks and other equity
securities. The Fund's "Investment Manager," Morgan Stanley Dean
Witter Advisors Inc., and its "Sub-Advisor" -- Morgan Stanley Dean
Witter Investment Management Inc. -- use a "top-down" approach that
emphasizes country and sector selection and weightings over
individual stock selection.
COUNTRY SELECTION. The Sub-Advisor first considers the countries
represented in the Morgan Stanley Capital International EAFE (Europe,
Australia and Far East) Index. The Sub-Advisor -- on an ongoing basis
-- establishes the proportion or weighting for each country (eg.,
overweight, underweight or neutral) relative to the Index for
investment by the Fund. The Sub-Advisor may also choose to overweight
or underweight particular sectors, such as telecommunications or
banking, within each country or region. In making its determinations,
it evaluates factors such as valuation, economic outlook, corporate
earnings growth, inflation, liquidity and risk characteristics,
investor sentiment, interest rates, and currency outlook. The Fund
will invest in at least three separate countries.
STOCK SELECTION. The Sub-Advisor invests the Fund's assets within
each country and/or sector based on its assigned weighting. Within
each country, the Sub-Advisor will try to match the performance of a
broad local market index by investing in optimized "baskets" of
common stocks and other equity securities, which may include
depository receipts, preferred securities and convertible securities.
In most cases, the MSCI Index for that country will be used as the
benchmark index.
In addition to the securities discussed above, the Fund may also
invest in equity and/or fixed-income and convertible securities of
issuers located anywhere in the world, including the United States;
securities of other investment companies; forward currency contracts
and futures on stock indexes. The Fund may invest up to 10% of its
assets in securities of companies located in emerging market
countries.
Common stock is a share ownership or equity interest in a
corporation. It may or may not pay dividends, as some companies
reinvest all of their profits back into their businesses, while
others pay out some of their profits to shareholders as dividends. A
depository receipt is generally issued by a bank or financial
institution and represents an ownership interest in the common stock
or other equity securities of a foreign company.
1
<PAGE>
In pursuing the Fund's investment objective, the Investment Manager
and/or Sub-Advisor have considerable leeway in deciding which
investments they buy, hold or sell on a day-to-day basis -- and which
trading strategies they use. For example, the Investment Manager
and/or Sub-Advisor in their discretion may determine to use some
permitted trading strategies while not using others.
[ICON] PRINCIPAL RISKS
- --------------------------------------------------------------------------------
There is no assurance that the Fund will achieve its investment
objective. The Fund's share price will fluctuate with changes in the
market value of the Fund's portfolio securities. When you sell Fund
shares, they may be worth less than what you paid for them and,
accordingly, you can lose money investing in this Fund.
A principal risk of investing in the Fund is associated with its
foreign stock investments. In general, stock values fluctuate in
response to activities specific to the company as well as general
market, economic and political conditions. Stock prices can fluctuate
widely in response to these factors.
FOREIGN SECURITIES. The Fund's investments in foreign securities
(including depository receipts) involve risks that are in addition to
the risks associated with domestic securities. One additional risk is
currency risk. While the price of Fund shares is quoted in U.S.
dollars, the Fund generally converts U.S. dollars to a foreign
market's local currency to purchase a security in that market. If the
value of that local currency falls relative to the U.S. dollar, the
U.S. dollar value of the foreign security will decrease. This is true
even if the foreign security's local price remains unchanged.
Foreign securities also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation,
exchange control regulation, limitation on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. In particular, adverse political or economic
developments in a particular region and/or country in which the Fund
invests could cause a substantial decline in value of the portfolio.
Foreign companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less
publicly available information about these companies. Moreover,
foreign accounting, auditing and financial reporting standards
generally are different from those applicable to U.S. companies.
Finally, in the event of a default of any foreign debt obligations,
it may be more difficult for 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.
Delays in purchasing
2
<PAGE>
securities may result in the Fund losing investment opportunities.
The inability to dispose of foreign securities due to settlement
delays could result in losses to the Fund due to subsequent declines
in value of the securities.
The foreign securities in which the Fund invests may be issued by
companies located in emerging market countries. Compared to the
United States and other developed countries, emerging market
countries may have relatively unstable governments, economies based
on only a few industries and securities markets that trade a small
number of securities. Prices of these securities tend to be
especially volatile and, in the past, securities in these countries
have been characterized by greater potential loss than securities of
companies located in developed countries.
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 Investment Manager and/or Sub-Advisor are successful in pursuing
the Fund's investment strategy. The Fund is also subject to other
risks from its permissible investments, including the risks
associated with its investments in the securities of other investment
companies, forward currency contracts and futures on stock indexes.
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.
3
<PAGE>
[Sidebar]
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 FISCAL PERIOD ENDED OCTOBER 31, 1999.
[End Sidebar]
[ICON] FEES AND EXPENSES
- --------------------------------------------------------------------------------
The table below briefly describes the fees and expenses that you may
pay if you buy and hold shares of the 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.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
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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 1.00% 1.00% 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25% 1.00% 1.00% None
- --------------------------------------------------------------------------------------------------------
Other expenses 0.56% 0.56% 0.56% 0.56%
- --------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.81% 2.56% 2.56% 1.56%
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the
time of purchase are subject to a contingent deferred sales
charge ("CDSC") of 1.00% that will be imposed if you sell
your shares within one year after purchase, except for
certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year,
reaching zero thereafter. See "Share Class Arrangements" for
a complete discussion of the CDSC.
4 Only applicable if you sell your shares within one year
after purchase.
</TABLE>
4
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your
investment has a 5% return each year, and the Fund's operating
expenses remain the same. Although your actual costs may be higher or
lower, the tables below show your costs at the end of each period
based on these assumptions depending upon whether or not you sell
your shares at the end of each period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES:
--------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
------------------------------------------------------------------------
CLASS A $699 $1,065 $1,454 $2,540
------------------------------------------------------------------------
CLASS B $759 $1,096 $1,560 $2,895
------------------------------------------------------------------------
CLASS C $359 $ 796 $1,360 $2,895
------------------------------------------------------------------------
CLASS D $159 $ 493 $ 850 $1,856
------------------------------------------------------------------------
<CAPTION>
IF YOU HELD YOUR SHARES:
------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
------------------------ ------------------------------------------
CLASS A $ 699 $1,065 $1,454 $2,540
------------------------ ------------------------------------------
CLASS B $ 259 $ 796 $1,360 $2,895
------------------------ ------------------------------------------
CLASS C $ 259 $ 796 $1,360 $2,895
------------------------ ------------------------------------------
CLASS D $ 159 $ 493 $ 850 $1,856
------------------------ ------------------------------------------
</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.
[ICON] ADDITIONAL INVESTMENT STRATEGY INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the Fund's
principal strategies.
OTHER GLOBAL SECURITIES. The Fund may invest up to 35% of its assets
in equity and/or fixed-income and convertible securities of issuers
located anywhere in the world, including the United States.
INVESTMENT COMPANIES. The Fund may invest up to 10% of its assets in
securities issued by other investment companies. The Investment
Manager and/or Sub-Advisor may view these investments as necessary to
participate in certain foreign markets where direct investment by the
Fund may be difficult or impracticable.
EMERGING MARKET COUNTRIES. The Fund may invest up to 10% of its
assets in securities of companies located in emerging market
countries. These are countries that major financial institutions,
such as the World Bank, generally consider to be less economically
mature than developed nations. Emerging market countries can include
every nation in the world except the United States, Canada, Japan,
Hong Kong, Singapore, Australia, New Zealand and most nations located
in Western Europe.
FORWARD CURRENCY CONTRACTS. The Fund's investments also may include
forward currency contracts, which involve the purchase or sale of a
specific amount of foreign currency at the current price with
delivery at a specified future date. The Fund may use
5
<PAGE>
these contracts to hedge against adverse price movements in its
portfolio securities and the currencies in which they are denominated
or to gain exposure to currencies underlying various securities or
financial instruments held in its portfolio.
FUTURES ON STOCK INDEXES. The Fund may invest in futures on stock
indexes. Futures on stock indexes may be used to facilitate
allocation of the Fund's investments among asset classes, to increase
or decrease the Fund's exposure to the stock or bond markets, to
generate income, or to seek to protect against decline in securities
prices or increases in prices of securities that may be purchased.
DEFENSIVE INVESTING. The Fund may take temporary "defensive"
positions in attempting to respond to adverse market conditions. The
Fund may invest any amount of its assets in cash or money market
instruments in a defensive posture when the Investment Manager and/or
Sub-Advisor believe 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. A high turnover rate 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.
[ICON] ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the
principal risks of investing in the Fund.
FIXED-INCOME SECURITIES. All fixed-income securities, such as
corporate debt, are subject to two types of risk: credit risk and
interest rate risk. Credit risk refers to the possibility that the
issuer of a security will be unable to make interest payments and/or
repay the principal on its debt.
Interest rate risk refers to fluctuations in the value of a
fixed-income security resulting from changes in the general level of
interest rates. When the general level of interest rates goes up, the
prices of most fixed-income securities go down. When the general
6
<PAGE>
level of interest rates goes down, the prices of most fixed-income
securities go up. (Zero coupon securities are typically subject to
greater price fluctuations than comparable securities that pay
interest.)
A portion of the fixed-income convertible securities in which the
Fund may invest may be rated below investment grade. Securities rated
below investment grade are commonly known as "junk bonds" and have
speculative credit risk characteristics.
FORWARD CURRENCY CONTRACTS. The Fund's participation in forward
currency contracts also involves risks. If the Investment Manager
and/or Sub-Advisor employs a strategy that does not correlate well
with the Fund's investments or the currencies in which the
investments are denominated, currency contracts could result in a
loss. The contracts also may increase the Fund's volatility and may
involve a significant risk.
FUTURES ON STOCK INDEXES. If the Fund invests in futures on stock
indexes, its participation in these markets would subject the Fund to
investment risks to which the Fund would not be subject absent the
use of these strategies. If the Investment Manager's and/or
Sub-Advisor's predictions of movements in the direction of the stock
index are inaccurate, the adverse consequences to the Fund (e.g., a
reduction in the Fund's net asset value or a reduction in the amount
of income available for distribution) may leave the Fund in a worse
position than if these strategies were not used. Other risks inherent
in the use of futures on stock indexes include, for example, the
possible imperfect correlation between the price of futures contracts
and movements in the prices of the securities being hedged, and the
possible absence of a liquid secondary market for any particular
instrument.
7
<PAGE>
[Sidebar]
MORGAN STANLEY DEAN WITTER ADVISORS INC.
THE INVESTMENT MANAGER IS WIDELY RECOGNIZED AS A LEADER IN THE MUTUAL FUND
INDUSTRY AND TOGETHER WITH MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC., ITS
WHOLLY-OWNED SUBSIDIARY, HAD APPROXIMATELY $145 BILLION IN ASSETS UNDER
MANAGEMENT AS OF DECEMBER 31, 1999.
[End Sidebar]
[ICON] FUND MANAGEMENT
- --------------------------------------------------------------------------------
The Fund has retained the Investment Manager -- Morgan Stanley Dean
Witter Advisors Inc. -- to provide administrative services, manage
its business affairs and supervise the investment of its assets. The
Investment Manager has, in turn, contracted with the Sub-Advisor --
Morgan Stanley Dean Witter Investment Management Inc. - 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, NY 10048.
The Sub-Advisor, together with its institutional investment
management affiliates, manages approximately $185 billion as of
December 31, 1999 primarily for employee benefit plans, investment
companies, endowments, foundations and wealthy individuals.The
Sub-Advisor also is a subsidiary of Morgan Stanley Dean Witter & Co.
Its main business office is located at 1221 Avenue of the Americas,
New York, NY 10020.
Ann D. Thivierge and Barton Biggs are the primary portfolio managers
of the Fund. Ann Thivierge is a Managing Director of the Sub-Advisor.
She is a member of the Sub-Advisor's Asset Allocation Committee,
primarily representing the Total Funds Management Team since its
inception in 1991. Barton M. Biggs has been the Chairman and a
Director of the Sub-Advisor since 1980 and a Managing Director of
Morgan Stanley & Co. Incorporated since 1975. He is also a director
and chairman of various registered investment companies to which the
Sub-Advisor and certain of its affiliates provide investment advisory
services.
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 calculated
daily by applying the annual rate of 1.0% to the Fund's daily net
assets. The Investment Manager pays the Sub-Advisor monthly
compensation equal to 40% of this fee.
8
<PAGE>
[Sidebar]
CONTACTING A FINANCIAL ADVISOR
IF YOU ARE NEW TO THE MORGAN STANLEY DEAN WITTER FAMILY OF FUNDS AND WOULD LIKE
TO CONTACT A FINANCIAL ADVISOR, CALL (877) 937-MSDW
(TOLL-FREE) FOR THE TELEPHONE NUMBER OF THE MORGAN STANLEY DEAN WITTER OFFICE
NEAREST YOU. YOU MAY ALSO ACCESS OUR OFFICE LOCATOR ON OUR INTERNET SITE AT:
WWW.MSDW.COM/INDIVIDUAL/FUNDS
[End Sidebar]
SHAREHOLDER INFORMATION
[ICON] PRICING 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-Advisor determines that a security's market price
is not accurate, a portfolio security is valued at its fair value, as
determined under procedures established by the Fund's Board of
Trustees. In these cases, the Fund's net asset value will reflect
certain portfolio securities' fair value rather than their market
price. With respect to securities that are primarily listed on
foreign exchanges, the values 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.
[ICON] 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 representative can
help you decide which Class may be most appropriate for you. When
purchasing Fund shares, you must specify which Class of shares you
wish to purchase.
9
<PAGE>
[Sidebar]
EASYINVEST-SM-
A PURCHASE PLAN THAT ALLOWS YOU TO TRANSFER MONEY AUTOMATICALLY FROM YOUR
CHECKING OR SAVINGS ACCOUNT OR FROM A MONEY MARKET FUND ON A SEMI-MONTHLY,
MONTHLY OR QUARTERLY BASIS. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL
ADVISOR FOR FURTHER INFORMATION ABOUT THIS SERVICE.
[End Sidebar]
When you buy Fund shares, the shares are purchased at the next share
price calculated (less any applicable front-end sales charge for
Class A shares) after we receive your purchase order. Your payment is
due on the third business day after you place your purchase order. We
reserve the right to reject any order for the purchase of Fund
shares.
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
--------------------------------------------------------------------------------
MINIMUM INVESTMENT
------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Regular Accounts $1,000 $100
--------------------------------------------------------------------------------
Individual Retirement
Accounts: Regular IRAs $1,000 $100
Education IRAs $500 $100
--------------------------------------------------------------------------------
EASYINVEST-SM-
(Automatically from your
checking or savings
account or Money Market
Fund) $100* $100*
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Provided your schedule of investments totals $1,000 in
twelve months.
</TABLE>
There is no minimum investment amount if you purchase 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).
- Make out a check for the total amount payable to: Morgan Stanley
Dean Witter International Fund.
- Mail the letter and check to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 1040, Jersey City, NJ 07303.
10
<PAGE>
[ICON] HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of any Class of
the Fund for the same Class of any other continuously offered
Multi-Class Fund, or for shares of a No-Load Fund, a Money Market
Fund, North American Government Income Trust or Short-Term U.S.
Treasury Trust, without the imposition of an exchange fee. 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 minimums, and should be read
before investment. Since exchanges are available only into
continuously offered Morgan Stanley Dean Witter Funds, exchanges are
not available into any new Morgan Stanley Dean Witter Fund during its
initial offering period, or when shares of a particular Morgan
Stanley Dean Witter Fund are not being offered for purchase.
EXCHANGE PROCEDURES. You can process an exchange by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative. Otherwise, you must forward an exchange
privilege authorization form to the Fund's transfer agent -- Morgan
Stanley Dean Witter Trust FSB -- and then write the transfer agent or
call (800) 869-NEWS to place an exchange order. You can obtain an
exchange privilege authorization form by contacting your Financial
Advisor or other authorized financial representative or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money
Market Fund) is made on the basis of the next calculated net asset
values of the Funds involved after the exchange instructions are
accepted. When exchanging into a Money Market Fund, the Fund's shares
are sold at their next calculated net asset value and the Money
Market Fund's shares are purchased at their net asset value on the
following business day.
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.
11
<PAGE>
Telephone instructions will be accepted if received by the Fund's
transfer agent between 9:00 a.m. and 4:00 p.m. Eastern time on any
day the New York Stock Exchange is open for business. During periods
of drastic economic or market changes, it is possible that the
telephone exchange procedures may be difficult to implement, although
this has not been the case with the Fund in the past.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin
account, contact your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative regarding restrictions on
the exchange of such shares.
TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of the Fund
for shares of another Morgan Stanley Dean Witter Fund there are
important tax considerations. For tax purposes, the exchange out of
the Fund is considered a sale of Fund shares -- and the exchange into
the other Fund is considered a purchase. As a result, you may realize
a capital gain or loss.
You should review the "Tax Consequences" section and consult your own
tax professional about the tax consequences of an exchange.
LIMITATIONS ON EXCHANGES. Certain patterns of exchanges may result in
the Fund limiting or prohibiting, at its discretion, additional
purchases and/or exchanges. Determinations in this regard may be made
based on the frequency or dollar amount of previous exchanges. The
Fund will notify you in advance of limiting your exchange privileges.
CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements"
section of this PROSPECTUS for a discussion of how applicable
contingent deferred sales charges (CDSCs) are calculated for shares
of one Morgan Stanley Dean Witter Fund that are exchanged for shares
of another.
For further information regarding exchange privileges, you should
contact your Morgan Stanley Dean Witter Financial Advisor or call
(800) 869-NEWS.
[ICON] 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 (redeem) your shares, simply call your Morgan
Financial Advisor Stanley Dean Witter Financial Advisor or other authorized
financial representative.
------------------------------------------------------------
ICON Payment will be sent to the address to which the account is
registered or deposited in your brokerage account.
------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of
instruction" that includes:
ICON - your account number;
- the dollar amount or the number of shares you wish to
sell;
- the Class of shares you wish to sell; and
- the signature of each owner as it appears on the account.
------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
------------------------------------------------------------------------------------
<S> <C>
By Letter, If you are requesting payment to anyone other than the
continued registered owner(s) or that payment be sent to any address
other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature
guarantee. You can obtain a signature guarantee from an
eligible guarantor acceptable to Morgan Stanley Dean Witter
Trust FSB. (You should contact Morgan Stanley Dean Witter
Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.)
A notary public CANNOT provide a signature guarantee.
Additional documentation may be required for shares held by
a corporation, partnership, trustee or executor.
------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at
P.O. Box 983, Jersey City, NJ 07303. If you hold share
certificates, you must return the certificates, along with
the letter and any required additional documentation.
------------------------------------------------------------
A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
instructions.
------------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter
Withdrawal Plan Family of Funds has a total market value of at least
ICON $10,000, you may elect to withdraw amounts of $25 or more,
or in any whole percentage of a Fund's balance (provided the
amount is at least $25), on a monthly, quarterly,
semi-annual or annual basis, from any Fund with a balance of
at least $1,000. Each time you add a Fund to the plan, you
must meet the plan requirements.
------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC
may be waived under certain circumstances. See the Class B
waiver categories listed in the "Share Class Arrangements"
section of this PROSPECTUS.
------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your
Morgan Stanley Dean Witter Financial Advisor or call
(800) 869-NEWS. You may terminate or suspend your plan at
any time. Please remember that withdrawals from the plan are
sales of shares, not Fund "distributions," and ultimately
may exhaust your account balance. The Fund may terminate or
revise the plan at any time.
------------------------------------------------------------------------------------
</TABLE>
PAYMENT FOR SOLD SHARES. After we receive your complete instructions
to sell as described above, a check will be mailed to you within
seven days, although we will attempt to make payment within one
business day. Payment may also be sent to your brokerage account.
Payment may be postponed or the right to sell your shares suspended
under unusual circumstances. If you request to sell shares that were
recently purchased by check, your sale will not be effected until it
has been verified that the check has been honored.
TAX CONSIDERATIONS. Normally, your sale of 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)
13
<PAGE>
[Sidebar]
TARGETED DIVIDENDS -SM-
YOU MAY SELECT TO HAVE YOUR FUND DISTRIBUTIONS AUTOMATICALLY INVESTED IN OTHER
CLASSES OF FUND SHARES OR CLASSES OF ANOTHER MORGAN STANLEY DEAN WITTER FUND
THAT YOU OWN. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR FOR
FURTHER INFORMATION ABOUT THIS SERVICE.
[End Sidebar]
whose shares, due to sales by the shareholder, have a value below
$100, or in the case of an account opened through EASYINVEST -SM-, if
after 12 months the shareholder has invested less than $1,000 in the
account.
However, before the Fund sells your shares in this manner, we will
notify you and allow you sixty days to make an additional investment
in an amount that will increase the value of your account to at least
the required amount before the sale is processed. No CDSC will be
imposed on any involuntary sale.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin
account, contact your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative regarding restrictions on
the sale of such shares.
[ICON] 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 usually will be
higher than for Class B and Class C because distribution fees that
Class B and Class C pay are higher. Normally, income dividends are
distributed to shareholders annually. Capital gains, if any, are
usually distributed in December. The Fund 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.
14
<PAGE>
[ICON] 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 a
purchase of your new shares. Thus, the exchange may, like a sale,
result in a taxable gain or loss to you and will give you a new tax
basis for your new shares.
When you open your Fund account, you should provide your social
security or tax identification number on your investment application.
By providing this information, you will avoid being subject to a
federal backup withholding tax of 31% on taxable distributions and
redemption proceeds. Any withheld amount would be sent to the IRS as
an advance tax payment.
[ICON] SHARE CLASS ARRANGEMENTS
- --------------------------------------------------------------------------------
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.
15
<PAGE>
[Sidebar]
FRONT-END SALES
CHARGE OR FSC
AN INITIAL SALES CHARGE YOU PAY WHEN PURCHASING CLASS A SHARES THAT IS BASED ON
A PERCENTAGE OF THE OFFERING PRICE. THE PERCENTAGE DECLINES BASED UPON THE
DOLLAR VALUE OF CLASS A SHARES YOU PURCHASE. WE OFFER THREE WAYS TO REDUCE YOUR
CLASS A SALES CHARGES - THE COMBINED PURCHASE PRIVILEGE, RIGHT OF ACCUMULATION
AND LETTER OF INTENT.
[End Sidebar]
The general public is offered three Classes: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales
charges and ongoing expenses. A fourth Class, Class D shares, is
offered only to a limited category of investors. Shares that you
acquire through reinvested distributions will not be subject to any
front-end sales charge or CDSC -- contingent deferred sales charge.
Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide
for the distribution financing of shares of that Class.
The chart below compares the sales charge and annual 12b-1 fee
applicable to each Class:
<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1 FEE
<S> <C> <C>
-----------------------------------------------------------------
A Maximum 5.25% initial sales charge
reduced for purchase of $25,000 or more;
shares sold without an initial sales
charge are generally subject to a 1.0%
CDSC during the first year 0.25%
-----------------------------------------------------------------
B Maximum 5.0% CDSC during the first year
decreasing to 0% after six years 1.0%
-----------------------------------------------------------------
C 1.0% CDSC during the first year 1.0%
-----------------------------------------------------------------
D None None
-----------------------------------------------------------------
</TABLE>
CLASS A SHARES Class A shares are sold at net asset value plus an
initial sales charge of up to 5.25%. The initial sales charge is
reduced for purchases of $25,000 or more according to the schedule
below. Investments of $1 million or more are not subject to an initial
sales charge, but are generally subject to a contingent deferred sales
charge, or CDSC, of 1.0% on sales made within one year after the last
day of the month of purchase. The CDSC will be assessed in the same
manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25% of
the average daily net assets of the Class.
The offering price of Class A shares includes a sales charge (expressed
as a percentage of the offering price) on a single transaction as shown
in the following table:
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
---------------------------------------------
PERCENTAGE OF APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION PUBLIC OFFERING PRICE OF NET AMOUNT INVESTED
<S> <C> <C>
---------------------------------------------------------------------------------------
Less than $25,000 5.25% 5.54%
---------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
---------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
---------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
---------------------------------------------------------------------------------------
$250,000 but less than $1 million 2.00% 2.04%
---------------------------------------------------------------------------------------
$1 million and over 0.00% 0.00%
---------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
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 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
17
<PAGE>
charge. You can obtain a letter of intent by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative or by calling (800) 869-NEWS. If you do not achieve
the stated investment goal within the thirteen-month period, you are
required to pay the difference between the sales charges otherwise
applicable and sales charges actually paid, which may be deducted
from your investment.
OTHER SALES CHARGE WAIVERS. In addition to investments of $1 million
or more, your purchase of Class A shares is not subject to a
front-end sales charge (or CDSC upon sale) if your account qualifies
under one of the following categories:
- A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.
- Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including termination fees,
mandatory sale or transfer restrictions on termination) approved by
the Fund's distributor pursuant to which they pay an asset-based
fee for investment advisory, administrative and/or brokerage
services.
- Employer-sponsored employee benefit plans, whether or not qualified
under the Internal Revenue Code, for which Morgan Stanley Dean
Witter Trust FSB serves as trustee or Dean Witter Reynolds'
Retirement Plan Services serves as recordkeeper under a written
Recordkeeping Services Agreement ("MSDW Eligible Plans") which have
at least 200 eligible employees.
- An MSDW Eligible Plan whose Class B shares have converted to
Class A shares, regardless of the plan's asset size or number of
eligible employees.
- A client of a Morgan Stanley Dean Witter Financial Advisor who
joined us from another investment firm within six months prior to
the date of purchase of Fund shares, and you used the proceeds from
the sale of shares of a proprietary mutual fund of that Financial
Advisor's previous firm that imposed either a front-end or deferred
sales charge to purchase Class A shares, provided that: (1) you
sold the shares not more than 60 days prior to the purchase of Fund
shares, and (2) the sale proceeds were maintained in the interim in
cash or a money market fund.
- 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.
18
<PAGE>
[Sidebar]
CONTINGENT DEFERRED SALES CHARGE OR CDSC
A FEE YOU PAY WHEN YOU SELL SHARES OF CERTAIN MORGAN STANLEY DEAN WITTER FUNDS
PURCHASED WITHOUT AN INITIAL SALES CHARGE. THIS FEE DECLINES THE LONGER YOU HOLD
YOUR SHARES AS SET FORTH IN THE TABLE.
[End Sidebar]
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.
<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
<S> <C>
--------------------------------------------------------------
First 5.0%
--------------------------------------------------------------
Second 4.0%
--------------------------------------------------------------
Third 3.0%
--------------------------------------------------------------
Fourth 2.0%
--------------------------------------------------------------
Fifth 2.0%
--------------------------------------------------------------
Sixth 1.0%
--------------------------------------------------------------
Seventh and thereafter None
--------------------------------------------------------------
</TABLE>
Each time you place an order to sell or exchange shares, shares with
no CDSC will be sold or exchanged first, then shares with the lowest
CDSC will be sold or exchanged next. For any shares subject to a
CDSC, the CDSC will be assessed on an amount equal to the lesser of
the current market value or the cost of the shares being sold.
CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived in the
case of:
- Sales of shares held at the time you die or become disabled (within
the definition in Section 72(m)(7) of the Internal Revenue Code
which relates to the ability to engage in gainful employment), if
the shares are: (i) registered either in your name (not a trust) or
in the names of you and your spouse as joint tenants with right of
survivorship; or (ii) held in a qualified corporate or
self-employed retirement plan, IRA or 403(b) Custodial Account,
provided in either case that the sale is requested within one year
of your death or initial determination of disability.
- Sales in connection with the following retirement plan
"distributions:" (i) lump-sum or other distributions from a
qualified corporate or self-employed retirement plan following
retirement (or, in the case of a "key employee" of a "top heavy"
plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age 59
1/2; or (iii) a tax-free return of an excess IRA contribution (a
"distribution" does not include a direct transfer of IRA,
403(b) Custodial Account or retirement plan assets to a successor
custodian or trustee).
- Sales of shares held for you as a participant in an MSDW Eligible
Plan.
- Sales of shares in connection with the Systematic Withdrawal Plan
of up to 12% annually of the value of each Fund from which plan
sales are made. The percentage is determined on the date you
establish the Systematic Withdrawal Plan and based on the next
calculated share price. You may have this CDSC waiver applied in
amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12%
annually. Shares with no
19
<PAGE>
CDSC will be sold first, followed by those with the lowest CDSC. As
such, the waiver benefit will be reduced by the amount of your
shares that are not subject to a CDSC. If you suspend your
participation in the plan, you may later resume plan payments
without requiring a new determination of the account value for the
12% CDSC waiver.
- Sales of shares if you simultaneously invest the proceeds in the
Investment Manager's mutual fund asset allocation program, pursuant
to which investors pay an asset-based fee. Any shares you acquire
in connection with the Investment Manager's mutual fund asset
allocation program are subject to all of the terms and conditions
of that program, including termination fees, mandatory sale or
transfer restrictions on termination.
All waivers will be granted only following the Fund's distributor
receiving confirmation of your entitlement. If you believe you are
eligible for a CDSC waiver, please contact your Financial Advisor or
call (800) 869-NEWS.
DISTRIBUTION FEE. Class B shares are subject to an annual
distribution (12b-1) fee of 1.0% of the average daily net assets of
Class B.
CONVERSION FEATURE. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales
charge. The ten year period runs from the last day of the month in
which the shares were purchased, or in the case of Class B shares
acquired through an exchange, from the last day of the month in which
the original Class B shares were purchased; the shares will convert
to Class A shares based on their relative net asset values in the
month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically
reinvested distributions will convert to Class A shares on the same
basis.
In the case of Class B shares held in an MSDW Eligible Plan, the plan
is treated as a single investor and all Class B shares will convert
to Class A shares on the conversion date of the Class B shares of a
Morgan Stanley Dean Witter Fund purchased by that plan.
Currently, the Class B share conversion is not a taxable event; the
conversion feature may be cancelled if it is deemed a taxable event
in the future by the Internal Revenue Service.
If you exchange your Class B shares for shares of a Money Market
Fund, a No-Load Fund, North American Government Income Trust or
Short-Term U.S. Treasury Trust, the holding period for conversion is
frozen as of the last day of the month of the exchange and resumes on
the last day of the month you exchange back into Class B shares.
EXCHANGING SHARES SUBJECT TO A CDSC. There are special considerations
when you exchange Fund shares that are subject to a CDSC. When
determining the length of time 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.
20
<PAGE>
For example, if you held Class B shares of the Fund for one year,
exchanged to Class B of another Morgan Stanley Dean Witter
Multi - Class Fund for another year, then sold your shares, a CDSC
rate of 4% would be imposed on the shares based on a two year holding
period -- one year for each Fund. However, if you had exchanged the
shares of the Fund for a Money Market Fund (which does not charge a
CDSC) instead of the Multi-Class Fund, then sold your shares, a CDSC
rate of 5% would be imposed on the shares based on a one year holding
period. The one year in the Money Market Fund would not be counted.
Nevertheless, if shares subject to a CDSC are exchanged for a Fund
that does not charge a CDSC, you will receive a credit when you sell
the shares equal to the distribution (12b-1) fees, if any, you paid
on those shares while in that Fund up to the amount of any applicable
CDSC.
In addition, shares that are exchanged into or from a Morgan Stanley
Dean Witter Fund subject to a higher CDSC rate will be subject to the
higher rate, even if the shares are re - exchanged into a Fund with a
lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no
initial sales charge but are subject to a CDSC of 1.0% on sales made
within one year after the last day of the month of purchase. The CDSC
will be assessed in the same manner and with the same CDSC waivers as
with Class B shares.
DISTRIBUTION FEE. Class C shares are subject to an annual
distribution (12b-1) fee of 1.0% of the average daily net assets of
that Class. The Class C shares' distribution fee may cause that
Class to have higher expenses and pay lower dividends than Class A or
Class D shares. Unlike Class B shares, Class C shares have no
conversion feature and, accordingly, an investor that purchases
Class C shares may be subject to distribution (12b-1) fees applicable
to Class C shares for an indefinite period.
CLASS D SHARES Class D shares are offered without any sales charge on
purchases or sales and without any distribution (12b-1) fee. Class D
shares are offered only to investors meeting an initial investment
minimum of $5 million ($25 million for MSDW Eligible Plans) and the
following investor categories:
- Investors participating in the Investment Manager's mutual fund
asset allocation program (subject to all of its terms and
conditions, including termination fees, mandatory sale or transfer
restrictions on termination) pursuant to which they pay an
asset-based fee.
- Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including termination fees,
mandatory sale or transfer restrictions on termination) approved by
the Fund's distributor pursuant to which they pay an asset-based
fee for investment advisory, administrative and/or brokerage
services.
21
<PAGE>
- 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.
MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million
($25 million for certain MSDW Eligible Plans) initial investment to
qualify to purchase Class D shares you may combine: (1) purchases in
a single transaction of Class D shares of the Fund and other Morgan
Stanley Dean Witter Multi-Class Funds and/or (2) previous purchases
of Class A and Class D shares of Multi-Class Funds and shares of FSC
Funds you currently own, along with shares of Morgan Stanley Dean
Witter Funds you currently own that you acquired in exchange for
those shares.
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a
cash payment representing an income dividend or capital gain and you
reinvest that amount in the applicable Class of shares by returning the
check within 30 days of the payment date, the purchased shares would
not be subject to an initial sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12b-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company
Act of 1940 with respect to the distribution of Class A, Class B and
Class C shares. The Plan allows the Fund to pay distribution fees for
the sale and distribution of these shares. It also allows the Fund to
pay for services to shareholders of Class A, Class B and Class C
shares. Because these fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost of your
investment in these Classes and may cost you more than paying other
types of sales charges.
22
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the period June 28, 1999* through October 31, 1999.
Certain information reflects financial results for a single Fund share
throughout the period. The total return 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.
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 28, 1999*
THROUGH OCTOBER 31, 1999**
<S> <C>
- -------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- -------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
- -------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.02)
Net realized and unrealized gain 0.57
------
Total income from investment operations 0.55
- -------------------------------------------------------------------------------------------
Net asset value, end of period $10.55
- -------------------------------------------------------------------------------------------
TOTAL RETURN+(1) 5.50%
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- -------------------------------------------------------------------------------------------
Expenses 2.56%
- -------------------------------------------------------------------------------------------
Net investment income (0.44)%
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $465,258
- -------------------------------------------------------------------------------------------
Portfolio turnover rate(1) 14%
- -------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
23
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 28, 1999*
THROUGH OCTOBER 31, 1999**
<S> <C>
- -------------------------------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------------------------------
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 0.56
------
Total income from investment operations 0.57
- -------------------------------------------------------------------------------------------
Net asset value, end of period $10.57
- -------------------------------------------------------------------------------------------
TOTAL RETURN+(1) 5.70%
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- -------------------------------------------------------------------------------------------
Expenses 1.81%
- -------------------------------------------------------------------------------------------
Net investment income 0.31%
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $38,506
- -------------------------------------------------------------------------------------------
Portfolio turnover rate(1) 14%
- -------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
24
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 28, 1999*
THROUGH OCTOBER 31, 1999**
<S> <C>
- -------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- -------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
- -------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.02)
Net realized and unrealized gain 0.57
------
Total income from investment operations 0.55
- -------------------------------------------------------------------------------------------
Net asset value, end of period $10.55
- -------------------------------------------------------------------------------------------
TOTAL RETURN+(1) 5.50%
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- -------------------------------------------------------------------------------------------
Expenses 2.56%
- -------------------------------------------------------------------------------------------
Net investment income (0.44)%
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $69,811
- -------------------------------------------------------------------------------------------
Portfolio turnover rate(1) 14%
- -------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
25
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 28, 1999*
THROUGH OCTOBER 31, 1999**
<S> <C>
- -------------------------------------------------------------------------------------------
CLASS D
- -------------------------------------------------------------------------------------------
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 0.57
------
Total income from investment operations 0.58
- -------------------------------------------------------------------------------------------
Net asset value, end of period $10.58
- -------------------------------------------------------------------------------------------
TOTAL RETURN+(1) 5.80%
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(2)(3):
- -------------------------------------------------------------------------------------------
Expenses 1.56%
- -------------------------------------------------------------------------------------------
Net investment income 0.56%
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $1,336
- -------------------------------------------------------------------------------------------
Portfolio turnover rate(1) 14%
- -------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
26
<PAGE>
NOTES
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27
<PAGE>
NOTES
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28
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers investors a wide
range of investment choices. Come on in and meet the family!
- --------------------------------------------------------------------------------
GROWTH FUNDS
- ---------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
Next Generation Trust
Small Cap Growth Fund
Special Value Fund
21st Century Trend Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas"
Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUNDS
- ---------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Equity Fund
Fund of Funds - Domestic Portfolio
<PAGE>
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Market Index Fund
Total Return Trust
Value Fund
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
Global Utilities Fund
- --------------------------------------------------------------------------------
INCOME FUNDS
- ---------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust (FSC)
Limited Term Municipal Trust (NL)
Multi-State Municipal Series Trust (FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
<PAGE>
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
- ---------------------------------
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund (MM)
U.S. Government Money Market Trust (MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust (MM)
N.Y. Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)
There may be Funds created after this PROSPECTUS was published. Please consult
the inside back cover of a new Fund's prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of funds are: NL - No-Load (Mutual) Fund; MM - Money
Market Fund; FSC - A mutual fund sold with a front-end sales charge and a
distribution (12b-1) fee.
<PAGE>
PROSPECTUS - FEBRUARY 3, 2000
Additional information about the Fund's investments is available in the Fund's
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. In the Fund's ANNUAL REPORT, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's STATEMENT OF ADDITIONAL INFORMATION also provides additional information
about the Fund. The STATEMENT OF ADDITIONAL INFORMATION is incorporated herein
by reference (legally is part of this PROSPECTUS). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
www.msdw.com/individual/funds
Information about the Fund (including the STATEMENT OF ADDITIONAL INFORMATION)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (202) 942-8090. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov), and copies of this information may be obtained, after paying a
duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the Public Reference Section of the SEC,
Washington, DC 20549-0102.
TICKER SYMBOLS:
<TABLE>
<S> <C>
CLASS A: INLAX CLASS C: INLCX
- --------------------- ---------------------
CLASS B: INLBX CLASS D: INLDX
- --------------------- ---------------------
</TABLE>
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-09081)
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
[BACK COVER PHOTO]
A MUTUAL FUND THAT SEEKS
LONG-TERM CAPITAL GROWTH
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 3, 2000
MORGAN STANLEY
DEAN WITTER
INTERNATIONAL
FUND
- ----------------------------------------------------------------------
This STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. The PROSPECTUS
dated (February 3, 2000) for the Morgan Stanley Dean Witter International 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
International Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <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.................... 14
III. Management of the Fund...................................... 15
A. Board of Trustees........................................ 15
B. Management Information................................... 15
C. Compensation............................................. 19
IV. Control Persons and Principal Holders of Securities......... 21
V. Investment Management and Other Services.................... 21
A. Investment Manager and Sub-Advisor....................... 21
B. Principal Underwriter.................................... 22
C. Services Provided by the Investment Manager and
Sub-Advisor.............................................. 22
D. Dealer Reallowances...................................... 23
E. Rule 12b-1 Plan.......................................... 23
F. Other Service Providers.................................. 27
VI. Brokerage Allocation and Other Practices.................... 28
A. Brokerage Transactions................................... 28
B. Commissions.............................................. 28
C. Brokerage Selection...................................... 29
D. Directed Brokerage....................................... 29
E. Regular Broker-Dealers................................... 29
VII. Capital Stock and Other Securities.......................... 30
VIII. Purchase, Redemption and Pricing of Shares.................. 30
A. Purchase/Redemption of Shares............................ 30
B. Offering Price........................................... 31
IX. Taxation of the Fund and Shareholders....................... 32
X. Underwriters................................................ 34
XI. Calculation of Performance Data............................. 34
XII. Financial Statements........................................ 35
</TABLE>
2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
- --------------------------------------------------------------------------------
The terms defined in this glossary are frequently used in this STATEMENT OF
ADDITIONAL INFORMATION (other terms used occasionally are defined in the text of
the document).
"CUSTODIAN"--The Chase Manhattan Bank.
"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 International 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-ADVISOR"--Morgan Stanley Dean Witter Investment Management Inc., a
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>
I. FUND HISTORY
- --------------------------------------------------------------------------------
The Fund was incorporated in the Commonwealth of Massachusetts on
October 23, 1998.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end, diversified management investment company whose
investment objective is long-term capital growth.
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."
U.S. GOVERNMENT SECURITIES. Securities issued by the U.S. Government, its
agencies or instrumentalities in which the Fund may invest include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
Neither the value nor the yield of the U.S. Government securities which may
be invested in by the Fund are guaranteed by the U.S. Government. Such values
and yield will fluctuate with changes in prevailing interest rates and other
factors. Generally, as prevailing interest rates rise, the value of any U.S.
Government securities held by the Fund will fall. Such securities with longer
maturities generally tend to produce higher yields and are subject to greater
market fluctuation as a result of changes in interest rates than debt securities
with shorter maturities.
CONVERTIBLE SECURITIES. The Fund may invest in fixed-income securities
and/or equity securities which are convertible into common stock. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, entail less risk than the corporation's common stock. The value
of a convertible security is a function of its "investment value" (its value as
if it did not have a conversion privilege), and its "conversion value" (the
security's worth if it were to be exchanged for the underlying security, at
market value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater than
its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, will sell at some premium over its conversion value.
(This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security. Convertible securities may be purchased by the Fund
at varying price levels above their investment values and/or their conversion
values in keeping with the Fund's objective. Up to 5% of the Fund's net assets
may be
4
<PAGE>
invested in fixed-income convertible securities rated below investment grade or,
if unrated, of comparable quality as determined by the Sub-Advisor or the
Investment Manager. Securities rated below investment grade are the equivalent
of high yield, high risk bonds (commonly known as "junk bonds").
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, foreign banks, 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 Fund may enter into forward contracts under various circumstances. The
typical use of a forward contract is to "lock in" the price of a security in
U.S. dollars or some other foreign currency which the Fund is holding in its
portfolio. By entering into a forward contract for the purchase or sale, for a
fixed amount of dollars or other currency, of the amount of foreign currency
involved in the underlying security transactions, the Fund may be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar or other currency which is being used for
the security purchase and the foreign currency in which the security is
denominated during the period between the date on which the security is
purchased or sold and the date on which payment is made or received.
The Investment Manager also may from time to time utilize forward contracts
for other purposes. For example, they may be used 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.
OPTION AND FUTURES TRANSACTIONS. The Fund may engage in transactions in
listed options. 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
5
<PAGE>
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.
COVERED PUT WRITING. A writer of a covered put option incurs an obligation
to buy the security underlying the option from the purchaser of the put, at the
option's exercise price at any time during the option period, at the purchaser's
election. Through the writing of a put option, the Fund would receive income
from the premium paid by purchasers. The potential gain on a covered put option
is limited to the premium received on the option (less the commissions paid on
the transaction). During the option period, the Fund may be required, at any
time, to make payment of the exercise price against delivery of the underlying
security (or currency). A put option is "covered" if the Fund maintains cash,
Treasury bills or other liquid portfolio securities with a value equal to the
exercise price in a segregated account on the Fund's books, or holds a put on
the same security as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written. The aggregate
value of the obligations underlying puts may not exceed 50% of the Fund's
assets. The operation of and limitations on covered put options in other
respects are substantially identical to those of call options.
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
6
<PAGE>
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 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.
RISKS OF OPTIONS TRANSACTIONS. The successful use of options depends on the
ability of the Investment Manager 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.
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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.
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.
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Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits of cash or U.S. Government
securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.
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. 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.
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Exchanges also limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin on open
futures positions. In these situations, if the Fund has insufficient cash, it
may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. 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;
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BANK OBLIGATIONS. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;
EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions, having total assets of less than $1 billion. If the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the FDIC), limited to $100,000 principal amount per certificate and to 10% or
less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;
COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grades by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, issued by a company having
an outstanding debt issue rated at least AA by S&P or
Aa by Moody's; and
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although this
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continually monitored by the Sub-Advisor 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.
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements for purposes of meeting redemptions or as part of its investment
strategy. Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. Generally, the effect of such a transaction is
that the Fund can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement, while
it will be able to keep the interest income associated with those portfolio
securities. These transactions are only advantageous if the interest cost to the
Fund of the
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reverse repurchase transaction is less than the cost of obtaining the cash
otherwise. Opportunities to achieve this advantage may not always be available,
and the Fund intends to use the reverse repurchase technique only when it will
be to its advantage to do so.
The Fund will establish a segregated account in which it will maintain cash,
U.S. Government securities or other appropriate liquid portfolio securities
equal in value to its obligations in respect of reverse repurchase agreements.
Reverse repurchase agreements may not exceed 10% of the Fund's total assets. The
Fund will make no purchases of portfolio securities while it is still subject to
a reverse repurchase agreement.
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.
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-Advisor determines that issuance of the security is probable. At that
time, the Fund will record the transaction
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and, in determining its net asset value, will reflect the value of the security
daily. At that time, the Fund will also establish a segregated account on the
Fund's books in which it will maintain cash or cash equivalents or other liquid
portfolio securities equal in value to recognized commitments for such
securities.
The value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all securities of such issuer owned by the
Fund, may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made. 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-Advisor, pursuant to procedures
adopted by the Trustees, will make a determination as to the liquidity of each
restricted security purchased by the Fund. If a restricted security is
determined to be "liquid," the security will not be included within the category
"illiquid securities," which may not exceed 15% of the Fund's net assets.
However, investing in Rule 144A securities could have the effect of increasing
the level of Fund illiquidity to the extent the Fund, at a particular point in
time, may be unable to find qualified institutional buyers interested in
purchasing such securities.
WARRANTS AND SUBSCRIPTION RIGHTS. The Fund may acquire warrants and
subscription rights attached to other securities. A warrant is, in effect, an
option to purchase equity securities at a specific price, generally valid for a
specific period of time, and has no voting rights, pays no dividends and has no
rights with respect to the corporation issuing it.
A subscription right is a privilege granted to existing shareholders of a
corporation to subscribe to shares of a new issue of common stock before it is
offered to the public. A subscription right normally has a life of two to four
weeks and a subscription price lower than the current market value of the common
stock.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the Sub-Advisor 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 were
designed in such a way that they may not be able to 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.
Improperly functioning trading systems may result in settlement problems and
liquidity issues. Corporate and governmental data processing errors could result
in production problems for individual companies and overall economic
uncertainties. Operations ran smoothly from the last week in December through
the first few weeks of January, but the year 2000 issue may yet have an adverse
impact on financial market participants and other entities, including the
companies whose stocks are contained in the Fund's portfolio.
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C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940 (the "INVESTMENT COMPANY ACT"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund.
The Investment Company Act defines a majority as the lesser of (a) 67% or more
of the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions: (i) all percentage limitations apply immediately after a purchase
or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.
The Fund will:
1. Seek long-term capital growth.
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).
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.
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 (including real estate
limited partnerships), 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 these programs.
6. Purchase or sell commodities or commodities contracts, except that the
Fund may purchase or sell (write) interest rate, currency and stock and bond
index futures contracts and related options thereon.
7. Borrow money (except insofar as the Fund may be deemed to have borrowed
by entrance into a reverse repurchase agreement up to an amount not exceeding
10% of the Fund's total assets), except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% of its total assets
(not including the amount borrowed).
8. Pledge its assets or assign or otherwise encumber them except to secure
permitted borrowings. For the purpose of this restriction, collateral
arrangements with respect to the writing of options and collateral arrangements
with respect to initial or variation margin for futures are not deemed to be
pledges of assets.
9. 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 or reverse repurchase agreement;
(b) purchasing any securities on a when-issued or delayed delivery basis; (c)
purchasing or selling futures contracts, forward foreign exchange contracts or
options; (d) borrowing money; or (e) lending portfolio securities.
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10. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations; (b) by investment in repurchase or
reverse repurchase agreements; or (c) by lending its portfolio securities.
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 short-term loans as are
necessary for the clearance of portfolio securities. The deposit or payment by
the Fund of initial or variation margin in connection with futures contracts or
related options thereon is not considered the purchase of a security on margin.
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.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
Notwithstanding any other investment policy or restriction, 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.
III. MANAGEMENT OF THE FUND
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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.
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 93 Morgan Stanley Dean Witter Funds, are shown
below.
15
<PAGE>
<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
Trustee December 1998); Director or Trustee of the
c/o Kmart Corporation Morgan Stanley Dean Witter Funds; formerly
3100 West Big Beaver Road Chairman and Chief Executive Officer of Levitz
Troy, Michigan 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 Weirton Steel Corporation.
Charles A. Fiumefreddo* (66) ................ Chairman, Director or Trustee and Chief
Chairman of the Board, Executive Officer of the Morgan Stanley Dean
Chief Executive Officer and Trustee Witter Funds; formerly Chairman, Chief
Two World Trade Center Executive Officer and Director of the
New York, New York Investment Manager, Morgan Stanley Dean Witter
Distributors Inc. ("MSDW Distributors") a
wholly-owned broker-dealer subsidiary of MSDW,
and MSDW Services Company; Executive Vice Pres-
ident and Director of Dean Witter Reynolds;
Chairman and Director of the Transfer Agent;
formerly Director and/or officer of various
MSDW subsidiaries (until June 1998).
Edwin J. Garn (67) .......................... Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds; formerly United States Senator
c/o Huntsman Corporation (R- Utah)(1974-1992) and Chairman, Senate
500 Huntsman Way Banking Committee (1980-1986); formerly Mayor
Salt Lake City, Utah 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 ven-
ture between Lockheed Martin and the Boeing
Company) and Nuskin Asia Pacific (multilevel
marketing); member of the board of various
civic and charitable organizations.
Wayne E. Hedien (65) ........................ Retired; Director or Trustee of the Morgan
Trustee Stanley Dean Witter Funds; Director of The PMI
c/o Mayer, Brown & Platt Group, Inc. (private mortgage insurance);
Counsel to the Independent Trustee Trustee and Vice Chairman of The Field Museum
1675 Broadway of Natural History; formerly associated with
New York, New York 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.
</TABLE>
- ------------------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in the
Investment Company Act.
16
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- --------------------------------------------- -----------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (50) .................. Senior Partner, Johnson Smick
Trustee International, Inc., a consulting firm;
c/o Johnson Smick International, Inc. Co-Chairman and a founder of the Group of Seven
1133 Connecticut Avenue, N.W. Council (G7C), an international economic
Washington, D.C. commission; Chairman of the Audit Committee and
Director or Trustee of the Morgan Stanley Dean
Witter Funds, 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
Trustee private investment partnership; Chairman of the
c/o Triumph Capital, L.P. Insurance Committee and Director or Trustee of
237 Park Avenue the Morgan Stanley Dean Witter Funds; formerly
New York, New York 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
1585 Broadway and Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of American
Airlines, Inc. and its parent company, AMR
Corporation; Director and/ or officer of
various MSDW subsidiaries.
John L. Schroeder (69) ...................... Retired; Chairman of the Derivatives Committee
Trustee and Director or Trustee of the Morgan Stanley
c/o Mayer, Brown & Platt Dean Witter Funds; Director of Citizens
Counsel to the Independent Trustees Utilities Company; (telecommunications, gas,
1675 Broadway electric and water utilities company), formerly
New York, New York 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 (since May 1999); Trustee of
various Van Kampen investment companies (since
December 1999); previously Chief Strategic
Officer of the Investment Manager and MSDW
Services Company and Executive Vice President
of the Distributor (April 1997-June 1998), Vice
President of the Morgan Stanley Dean Witter
Funds (May 1997-April 1999), and Executive Vice
President of Dean Witter, Discover & Co.
</TABLE>
- ------------------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in the
Investment Company Act.
17
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- --------------------------------------------- -----------------------------------------------
<S> <C>
Barry Fink (45) ............................. Executive Vice President (since December 1999)
Vice President, and Secretary and General Counsel (since
Secretary and General Counsel February 1997) and Director (since July 1998)
Two World Trade Center of the Investment Manager and MSDW Services
New York, New York Company; Executive Vice President (since
December 1999) and Assistant Secretary and
Assistant General Counsel (since February 1997)
of MSDW Distributors; 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); previously Senior Vice
President (March 1997-December 1999), First
Vice President (June 1993-February 1997), Vice
President and Assistant Secretary and Assistant
General Counsel of the Investment Manager and
MSDW Services Company, Senior Vice President of
the Distributor (March 1997-December 1999) and
Assistant Secretary of the Morgan Stanley Dean
Witter Funds.
Thomas F. Caloia (53) ....................... First Vice President and Assistant Treasurer of
Treasurer the Investment Manager, the Distributor and
Two World Trade Center MSDW Services Company; Treasurer of the Morgan
New York, New York Stanley Dean Witter Funds.
</TABLE>
In addition, RONALD E. ROBISON, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, ROBERT S. GIAMBRONE, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, and JOSEPH J. MCALINDEN, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer Agent,
and MARK BAVOSO, Senior Vice President of the Investment Manager, are Vice
Presidents of the Fund.
In addition, MARILYN K. CRANNEY, TODD LEBO, LOU ANNE D. MCINNIS, CARSTEN
OTTO AND RUTH ROSSI, First Vice Presidents and Assistant General Counsels of the
Investment Manager and MSDW Services Company, and NATASHA KASSIAN, Assistant
Vice President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Fund.
INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the independent
directors/trustees. The Morgan Stanley Dean Witter Funds seek as independent
directors/trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' boards, such individuals may reject other
attractive assignments because the Funds make substantial demands on their time.
All of the independent directors/trustees serve as members of the Audit
Committee. In addition, three of the directors/trustees, including two
independent directors/trustees, serve as members of the Derivatives Committee
and the Insurance Committee.
The independent directors/trustees are charged with recommending to the full
board approval of management, advisory and administration contracts, Rule 12b-1
plans and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
independent directors/trustees are required to select and nominate individuals
to fill any independent directors/trustees 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.
18
<PAGE>
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 DIRECTORS/TRUSTEES FOR
ALL MORGAN STANLEY DEAN WITTER FUNDS. The independent directors/trustees and
the Funds' management believe that having the same independent
directors/trustees for each of the Morgan Stanley Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as independent directors/trustees for each of the Funds or
even of sub-groups of Funds. They believe that having the same individuals serve
as independent directors/trustees of all the Funds tends to increase their
knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility of
separate groups of independent directors/trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same independent
directors/trustees serve on all Fund boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of independent
directors/trustees, of the caliber, experience and business acumen of the
individuals who serve as independent directors/trustees of the Morgan Stanley
Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties. It
also provides that all third persons shall look solely to the Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Directors 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.
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
19
<PAGE>
Dean Witter Funds during the calendar year ended December 31, 1999, 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>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------------------------------------ ------
<S> <C>
Michael Bozic............................................... $1,600
Edwin J. Garn............................................... 1,600
Wayne E. Hedien............................................. 1,600
Dr. Manuel H. Johnson....................................... 2,350
Michael E. Nugent........................................... 2,100
John L. Schroeder........................................... 2,100
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1999 for services
to the 93 Morgan Stanley Dean Witter Funds that were in operation at
December 31, 1999.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
TOTAL CASH
COMPENSATION
FOR SERVICES
TO 93 MORGAN
NAME OF STANLEY DEAN
INDEPENDENT TRUSTEE WITTER FUNDS
- ------------------------------------------------------------ --------
<S> <C>
Michael Bozic............................................... $134,600
Edwin J. Garn............................................... 138,700
Wayne E. Hedien............................................. 138,700
Dr. Manuel H. Johnson....................................... 208,638
Michael E. Nugent........................................... 193,324
John L. Schroeder........................................... 193,324
</TABLE>
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, 55 of the Morgan
Stanley Dean Witter Funds, not including the Fund, have adopted a retirement
program under which an independent director/trustee who retires after serving
for at least five years (or such lesser period as may be determined by the
Board) as an independent director/trustee of any Morgan Stanley Dean Witter Fund
that has adopted the retirement program (each such Fund referred to as an
"Adopting Fund" and each such trustee referred to as an "Eligible Director") is
entitled to retirement payments upon reaching the eligible retirement age
(normally, after attaining age 72). Annual payments are based upon length of
service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
independent director/ trustee of any Adopting Fund in excess of five years up to
a maximum of 60.44% after ten years of service. The foregoing percentages may be
changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are accrued as expenses on the books of
the Adopting Funds. Such benefits are not secured or funded by the Adopting
Funds.
- ------------------------
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.
20
<PAGE>
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, 1999, and the
estimated retirement benefits for the Fund's Independent Trustees, to commence
upon their retirement, from the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) as of the calendar year ended December 31, 1999.
RETIREMENT BENEFITS FROM ALL MORGAN STANLEY
DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
----------------------------
ESTIMATED
CREDITED
YEARS OF ESTIMATED RETIREMENT ESTIMATED ANNUAL
SERVICE AT PERCENTAGE OF BENEFITS ACCRUED BENEFITS UPON
RETIREMENT ELIGIBLE AS EXPENSES BY ALL RETIREMENT FROM ALL
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION ADOPTING FUNDS ADOPTING FUNDS(2)
- --------------------------- ------------ ------------ -------------- -----------------
<S> <C> <C> <C> <C>
Michael Bozic................ 10 60.44% $20,933 $ 50,588
Edwin J. Garn................ 10 60.44 31,737 50,675
Wayne E. Hedien.............. 9 51.37 39,566 43,000
Dr. Manuel H. Johnson........ 10 60.44 13,129 75,520
Michael E. Nugent............ 10 60.44 23,175 67,209
John L. Schroeder............ 8 50.37 41,558 52,994
</TABLE>
- ------------------------
2 Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) on
page 20.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
No persons owned 5% or more of the Shares of the Fund as of January 3, 2000.
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, the aggregate
number of shares of common stock 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-ADVISOR
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New York,
NY 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
The Sub-Advisor is Morgan Stanley Dean Witter Investment Management Inc., a
subsidiary of MSDW and an affiliate of the Investment Manager, whose address is
1221 Avenue of the Americas, New York, NY 10020. The Sub-Advisor was retained to
provide sub-advisory services to the Fund effective May 4, 1999.
Pursuant to an Investment Management Agreement (the "MANAGEMENT AGREEMENT")
with the Investment Manager, the Fund has retained the Investment Manager to
provide administrative services, manage its business affairs and supervise the
investment of the Fund's assets. The Fund pays the Investment Manager monthly
compensation calculated daily by applying the annual rate of 1.00% to the net
assets of the Fund determined as of the close of each business day. 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 June 28, 1999
(commencement of operations) through October 31, 1999, the Investment Manager
accrued total compensation under the Management Agreement in the amount of
$1,734,026.
21
<PAGE>
Under a Sub-Advisory Agreement (the "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,
subject to the overall supervision of the Investment Manager. The Investment
Manager pays the Sub-Advisor monthly compensation equal to 40% of the Investment
Manager's fee. For the period ended October 31, 1999, the Sub-Advisor accrued
total compensation under the Sub-Advisory Agreement in the amount of $693,610.
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 shares are distributed by the Distributor. The Distributor has
entered into a selected dealer agreement with Dean Witter Reynolds, which
through its own sales organization sells shares of the Fund. In addition, the
Distributor may enter into similar agreements with other selected broker-
dealers. The Distributor, a Delaware corporation, is a wholly-owned subsidiary
of MSDW.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. These expenses include the payment of commissions
for sales of the Fund's shares and incentive compensation to Financial Advisors,
the cost of educational and/or business-related trips, and educational and/or
promotional and business-related expenses. The Distributor also pays certain
expenses in connection with the distribution of the Fund's shares, including the
costs of preparing, printing and distributing advertising or promotional
materials, and the costs of printing and distributing prospectuses and
supplements thereto used in connection with the offering and sale of the Fund's
shares. The Fund bears the costs of initial typesetting, printing and
distribution of prospectuses and supplements thereto to shareholders. The Fund
also bears the costs of registering the Fund and its shares under federal and
state securities laws and pays filing fees in accordance with state securities
laws.
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 SUB-ADVISOR
The Investment Manager supervises the investment of the Fund's assets. The
Investment Manager obtains and evaluates the information and advice relating to
the economy, securities markets, and specific securities as it considers
necessary or useful to continuously oversee the management of the assets of the
Fund in a manner consistent with its investment objective.
Under the terms of the Management Agreement, the Investment Manager also
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.
Pursuant to the Sub-Advisory Agreement, the Sub-Advisor has been retained,
subject to the overall supervision of the Investment Manager, to continuously
furnish investment advice concerning individual security selections, asset
allocations and overall economic trends with respect to International issuers.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses will be allocated among the four Classes of
22
<PAGE>
shares pro rata based on the net assets of the Fund attributable to each Class,
except as described below. Such expenses include, but are not limited to:
expenses of the Plan of Distribution pursuant to Rule 12b-1; charges and
expenses of any registrar, custodian, stock transfer and dividend disbursing
agent; brokerage commissions; taxes; engraving and printing share certificates;
registration costs of the Fund and its shares under federal and state securities
laws; the cost and expense of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and Trustees' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of Trustees or members of any advisory board or committee who are not
employees of the Investment Manager or any corporate affiliate of the Investment
Manager; all expenses incident to any dividend, withdrawal or redemption
options; charges and expenses of any outside service used for pricing of the
Fund's shares; fees and expenses of legal counsel, including counsel to the
Trustees who are not interested persons of the Fund or of the Investment Manager
(not including compensation or expenses of attorneys who are employees of the
Investment Manager); fees and expenses of the Fund's independent accountants;
membership dues of industry associations; interest on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Fund which inure to its benefit; extraordinary expenses (including, but not
limited to, legal claims and liabilities and litigation costs and any
indemnification relating thereto); and all other costs of the Fund's operation.
The 12b-1 fees relating to a particular Class will be allocated directly to that
Class. In addition, other expenses associated with a particular Class (except
advisory or custodial fees) may be allocated directly to that Class, provided
that such expenses are reasonably identified as specifically attributable to
that Class and the direct allocation to that Class is approved by the Trustees.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees, including a majority of the Independent Trustees, who are not parties
to the Management Agreement or the Sub-Advisory Agreement or are "independent
Trustees," which votes must be cast in person at a meeting called for the
purpose of voting on such approval.
D. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is defined
in the Securities Act.
E. RULE 12b-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act (the "PLAN") pursuant to which each Class, other than
Class D, pays the Distributor compensation accrued daily and payable monthly at
the following annual rates: 0.25%, 1.0% and 1.0% of the average daily net assets
of Class A, Class B and Class C, respectively.
The Distributor also receives the proceeds of front-end sales charges
("FSCS") and of contingent deferred sales charges ("CDSCS") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or
23
<PAGE>
Dean Witter Reynolds received the proceeds of CDSCs and FSCs, for the fiscal
period June 28, 1999 (commencement of operations) through October 31, 1999, in
approximate amounts as provided in the table below (the Distributor did not
retain any of these amounts).
<TABLE>
<CAPTION>
1999
---------------------
<S> <C> <C>
Class A............................... FSCs:(1) $103,705
CDSCs: $ 1,100
Class B............................... CDSCs: $235,698
Class C............................... CDSCs: $ 29,401
</TABLE>
- ------------------------
(1) FSC applies 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 June 28, 1999 (commencement of
operations) through October 31, 1999, Class A, Class B and Class C shares of the
Fund accrued payments under the Plan amounting to $28,368, $1,399,606 and
$219,865, respectively, which amounts are equal to 0.25%, 1.00% and 1.00% 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.
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.
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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 Investment Manager pays a retention fee to Financial Advisors at an
annual rate of 0.05% of the value of shares of the Fund sold after January 1,
2000 and held for at least one year. Shares purchased through the reinvestment
of dividends will be eligible for a retention fee, provided that such dividends
were earned on shares otherwise eligible for a retention fee payment. Shares
owned in variable annuities, closed-end fund shares and shares held in 401(k)
plans where the Transfer Agent or Dean Witter Reynolds's Retirement Plan
Services is either recordkeeper or trustee are not eligible for a retention fee.
For the first year only, the retention fee is paid on any shares of the Fund
sold after January 1, 2000 and held by shareholders on December 31, 2000.
The retention fees are paid by the Investment Manager from its own assets,
which may include profits from investment management fees payable under the
Management Agreement, as well as from borrowed funds.
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on behalf
of the Fund and, in the case of Class B shares, opportunity costs, such as the
gross sales credit and an assumed interest charge thereon ("CARRYING CHARGE").
These expenses may include the cost of Fund-related educational and/or
business-related trips or payment of Fund-related educational and/or promotional
expenses of Financial Advisors. In the Distributor's reporting of the
distribution expenses to the Fund, in the case of Class B shares, such assumed
interest (computed at the "BROKER'S CALL RATE") has been calculated on the gross
credit as it is reduced by amounts received by the Distributor under the Plan
and any contingent deferred sales charges received by the Distributor upon
redemption of shares of the Fund. No other interest charge is included as a
distribution expense in the Distributor's calculation of its distribution costs
for this purpose. The broker's call rate is the interest rate charged to
securities brokers on loans secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of
Class A, and 1.0%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C will
be reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to Financial Advisors and other
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authorized financial representatives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including, a majority of the
Independent Trustees. Expenses representing the service fee (for Class A) or a
gross sales credit or a residual to Financial Advisors and other authorized
financial representatives (for Class C) may be reimbursed without prior
determination. In the event that the Distributor proposes that monies shall be
reimbursed for other than such expenses, then in making quarterly determinations
of the amounts that may be reimbursed by the Fund, the Distributor will provide
and the Trustees will review a quarterly budget of projected distribution
expenses to be incurred on behalf of the Fund, together with a report explaining
the purposes and anticipated benefits of incurring such expenses. The Trustees
will determine which particular expenses, and the portions thereof, that may be
borne by the Fund, and in making such a determination shall consider the scope
of the Distributor's commitment to promoting the distribution of the Fund's
Class A and Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal period ended October 31, 1999, to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $23,281,795 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)
8.60% ($2,001,765) - advertising and promotional expenses; (ii) 0.33% ($77,455)
- -printing of prospectuses for distribution to other than current shareholders;
and (iii) 91.07% ($21,202,575) - other expenses, including the gross sales
credit and the carrying charge, of which 1.49% ($315,606) represents carrying
charges, 40.78% ($8,647,205) 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 57.73% ($12,239,764) 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
period ended October 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 $21,671,679 as of October 31, 1999 (the end of
the Fund's fiscal year), which was equal to 4.66% 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 $388,145 in the case of Class C at
December 31, 1999 (the end
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of the calendar year), which amount was equal to 0.47% 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 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 Trustee's 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, NJ 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Chase Manhattan Bank, One Chase Plaza, New York, NY 10005 is the
Custodian of the Fund's assets. The Custodian has contracted with various
foreign banks and depositaries to hold portfolio securities of non-U.S. issuers
on behalf of the Fund. 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.
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PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, NY 10036,
serves as the independent accountants of the Fund. The independent accountants
are responsible for auditing the annual financial statements of the Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, Sub-Advisor
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
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A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
and the Sub-Advisor 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 non-affiliated 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. Options and futures transactions will
usually be effected through a broker and a commission will be charged. On
occasion, the Fund may also purchase certain money market instruments directly
from an issuer, in which case no commissions or discounts are paid.
For the period June 28, 1999 (commencement of operations) through
October 31, 1999, the Fund paid a total of $452,413 in brokerage commissions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds. The Fund will
limit its transactions with Dean Witter Reynolds to U.S. Government and
government agency securities, bank money instruments (i.e., certificates of
deposit and bankers' acceptances) and commercial paper. The transactions will be
effected with Dean Witter Reynolds only when the price available from Dean
Witter Reynolds is better than that available from other dealers. During the
fiscal period ended October 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
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<PAGE>
standard. The Fund does not reduce the management fee it pays to the Investment
Manager by any amount of the brokerage commissions it may pay to an affiliated
broker or dealer. During the fiscal period ended October 31, 1999, the Fund did
not pay any brokerage commissions to Dean Witter Reynolds.
During the fiscal period ended October 31, 1999, the Fund paid a total of
$7,129 in brokerage commissions to Morgan Stanley & Co., which broker-dealer
became an affiliate of the Investment Manager on May 31, 1997 upon consummation
of the merger of Dean Witter, Discover & Co. with Morgan Stanley Group Inc.
During the fiscal period ended October 31, 1999, the brokerage commissions paid
to Morgan Stanley & Co. represented approximately 1.58% 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 0.49% 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 the Sub-Advisor 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 the Sub-Advisor rely upon their 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.
In seeking to implement the Fund's policies, the Investment Manager and the
Sub-Advisor effect transactions with those brokers and dealers who the
Investment Manager and/or the Sub-Advisor believe provide the most favorable
prices and are capable of providing efficient executions. If the Investment
Manager and/or the Sub-Advisor 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 and the Sub-Advisor.
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/or the
Sub-Advisor from brokers and dealers may be of benefit to the Investment Manager
and/or the Sub-Advisor in the management of accounts of some of its other
clients and may not in all cases benefit the Fund directly.
The Investment Manager and the Sub-Advisor currently serve as advisors 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-Advisor to cause purchase and sale transactions
to be allocated among the Fund and others whose assets it manages in such manner
as it deems equitable. In making such allocations among the Fund and other
client accounts, various factors may be considered, including the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
In the case of certain initial and secondary public offerings, the Investment
Manager utilizes a pro rata allocation process based on the size of the Morgan
Stanley Dean Witter Funds involved and the number of shares available from the
public offering.
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D. DIRECTED BROKERAGE
During the fiscal period ended October 31, 1999, the Fund paid $36,194 in
brokerage commissions in connection with transactions in the aggregate amount of
$72,792,773 to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the fiscal period ended October 31, 1999, the Fund did not purchase
securities issued by brokers or dealers that were among the ten brokers or the
ten dealers which executed transactions for or with the Fund in the largest
dollar amounts during the period. As of October 31, 1999, the Fund did not own
any securities issued by any of such issuers.
VII. CAPITAL STOCK AND OTHER SECURITIES
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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 the actions
of the Trustees. In addition, under certain circumstances, the shareholders may
call a meeting to remove the Trustees and the Fund is required to provide
assistance in communication with shareholders about such a meeting. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect any
Trustees.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for the obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that notice
of such Fund obligations include such disclaimer, and provides for
indemnification out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Given the above limitations on shareholder personal liability, and the nature of
the Fund's assets and operations, the possibility of the Fund being unable to
meet its obligations is remote and thus, in the opinion of Massachusetts counsel
to the Fund, the risk to Fund shareholders of personal liability is remote.
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.
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VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
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A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's PROSPECTUS.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the Transfer
Agent to act as their agent in connection with the application of proceeds of
any redemption of Fund shares to the purchase of shares of any other Morgan
Stanley Dean Witter Fund and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transaction pursuant to the exchange privilege.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of Fund
shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the 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 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 or the Sub-Advisor 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
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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 Directors
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
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
latest bid and asked prices. Unlisted options on debt securities and all options
on equity securities are valued at the mean between their latest bid and asked
prices. Futures are valued at the latest sale price on the commodities exchange
on which they trade unless the Trustees determine such price does not reflect
their market value, in which case they will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
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.
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.
32
<PAGE>
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have a tax holding period of more than one
year. Gains or losses on the sale of securities with a tax holding period of one
year or less will be short-term gains or losses.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund.
Under certain tax rules, the Fund may be required to accrue a portion of any
discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year. 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.
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, and the portion taxable as
long-term capital gains.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment company
will have the effect of reducing the net asset value of the shareholder's stock
in that company by the exact amount of the dividend or capital gains
distribution. Furthermore, such dividends and capital gains distributions are
subject to federal income taxes. If the net asset value of the shares should be
reduced below a shareholder's cost as a result of the payment of dividends or
the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
33
<PAGE>
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Under current law, the maximum tax on long-term capital gains is 20%.
Any loss realized by shareholders upon a sale or redemption of shares within six
months of the date of their purchase will be treated as a long-term capital loss
to the extent of any distributions of net long-term capital gains with respect
to such shares during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured by
the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the tax
basis of their shares. Under certain circumstances a shareholder may compute and
use an average cost basis in determining the gain or loss on the sale or
redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
X. UNDERWRITERS
- --------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 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 $10,000 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 by the initial investment (which in the case of
Class A shares is reduced by the Class A initial sales charge) and subtracting 1
from the result. The ending redeemable value is reduced by any CDSC at the end
of the period. Based on the foregoing calculation, the total returns of Class A,
Class B, Class C and Class D for the period June 28, 1999 (commencement of
operations) through October 31, 1999 was 0.15%, 0.50%, 4.50% and 5.80%,
respectively.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the imposition of the maximum front-end sales charge for Class A
or
34
<PAGE>
the deduction of the CDSC for each of Class B and Class C which, if reflected,
would reduce the performance quotes. For example, the total return of the Fund
may be calculated in the manner described above, but without deduction of any
applicable sales charge. Based on this calculation, the total returns for each
Class for the period ended November 30, 1999 were 5.70%, 5.50%, 5.50% and 5.80%
for Class A, Class B, Class C and Class D, 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 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 October 31, 1999:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION -------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ----- --------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class A............................................. 06/28/99 $10,015 $50,736 $102,529
Class B............................................. 06/28/99 10,550 52,750 105,500
Class C............................................. 06/28/99 10,550 52,750 105,500
Class D............................................. 06/28/99 10,580 52,900 105,800
</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 June 28, 1999
(commencement of operations) through October 31, 1999 included in this STATEMENT
OF ADDITIONAL INFORMATION and incorporated by reference in the PROSPECTUS have
been so included and incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
*****
This STATEMENT OF ADDITIONAL INFORMATION and the PROSPECTUS do not contain
all of the information set forth in the REGISTRATION STATEMENT the Fund has
filed with the SEC. The complete REGISTRATION STATEMENT may be obtained from the
SEC.
35
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS AND RIGHTS (86.4%)
AUSTRALIA (1.3%)
AIR FREIGHT/DELIVERY SERVICES
14,653 Mayne Nickless Ltd..................................................................... $ 39,620
------------
ALCOHOLIC BEVERAGES
70,301 Foster's Brewing Group Ltd............................................................. 186,416
------------
BEVERAGES - NON-ALCOHOLIC
24,995 Coca-Cola Amatil Ltd................................................................... 76,965
------------
BUILDING MATERIALS
44,930 Boral Ltd.............................................................................. 67,459
40,639 CSR Limited............................................................................ 91,008
36,717 Pioneer International Ltd.............................................................. 80,123
------------
238,590
------------
CASINO/GAMBLING
12,954 TABCORP Holdings Limited............................................................... 81,919
------------
CONTAINERS/PACKAGING
25,870 Amcor Ltd.............................................................................. 112,790
25,423 Southcorp Holdings Ltd................................................................. 88,149
------------
200,939
------------
DIVERSIFIED COMMERCIAL SERVICES
8,690 Brambles Industries, Ltd............................................................... 243,810
------------
DIVERSIFIED FINANCIAL SERVICES
32,185 Colonial Limited....................................................................... 118,147
------------
ENGINEERING & CONSTRUCTION
10,862 Leighton Holdings Ltd.................................................................. 39,389
------------
FOOD CHAINS
43,442 Coles Myer Ltd......................................................................... 215,575
45,504 Woolworth's Ltd........................................................................ 154,302
------------
369,877
------------
FOREST PRODUCTS
7,399 Wesfarmers Limited..................................................................... 54,651
------------
INTERNATIONAL BANKS
52,548 National Australia Bank Ltd............................................................ 809,031
12,586 Suncorp-Metway Limited................................................................. 66,132
72,182 Westpac Banking Corp., Ltd............................................................. 462,069
------------
1,337,232
------------
LIFE INSURANCE
37,772 Amp Ltd................................................................................ 383,191
------------
MARINE TRANSPORTATION
8,023 Howard Smith Limited................................................................... 57,392
------------
MEDIA CONGLOMERATES
74,558 News Corporation Ltd................................................................... 537,899
65,870 News Corporation Ltd. (Pref.).......................................................... 444,921
------------
982,820
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MULTI-LINE INSURANCE
8,870 GIO Australia Holdings Ltd............................................................. $ 16,816
------------
MULTI-SECTOR COMPANIES
63,379 Broken Hill Proprietary Co., Ltd....................................................... 653,494
42,666 Pacific Dunlop Ltd..................................................................... 59,988
------------
713,482
------------
NATURAL GAS
15,176 Australian Gas Light Company Ltd....................................................... 83,516
------------
OIL & GAS PRODUCTION
23,982 Santos Ltd............................................................................. 61,487
------------
OTHER METALS/MINERALS
7,291 Rio Tinto Ltd.......................................................................... 116,924
71,583 Western Mining Corp. Holdings Ltd.*.................................................... 306,492
------------
423,416
------------
OTHER PHARMACEUTICALS
4,219 CSL Limited............................................................................ 50,998
4,876 FH Faulding & Company Ltd.............................................................. 29,749
------------
80,747
------------
OTHER TELECOMMUNICATIONS
191,943 Telstra Corp........................................................................... 974,104
------------
PRECIOUS METALS
79,367 Normandy Mining Ltd.................................................................... 60,087
------------
PROPERTY - CASUALTY INSURERS
16,250 QBE Insurance Group Ltd................................................................ 67,716
------------
REAL ESTATE
15,600 AMP Diversified Property Trust......................................................... 23,323
53,692 General Property Trust................................................................. 86,046
21,343 Lend Lease Corporation Ltd............................................................. 244,995
12,948 Stockland Trust Group.................................................................. 27,826
52,753 Westfield Trust........................................................................ 101,020
------------
483,210
------------
SPECIALTY CHEMICALS
11,504 Orica Limited.......................................................................... 60,673
------------
SPECIALTY FOODS/CANDY
47,768 Goodman Fielder Ltd.................................................................... 44,066
------------
STEEL/IRON ORE
26,970 North Ltd.............................................................................. 51,990
------------
TOTAL AUSTRALIA........................................................................ 7,532,268
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
AUSTRIA (0.2%)
AIRLINES
1,573 Oesterreichische Luftverkehrs AG....................................................... $ 33,509
------------
ALCOHOLIC BEVERAGES
588 BBAG Oesterreichische Brau-Beteiligungs AG............................................. 27,130
------------
BUILDING MATERIALS
898 RHI AG................................................................................. 25,286
898 RHI AG (Rights)........................................................................ 189
------------
25,475
------------
BUILDING PRODUCTS
4,433 Wienerberger Baustoffindustrie AG...................................................... 102,243
------------
CONTAINERS/PACKAGING
769 Mayr-Melnhof Karton AG................................................................. 34,345
------------
DIVERSIFIED COMMERCIAL SERVICES
1,363 Flughafen Wien AG...................................................................... 47,176
------------
ELECTRIC UTILITIES
1,959 Oesterreichische Elektrizitaetswirtschafts AG (Verbund) (A Shares)..................... 284,276
------------
ENGINEERING & CONSTRUCTION
108 BWT AG................................................................................. 19,567
963 VA Technologie AG...................................................................... 64,560
------------
84,127
------------
HOME BUILDING
302 Bau Holding AG......................................................................... 10,443
------------
INTERNATIONAL BANKS
6,967 Bank Austria AG........................................................................ 347,312
------------
MULTI-LINE INSURANCE
454 Generali Holding Vienna AG............................................................. 74,078
------------
OIL REFINING/MARKETING
1,715 OMV AG................................................................................. 166,051
------------
SEMICONDUCTORS
191 Austria Mikro Systeme International AG................................................. 6,174
------------
STEEL/IRON ORE
708 Boehler-Uddeholm AG.................................................................... 29,717
------------
TOBACCO
1,421 Austria Tabakwerke AG.................................................................. 64,065
------------
TOTAL AUSTRIA.......................................................................... 1,336,121
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINLAND (2.1%)
ALCOHOLIC BEVERAGES
4,350 Oyj Hartwall Abp....................................................................... $ 55,922
------------
CONSTRUCTION/AGRICULTURAL EQUIPMENT/TRUCKS
4,927 Metra Oyj (B Shares)................................................................... 93,528
------------
E.D.P. SERVICES
5,282 Tietoenator Oyj Abp.................................................................... 183,823
------------
FOOD CHAINS
12,873 Kesko Oyj.............................................................................. 146,891
------------
INDUSTRIAL MACHINERY/COMPONENTS
11,519 Metso Oyj.............................................................................. 130,590
------------
INTERNATIONAL BANKS
72,399 Merita PLC............................................................................. 420,699
------------
OTHER METALS/MINERALS
13,827 Outokumpu Oyj.......................................................................... 158,652
------------
PAPER
19,909 UPM-Kymmene Oyj........................................................................ 629,881
------------
PROPERTY - CASUALTY INSURERS
7,835 Sampo Insurance Co "A"................................................................. 272,672
------------
SPECIALTY FOODS/CANDY
11,941 Raisio Group PLC....................................................................... 77,951
------------
TELECOMMUNICATIONS
25,752 Sonera Group Oyj....................................................................... 775,363
------------
TELECOMMUNICATIONS EQUIPMENT
79,035 Nokia Oyj (A Shares)................................................................... 9,069,347
------------
TOTAL FINLAND.......................................................................... 12,015,319
------------
FRANCE (6.5%)
ALCOHOLIC BEVERAGES
4,383 LVMH-Moet Hennessy Louis Vuitton....................................................... 1,326,603
------------
AUTO PARTS: O.E.M.
4,075 Valeo S.A.............................................................................. 293,519
------------
AUTOMOTIVE AFTERMARKET
5,698 Compagnie Generale des Etablissements Michelin (B Shares).............................. 248,777
------------
BEVERAGES - NON-ALCOHOLIC
3,233 Pernod-Ricard.......................................................................... 218,891
------------
BUILDING MATERIALS
4,972 Lafarge S.A............................................................................ 479,778
------------
CABLE TELEVISION
5,620 Canal Plus............................................................................. 391,172
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER SOFTWARE
4,822 Dassault Systemes S.A.................................................................. $ 200,513
------------
CONSUMER SPECIALTIES
2,801 Societe BIC S.A........................................................................ 137,358
------------
CONTAINERS/PACKAGING
4,085 Pechiney S.A. (A Shares)............................................................... 229,188
------------
DIVERSIFIED COMMERCIAL SERVICES
1,560 Sodexho Alliance S.A................................................................... 256,647
------------
DIVERSIFIED ELECTRONIC PRODUCTS
325 Sagem S.A.............................................................................. 99,567
------------
DIVERSIFIED MANUFACTURING
4,537 Compagnie de Saint Gobain.............................................................. 789,479
------------
E.D.P. SERVICES
2,849 Cap Gemini S.A......................................................................... 432,656
------------
ELECTRICAL PRODUCTS
1,304 Legrand SA............................................................................. 312,858
7,888 Schneider Electric S.A................................................................. 544,874
------------
857,732
------------
ENGINEERING & CONSTRUCTION
1,274 Bouygues S.A........................................................................... 444,718
6,509 Suez Lyonnaise des Eaux................................................................ 1,053,684
------------
1,498,402
------------
FARMING/SEEDS/MILLING
1,975 Eridania Beghin-Say S.A................................................................ 224,946
------------
FOOD CHAINS
10,499 Carrefour S.A.......................................................................... 1,948,715
3,486 Etablissements Economiques du Casino Guichard-Perrachon S.A............................ 397,044
861 Promodes............................................................................... 926,171
------------
3,271,930
------------
HOTELS/RESORTS
1,726 Accor S.A.............................................................................. 389,531
------------
INTEGRATED OIL COMPANIES
12,688 Elf Aquitaine S.A...................................................................... 1,873,307
------------
INTERNATIONAL BANKS
21,046 Banque Nationale de Paris.............................................................. 1,853,292
5,226 Banque Nationale de Paris-CVG.......................................................... 30,974
5 Compagnie Financiere de Paribas........................................................ 522
4,393 Societe Generale....................................................................... 959,002
------------
2,843,790
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MAJOR CHEMICALS
17,070 Rhone-Poulenc S.A. (A Shares).......................................................... $ 957,708
------------
MEDICAL SPECIALTIES
613 Essilor International S.A.............................................................. 193,941
------------
MILITARY/GOV'T/TECHNICAL
7,561 Thomson CSF............................................................................ 257,555
------------
MOTOR VEHICLES
2,392 PSA Peugeot Citroen.................................................................... 460,375
------------
MULTI-LINE INSURANCE
15,046 AXA++.................................................................................. 2,127,833
------------
MULTI-SECTOR COMPANIES
6,515 Lagardere S.C.A........................................................................ 264,523
21,917 Vivendi................................................................................ 1,665,340
------------
1,929,863
------------
OIL REFINING/MARKETING
11,809 Total S.A. (B Shares).................................................................. 1,600,310
------------
OTHER PHARMACEUTICALS
31,122 Sanofi-Synthelabo S.A.................................................................. 1,376,852
------------
OTHER SPECIALTY STORES
5,382 Pinault-Printemps-Redoute S.A.......................................................... 1,029,033
------------
OTHER TELECOMMUNICATIONS
41,466 France Telecom S.A..................................................................... 4,016,605
------------
PACKAGE GOODS/COSMETICS
2,997 L'Oreal S.A............................................................................ 2,005,424
------------
PACKAGED FOODS
2,867 Groupe Danone.......................................................................... 733,208
------------
REAL ESTATE
2,100 Foncierre Lyonnaise.................................................................... 281,926
4,610 Klepierre.............................................................................. 477,906
7,050 Simco S.A.............................................................................. 608,921
1,300 Societe Immobiliere de Location pour l'Industrie et le Commerce........................ 215,244
4,920 Unibail................................................................................ 721,220
------------
2,305,217
------------
SPECIALTY CHEMICALS
4,180 Air Liquide S.A........................................................................ 645,805
------------
SPECIALTY STEELS
13,126 Usinor S.A............................................................................. 182,862
------------
TELECOMMUNICATIONS EQUIPMENT
7,890 Alcatel++.............................................................................. 1,235,638
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TOBACCO
3,039 SEITA.................................................................................. $ 169,861
------------
TOTAL FRANCE........................................................................... 37,291,876
------------
GERMANY (8.2%)
AIRLINES
23,450 Deutsche Lufthansa AG.................................................................. 494,607
------------
AUTO PARTS: O.E.M.
7,550 Continental AG......................................................................... 164,420
------------
BUILDING MATERIALS
600 Heidelberger Zement AG................................................................. 47,457
600 Heidelberger (Rights)*................................................................. 190
------------
47,647
------------
BUILDING PRODUCTS
2,950 Buderus AG............................................................................. 49,777
------------
COMPUTER SOFTWARE
3,550 SAP AG................................................................................. 1,322,321
2,450 SAP AG (Pref.)......................................................................... 1,082,600
------------
2,404,921
------------
DEPARTMENT STORES
1,650 Karstadt AG............................................................................ 74,824
------------
DIVERSIFIED ELECTRONIC PRODUCTS
36,500 Siemens AG (Registered Shares)......................................................... 3,285,369
------------
DIVERSIFIED MANUFACTURING
21,850 Mannesmann AG.......................................................................... 3,444,930
------------
ENGINEERING & CONSTRUCTION
4,200 Bilfinger & Berger Bau AG.............................................................. 86,372
------------
INTERNATIONAL BANKS
25,950 Bayerische Hypo-Und Vereinsbank AG..................................................... 1,707,693
32,650 Deutsche Bank AG (Registered Shares)................................................... 2,348,309
30,900 Dresdner Bank AG....................................................................... 1,588,623
------------
5,644,625
------------
MAJOR CHEMICALS
40,100 BASF AG................................................................................ 1,807,874
43,200 Bayer AG............................................................................... 1,772,234
------------
3,580,108
------------
METALS FABRICATIONS
9,650 FAG Kugelfischer Georg Schaefer AG..................................................... 81,924
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MOTOR VEHICLES
59,800 DaimlerChrylser AG..................................................................... $ 4,666,816
19,050 Volkswagen AG.......................................................................... 1,129,065
6,000 Volkswagen AG (Pref.).................................................................. 213,240
------------
6,009,121
------------
MULTI-LINE INSURANCE
15,100 Allianz AG++........................................................................... 4,610,131
400 Axa Colonia Konzern AG................................................................. 40,918
9,850 Muenchener Rueckver AG (Registered Shares)............................................. 2,264,543
------------
6,915,592
------------
MULTI-SECTOR COMPANIES
5,950 Linde AG............................................................................... 312,489
5,950 Linde AG (Rights)*..................................................................... 18,887
8,150 Preussag AG............................................................................ 442,642
27,600 RWE AG................................................................................. 1,114,797
26,400 Thyssen Krupp AG*...................................................................... 626,432
32,000 VEBA AG................................................................................ 1,734,606
48,000 Viag AG................................................................................ 888,395
------------
5,138,248
------------
OTHER SPECIALTY STORES
4,900 Douglas Holding AG..................................................................... 222,979
15,200 Metro AG............................................................................... 819,129
------------
1,042,108
------------
OTHER TELECOMMUNICATIONS
8,700 MAN AG................................................................................. 289,931
------------
PACKAGE GOODS/COSMETICS
2,300 Beiersdorf AG.......................................................................... 155,237
------------
SHOE MANUFACTURING
3,200 Adidas-Salomon AG...................................................................... 232,181
------------
TELECOMMUNICATIONS
173,650 Deutsche Telekom AG.................................................................... 8,002,837
------------
TOTAL GERMANY.......................................................................... 47,144,779
------------
HONG KONG (2.0%)
AIRLINES
165,000 Cathay Pacific Airways, Ltd............................................................ 334,524
------------
BROADCASTING
25,000 Television Broadcasts Ltd.............................................................. 133,552
------------
DIVERSIFIED MANUFACTURING
53,000 Johnson Electric Holdings Ltd.......................................................... 286,542
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HOTELS/RESORTS
60,500 Hong Kong & Shanghai Hotels Ltd........................................................ $ 44,391
98,000 Regal Hotels International............................................................. 8,452
26,000 Shangri-La Asia Ltd.................................................................... 28,281
------------
81,124
------------
INTERNATIONAL BANKS
86,735 Bank of East Asia, Ltd................................................................. 189,804
122,200 Hang Seng Bank Ltd..................................................................... 1,329,201
------------
1,519,005
------------
MULTI-SECTOR COMPANIES
77,000 Hopewell Holdings Ltd.................................................................. 48,816
250,000 Hutchison Whampoa, Ltd................................................................. 2,510,137
136,000 New World Development Co., Ltd......................................................... 257,347
103,000 Swire Pacific Ltd. (Class A)........................................................... 510,459
------------
3,326,759
------------
NATURAL GAS
248,000 Hong Kong & China Gas Co., Ltd......................................................... 328,815
------------
NEWSPAPERS
52,000 South China Morning Post (Holdings) Ltd................................................ 37,819
------------
REAL ESTATE
151,000 Cheung Kong (Holdings) Ltd............................................................. 1,370,342
123,000 Hang Lung Development Co............................................................... 131,415
54,000 Hysan Development Co., Ltd............................................................. 64,298
218,000 Sino Land Co........................................................................... 99,620
161,000 Sun Hung Kai Properties Ltd............................................................ 1,300,476
147,000 Wharf (Holdings) Ltd................................................................... 424,812
------------
3,390,963
------------
TELECOMMUNICATIONS
775,200 Cable & Wireless HKT Ltd............................................................... 1,771,230
------------
UTILITIES
115,000 CLP Holdings Ltd....................................................................... 527,000
------------
TOTAL HONG KONG........................................................................ 11,737,333
------------
ITALY (2.7%)
AIRLINES
57,721 Alitalia............................................................................... 159,790
------------
APPAREL
77,548 Benetton Group SpA..................................................................... 171,742
------------
AUTO PARTS: O.E.M.
105,536 Pirelli SpA............................................................................ 242,630
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BROADCASTING
55,386 Mediaset SpA*.......................................................................... $ 554,312
------------
BUILDING MATERIALS
6,880 Italcementi SpA........................................................................ 87,140
10,136 Italcementi SpA (Pref.)................................................................ 47,354
------------
134,494
------------
CELLULAR TELEPHONE
66,807 Telecom Italia Mobile SpA-RNC.......................................................... 232,500
290,179 Telecom Italia Mobile SpA.............................................................. 1,817,775
40,713 Telecom Italia SpA-RNC................................................................. 200,511
167,059 Telecom Italia SpA..................................................................... 1,446,441
------------
3,697,227
------------
ELECTRIC UTILITIES
30,946 Edison SpA............................................................................. 257,495
------------
ENGINEERING & CONSTRUCTION
19,787 Impregilo SpA.......................................................................... 14,023
8,209 Sirti SpA.............................................................................. 44,585
------------
58,608
------------
FOOD CHAINS
9,811 La Rinascente SpA...................................................................... 68,288
------------
INTEGRATED OIL COMPANIES
362,483 Ente Nazionale Idrocarburi SpA......................................................... 2,125,447
------------
INTERNATIONAL BANKS
88,093 Banca Commerciale Italiana............................................................. 531,404
15,038 Banca Popolare di Milano............................................................... 101,339
118,991 Banco Ambrosiano Veneto SpA............................................................ 509,481
64,489 Istituto Bancario San Paolo di Torino SpA*............................................. 837,884
29,467 Mediobanca SpA......................................................................... 303,922
195,409 Unicredito Italiano SpA................................................................ 917,049
------------
3,201,079
------------
LIFE INSURANCE
45,939 Assicurazioni Generali++............................................................... 1,477,642
191,057 Istituto Nazionale delle Assicurazioni SpA............................................. 581,295
------------
2,058,937
------------
MOTOR VEHICLES
18,899 Fiat SpA............................................................................... 599,920
6,197 Fiat SpA (Pref.)....................................................................... 95,482
------------
695,402
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MULTI-LINE INSURANCE
22,163 Runione Adriatica di Sicurta SpA....................................................... $ 204,982
6,168 Societa Assicuratrice Industriale SpA.................................................. 64,722
------------
269,704
------------
MULTI-SECTOR COMPANIES
42,033 Snia SpA............................................................................... 43,929
------------
NATURAL GAS
21,128 Italgas SpA............................................................................ 87,567
------------
OTHER TELECOMMUNICATIONS
198,110 Olivetti SpA........................................................................... 386,515
------------
PAPER
3,969 Burgo (Cartiere) SpA................................................................... 29,300
5,485 Reno de Medici SpA..................................................................... 16,110
------------
45,410
------------
REAL ESTATE
2,482,662 Unione Immobiliare SpA................................................................. 1,280,307
------------
SPECIALTY FOODS/CANDY
65,800 Montedison SpA......................................................................... 117,621
79,395 Parmalat Finanzeria SpA................................................................ 104,579
------------
222,200
------------
TOTAL ITALY............................................................................ 15,761,083
------------
JAPAN (28.5%)
AIR FREIGHT/DELIVERY SERVICES
53,000 Nippon Express Co., Ltd................................................................ 375,482
------------
AIRLINES
218,000 Japan Airlines Company, Ltd............................................................ 732,457
------------
ALCOHOLIC BEVERAGES
28,000 ASAHI Breweries, Ltd................................................................... 398,618
101,000 Kirin Brewery Co., Ltd................................................................. 1,157,665
------------
1,556,283
------------
APPAREL
24,000 Onward Kashiyama Co., Ltd.............................................................. 377,383
------------
AUTO PARTS: O.E.M.
24,000 Denso Corporation...................................................................... 513,776
44,000 NGK Spark Plug Co., Ltd................................................................ 358,607
------------
872,383
------------
AUTOMOTIVE AFTERMARKET
51,000 Bridgestone Corp....................................................................... 1,405,107
------------
BANKING
191,000 Sumitomo Bank Ltd...................................................................... 3,076,682
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BROADCASTING
18,000 Tokyo Broadcasting System, Inc......................................................... $ 476,049
------------
BUILDING MATERIALS
129,000 Asahi Glass Company, Ltd............................................................... 1,026,601
135,000 Ube Industries, Ltd.................................................................... 391,379
------------
1,417,980
------------
BUILDING PRODUCTS
73,000 Toto Ltd............................................................................... 556,417
------------
COMPUTER SOFTWARE
4,800 Fuji Soft ABC Inc...................................................................... 440,050
2,000 Konami Co., Ltd........................................................................ 193,914
------------
633,964
------------
CONSTRUCTION/AGRICULTURAL EQUIPMENT/TRUCKS
108,000 Komatsu Ltd............................................................................ 628,281
5,100 SMC Corporation........................................................................ 861,179
------------
1,489,460
------------
CONSUMER ELECTRONICS/APPLIANCES
81,000 Sharp Corp............................................................................. 1,290,775
39,000 Sony Corp.............................................................................. 6,087,549
------------
7,378,324
------------
CONSUMER SPECIALTIES
66,000 Casio Computer Co., Ltd................................................................ 453,643
------------
DEPARTMENT STORES
16,400 Marui Co. Ltd.......................................................................... 310,147
------------
DIVERSIFIED COMMERCIAL SERVICES
1,300 Meitec Corp............................................................................ 48,795
20,000 Secom Co., Ltd......................................................................... 2,146,491
------------
2,195,286
------------
DIVERSIFIED ELECTRONIC PRODUCTS
324,000 Hitachi Ltd.++......................................................................... 3,505,309
20,400 Kyocera Corp........................................................................... 1,958,337
189,000 Matsushita Electric Industrial Co., Ltd.++............................................. 3,982,481
148,000 NEC Corp............................................................................... 2,997,792
187,000 Sanyo Electric Co., Ltd................................................................ 897,571
293,000 Toshiba Corp........................................................................... 1,845,138
------------
15,186,628
------------
DIVERSIFIED FINANCIAL SERVICES
3,800 Nichiei Co., Ltd. (Kyoto).............................................................. 196,986
------------
DIVERSIFIED MANUFACTURING
164,000 Kubota Corp............................................................................ 653,355
230,000 Mitsubishi Electric Corp............................................................... 1,273,975
------------
1,927,330
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
E.D.P. SERVICES
2,100 CSK Corp............................................................................... $ 96,765
1,000 Toyo Information System Co., Ltd....................................................... 50,590
------------
147,355
------------
ELECTRIC UTILITIES
94,400 Tokyo Electric Power Co., Inc.......................................................... 2,111,472
------------
ELECTRICAL PRODUCTS
51,000 Furukawa Electric Co., Ltd............................................................. 372,084
48,000 NGK Insulators, Ltd.................................................................... 455,717
2,300 Nidec Corp............................................................................. 447,106
94,000 Sumitomo Electric Industries........................................................... 1,264,222
21,000 Taiyo Yuden Co., Ltd................................................................... 751,944
------------
3,291,073
------------
ELECTRONIC COMPONENTS
6,000 Alps Electric Co., Ltd................................................................. 116,348
1,300 Hirose Electric Co., Ltd............................................................... 227,004
25,000 Murata Manufacturing Co., Ltd.......................................................... 3,215,897
8,000 Omron Corp............................................................................. 167,419
------------
3,726,668
------------
ELECTRONIC DATA PROCESSING
10,400 Advantest Corp......................................................................... 1,567,438
179,000 Fujitsu Ltd.++......................................................................... 5,395,603
14,000 Tokyo Electron Ltd..................................................................... 1,163,867
------------
8,126,908
------------
ELECTRONIC DISTRIBUTORS
8,800 Softbank Corp.......................................................................... 3,657,867
------------
ENGINEERING & CONSTRUCTION
136,000 Kajima Corp............................................................................ 479,140
101,000 Shimizu Corporation.................................................................... 362,619
139,000 Taisei Corporation..................................................................... 293,559
------------
1,135,318
------------
FINANCE COMPANIES
8,400 Acom Co., Ltd.......................................................................... 919,267
1,300 Credit Saison Co., Ltd................................................................. 32,010
3,000 Orix Corp.............................................................................. 403,187
6,600 Promise Co., Ltd....................................................................... 443,506
8,900 Takefuji Corporation................................................................... 1,153,403
------------
2,951,373
------------
FINANCE ENERGY
21,000 Pioneer Corp........................................................................... 375,166
------------
FLUID CONTROLS
45,000 Ebara Corp............................................................................. 537,391
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FOOD CHAINS
74,000 Daiei, Inc............................................................................. $ 254,315
30,000 Ito-Yokado Co., Ltd.++................................................................. 2,401,843
27,000 Jusco Co............................................................................... 629,836
24,000 Mycal Corporation...................................................................... 113,814
------------
3,399,808
------------
HOME BUILDING
59,000 Daiwa House Industry Co., Ltd.......................................................... 540,328
60,000 Sekisui House Ltd...................................................................... 650,283
------------
1,190,611
------------
INDUSTRIAL MACHINERY/COMPONENTS
15,600 Fanuc, Ltd.++.......................................................................... 1,213,017
306,000 Mitsubishi Heavy Industries Ltd.++..................................................... 1,201,440
------------
2,414,457
------------
INDUSTRIAL SPECIALTIES
4,000 Hoya Corp.............................................................................. 287,991
------------
INTERNATIONAL BANKS
159,000 Asahi Bank Ltd......................................................................... 1,413,401
271,000 Bank of Tokyo-Mitsubishi Ltd........................................................... 4,495,421
115,000 Bank of Yokohama Ltd................................................................... 645,819
198,000 Daiwa Bank Ltd......................................................................... 948,469
190,000 Fuji Bank Ltd.++....................................................................... 2,608,237
27,000 Fukuoka Bank of Japan.................................................................. 208,131
14,000 Gunma Bank Ltd......................................................................... 105,097
173,000 Industrial Bank of Japan, Ltd.++....................................................... 2,341,653
4,000 Joyo Bank, Ltd......................................................................... 19,583
84,000 Mitsubishi Trust & Banking++........................................................... 1,131,343
114,000 Mitsui Trust & Banking Co., Ltd........................................................ 354,574
183,000 Sakura Bank Ltd........................................................................ 1,574,042
51,000 Shizuoka Bank, Ltd..................................................................... 577,710
131,000 Tokai Bank Ltd......................................................................... 1,144,379
------------
17,567,859
------------
INVESTMENT BANKERS/BROKERS/SERVICES
74,000 Daiwa Securities Co., Ltd.............................................................. 790,650
119,000 Nomura Securities Co., Ltd............................................................. 1,966,007
------------
2,756,657
------------
MAJOR PHARMACEUTICALS
32,000 Sankyo Co., Ltd........................................................................ 912,355
72,000 Takeda Chemical Industries, Ltd........................................................ 4,140,156
------------
5,052,511
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MARINE TRANSPORTATION
108,000 Nippon Yusen Kabushiki Kaisha.......................................................... $ 466,545
------------
MEAT/POULTRY/FISH
27,000 Nippon Meat Packers, Inc............................................................... 335,135
------------
MEDICAL SPECIALTIES
14,000 Terumo Corp............................................................................ 426,034
------------
METALS FABRICATIONS
131,000 Mitsubishi Materials Corp.............................................................. 345,829
------------
MOTOR VEHICLES
52,000 Honda Motor Co.++...................................................................... 2,196,410
176,000 Nissan Motor Co., Ltd.................................................................. 1,055,966
235,000 Toyota Motor Corp...................................................................... 8,143,899
------------
11,396,275
------------
MOVIES/ENTERTAINMENT
5,900 Oriental Land Co., Ltd................................................................. 559,585
------------
NATURAL GAS
139,000 Osaka Gas Co., Ltd..................................................................... 465,691
135,000 Tokyo Gas Co., Ltd..................................................................... 320,102
------------
785,793
------------
NON - U.S. UTILITIES
77,300 Kansai Electric Power Co., Inc......................................................... 1,446,268
18,400 Tohoku Electric Power Co., Inc......................................................... 287,561
------------
1,733,829
------------
OFFICE EQUIPMENT/SUPPLIES
84,000 Canon, Inc............................................................................. 2,378,804
------------
OFFICE/PLANT AUTOMATION
6,000 Dainippon Screen Manufacturing Co., Ltd................................................ 31,161
------------
OIL REFINING/MARKETING
125,000 Nippon Oil Co.......................................................................... 551,982
------------
OTHER CONSUMER SERVICES
6,600 Benesse Corporation.................................................................... 1,412,883
------------
OTHER METALS/MINERALS
70,000 Sumitomo Metal Mining Co............................................................... 211,673
------------
OTHER PHARMACEUTICALS
28,000 Chugai Pharmaceutical Co............................................................... 333,301
28,000 Taisho Pharmaceutical Co., Ltd......................................................... 1,166,555
25,000 Yamanouchi Pharmaceutical Co., Ltd..................................................... 1,135,164
------------
2,635,020
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PACKAGE GOODS/COSMETICS
38,000 Kao Corp............................................................................... $ 1,160,027
27,000 Shiseido Company, Ltd.................................................................. 412,115
------------
1,572,142
------------
PAPER
132,000 Oji Paper Co., Ltd..................................................................... 931,362
------------
PHOTOGRAPHIC PRODUCTS
42,000 Fuji Photo Film Co.++.................................................................. 1,350,677
12,000 Nikon Corporation...................................................................... 285,687
------------
1,636,364
------------
PRECISION INSTRUMENTS
53,000 Yokogawa Electric Corp................................................................. 371,412
------------
PRINTING/FORMS
63,000 Dai Nippon Printing Co., Ltd........................................................... 1,149,688
51,000 Toppan Printing Co., Ltd............................................................... 626,178
------------
1,775,866
------------
PROPERTY - CASUALTY INSURERS
96,000 Tokio Marine & Fire Insurance Co....................................................... 1,257,944
------------
RAILROADS
118 Central Japan Railway Co............................................................... 798,598
277 East Japan Railway Co.++............................................................... 1,699,174
87,000 Kinki Nippon Railway Co................................................................ 403,389
74,000 Tobu Railway Co., Ltd.................................................................. 232,293
79,000 Tokyu Corp............................................................................. 216,137
------------
3,349,591
------------
REAL ESTATE
59,000 Mitsubishi Estate Co., Ltd............................................................. 591,869
38,000 Mitsui Fudosan Co., Ltd................................................................ 284,170
------------
876,039
------------
RECREATIONAL PRODUCTS/TOYS
13,200 Nintendo Co., Ltd...................................................................... 2,097,149
13,900 Sega Enterprises Ltd................................................................... 249,792
10,600 Shimano, Inc........................................................................... 264,568
------------
2,611,509
------------
RESTAURANTS
20,000 Skylark Co., Ltd....................................................................... 560,622
------------
SEMICONDUCTORS
11,000 Rohm Co., Ltd.......................................................................... 2,470,961
------------
SPECIALTY CHEMICALS
169,000 Asahi Chemical Industry Co., Ltd....................................................... 1,022,079
212,000 Mitsubishi Chemical Corp............................................................... 962,619
21,000 Shin-Etsu Chemical Co., Ltd............................................................ 866,852
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
266,000 Sumitomo Chemical Co., Ltd............................................................. $ 1,708,304
------------
4,559,854
------------
SPECIALTY FOODS/CANDY
86,000 Ajinomoto Co., Inc..................................................................... 965,096
------------
STEEL/IRON ORE
111,400 Kawasaki Steel Corp.................................................................... 252,380
778,000 Nippon Steel Co........................................................................ 1,979,169
------------
2,231,549
------------
TELECOMMUNICATIONS
787 Nippon Telegraph & Telephone Corp...................................................... 12,087,933
------------
TEXTILES
131,000 Teijin Ltd............................................................................. 669,022
148,000 Toray Industries Inc................................................................... 816,934
------------
1,485,956
------------
WHOLESALE DISTRIBUTORS
181,000 Marubeni Corporation................................................................... 576,865
86,000 Mitsubishi Corp........................................................................ 619,180
53,000 Mitsui & Co............................................................................ 392,272
58,000 Mitsukoshi Ltd......................................................................... 323,490
81,000 Sumitomo Corporation................................................................... 592,512
------------
2,504,319
------------
TOTAL JAPAN............................................................................ 163,867,543
------------
NETHERLANDS (5.2%)
AIR FREIGHT/DELIVERY SERVICES
31,042 TNT Post Group NV...................................................................... 792,233
------------
AIRLINES
3,894 Koninklijke Luchtvaart Maatschappi NV.................................................. 106,382
------------
ALCOHOLIC BEVERAGES
20,396 Heineken NV............................................................................ 1,043,002
------------
DIVERSIFIED COMMERCIAL SERVICES
6,363 Vedior NV.............................................................................. 107,367
------------
DIVERSIFIED ELECTRONIC PRODUCTS
21,437 Koninklijke (Royal) Philips Electronics NV............................................. 2,204,227
------------
DIVERSIFIED FINANCIAL SERVICES
62,006 ING Groep NV........................................................................... 3,667,157
------------
E.D.P. SERVICES
2,935 Getronics NV........................................................................... 146,715
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL PUBLISHING/SERVICES
42,876 Elsevier NV............................................................................ $ 408,310
17,908 Wolters Kluwer NV...................................................................... 600,001
------------
1,008,311
------------
FOOD CHAINS
41,208 Koninklijke Ahold NV................................................................... 1,268,972
------------
INTEGRATED OIL COMPANIES
138,118 Royal Dutch Petroleum Co............................................................... 8,277,815
------------
INTERNATIONAL BANKS
94,264 ABN-AMRO Holding NV++.................................................................. 2,285,455
------------
LIFE INSURANCE
38,108 Aegon NV++............................................................................. 3,526,558
------------
MAJOR CHEMICALS
22,221 Akzo Nobel NV.......................................................................... 959,399
------------
OFFICE EQUIPMENT/SUPPLIES
5,619 OCE NV................................................................................. 93,331
------------
PACKAGED FOODS
37,087 Unilever NV............................................................................ 2,464,053
------------
TELECOMMUNICATIONS
30,166 KPN NV................................................................................. 1,552,159
------------
WHOLESALE DISTRIBUTORS
5,216 Buhrmann NV............................................................................ 90,158
6,878 Hagemeyer NV........................................................................... 141,371
------------
231,529
------------
TOTAL NETHERLANDS...................................................................... 29,734,665
------------
PORTUGAL (0.7%)
ALCOHOLIC BEVERAGES
613 Unicer-Uniao Cervejeira, S.A........................................................... 11,636
------------
BUILDING MATERIALS
15,220 Cimpor-Cimentos de Portugal, SGPS, S.A................................................. 253,124
------------
ELECTRIC UTILITIES
62,060 EDP-Electricidade de Portugal, S.A..................................................... 967,328
------------
ENGINEERING & CONSTRUCTION
1,506 Engil-Sociedade Gestora de Participacoes Sociais S.A................................... 15,358
------------
FOOD DISTRIBUTORS
8,898 Jeronimo Martins SGPS, S.A............................................................. 249,047
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INTERNATIONAL BANKS
21,318 Banco Comercial Portugues S.A.......................................................... $ 602,067
11,136 Banco Espirito Santo e Comercial de Lisboa, S.A. (Registered Shares)................... 290,312
------------
892,379
------------
INVESTMENT BANKERS/BROKERS/SERVICES
53,030 BPI-SGPS, S.A.......................................................................... 212,517
------------
OTHER SPECIALTY STORES
5,218 Sonae SGPS, S.A........................................................................ 174,772
------------
OTHER TRANSPORTATION
6,777 Brisa-Auto Estradas de Portugal, S.A................................................... 267,656
------------
PAPER
10,383 Portucel Industrial Empresa............................................................ 71,174
------------
PROPERTY - CASUALTY INSURERS
1,273 Companhia de Seguros Tranquilidade..................................................... 35,563
------------
TELECOMMUNICATIONS
17,563 Portugal Telecom S.A. (Registered Shares).............................................. 785,330
------------
TOTAL PORTUGAL......................................................................... 3,935,884
------------
SINGAPORE (2.0%)
AEROSPACE
437,000 Singapore Technologies Engineering Ltd................................................. 633,676
------------
AIRLINES
140,000 Singapore Airlines Ltd................................................................. 1,474,128
------------
ALCOHOLIC BEVERAGES
48,000 Fraser & Neave Ltd..................................................................... 205,054
------------
E.D.P. PERIPHERALS
13,800 Creative Technology, Ltd............................................................... 161,083
------------
ELECTRONIC COMPONENTS
36,000 Venture Manufacturing Ltd.............................................................. 320,578
------------
HOTELS/RESORTS
131,000 Hotel Properties Ltd................................................................... 111,925
170,000 United Overseas Land, Ltd.............................................................. 147,292
------------
259,217
------------
INTERNATIONAL BANKS
122,115 DBS Holdings Ltd....................................................................... 1,381,325
166,950 Overseas-Chinese Banking Corporation Ltd............................................... 1,255,641
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
109,000 United Overseas Bank Ltd............................................................... $ 826,354
------------
3,463,320
------------
MARINE TRANSPORTATION
95,000 Neptune Orient Lines Ltd............................................................... 137,756
------------
METALS FABRICATIONS
71,000 NatSteel Ltd........................................................................... 118,761
------------
MULTI-SECTOR COMPANIES
125,000 Keppel Corp., Ltd...................................................................... 339,952
275,000 Sembcorp Industries Ltd................................................................ 347,473
------------
687,425
------------
NEWSPAPERS
54,000 Singapore Press Holdings Ltd........................................................... 925,993
------------
OTHER SPECIALTY STORES
44,000 Cycle and Carriage Ltd................................................................. 149,579
------------
REAL ESTATE
119,000 City Developments Ltd.................................................................. 615,764
229,750 DBS Land Ltd........................................................................... 425,770
45,000 First Capital Corporation Ltd.......................................................... 53,610
67,000 Parkway Holdings Ltd................................................................... 123,357
241,000 United Industrial Corp................................................................. 131,230
------------
1,349,731
------------
TELECOMMUNICATIONS
928,000 Singapore Telecommunications Ltd....................................................... 1,764,428
------------
TOTAL SINGAPORE........................................................................ 11,650,729
------------
SPAIN (3.4%)
BUILDING PRODUCTS
4,506 Zardoya Otis S.A....................................................................... 50,752
4,506 Zardoya Otis S.A. (Rights)............................................................. 5,037
------------
55,789
------------
ELECTRIC UTILITIES
80,413 Endesa S.A............................................................................. 1,613,812
80,271 Iberdrola S.A.......................................................................... 1,173,302
26,222 Union Electrica Fenosa, S.A............................................................ 384,663
------------
3,171,777
------------
ENGINEERING & CONSTRUCTION
5,599 ACS, Actividades de Construccion y Servicios, S.A...................................... 134,627
8,524 Fomento de Construcciones y Contratas S.A.............................................. 214,397
13,521 Grupo Dragados, S.A.................................................................... 143,591
------------
492,615
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ENVIRONMENTAL SERVICES
13,053 Sociedad General de Aguas de Barcelona, S.A............................................ $ 208,963
------------
FARMING/SEEDS/MILLING
2,973 Azucarera Ebro Agricolas, S.A.......................................................... 53,238
------------
HOTELS/RESORTS
8,922 Sol Melia S.A.......................................................................... 102,089
------------
INTERNATIONAL BANKS
42,129 Argentaria, Caja Postal y Banco Hipotecario de Espana, S.A............................. 937,457
162,249 Banco Bilbao Vizcaya S.A.++............................................................ 2,186,758
319,968 Banco Santander Central Hispano, S.A.++................................................ 3,330,516
------------
6,454,731
------------
NATURAL GAS
35,316 Gas Natural SDG, S.A................................................................... 774,680
------------
OIL REFINING/MARKETING
76,970 Repsol-YPF, S.A........................................................................ 1,590,982
------------
OTHER TRANSPORTATION
24,178 Autopistas Concesionaria Espanola S.A.................................................. 261,356
------------
PROPERTY - CASUALTY INSURERS
6,856 Corporacion Mapfre S.A................................................................. 117,131
------------
REAL ESTATE
6,792 Corporacion Financiera Alba, S.A....................................................... 197,694
24,133 Metrovacesa S.A........................................................................ 514,867
22,070 Prima Inmobiliaria, S.A................................................................ 195,976
94,340 Vallehermoso S.A....................................................................... 816,821
------------
1,725,358
------------
RESTAURANTS
20,667 TelePizza, S.A......................................................................... 110,721
------------
SPECIALTY STEELS
6,895 Acerinox S.A........................................................................... 210,145
------------
TELECOMMUNICATIONS
235,035 Telefonica S.A.*....................................................................... 3,876,654
------------
TOBACCO
16,319 Tabacalera S.A......................................................................... 269,337
------------
TOTAL SPAIN............................................................................ 19,475,566
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SWEDEN (2.5%)
CLOTHING/SHOE/ACCESSORY STORES
55,400 Hennes & Mauritz AB (B Shares)......................................................... $ 1,475,344
------------
CONSUMER ELECTRONICS/APPLIANCES
20,800 Electrolux AB (Series B)............................................................... 415,757
------------
DIVERSIFIED COMMERCIAL SERVICES
26,500 Securitas AB (B Shares)................................................................ 394,038
------------
DIVERSIFIED MANUFACTURING
9,900 Trelleborg AB (Series B)............................................................... 90,496
------------
E.D.P. SERVICES
4,800 WM-Data AB (B Shares).................................................................. 202,126
------------
ENGINEERING & CONSTRUCTION
8,600 Skanska AB (B Shares).................................................................. 315,498
------------
INDUSTRIAL MACHINERY/COMPONENTS
8,700 Atlas Copco AB (A Shares).............................................................. 230,097
4,600 Atlas Copco AB (B Shares).............................................................. 119,979
13,400 Sandvik AB (A Shares).................................................................. 345,420
5,500 Sandvik AB (B Shares).................................................................. 142,782
------------
838,278
------------
INTERNATIONAL BANKS
35,800 ForeningsSparbanken AB................................................................. 571,592
40,600 Skandinaviska Enskilda Banken.......................................................... 418,133
44,000 Svenska Handelsbanken AB (A Shares).................................................... 611,349
------------
1,601,074
------------
INVESTMENT BANKERS/BROKERS/SERVICES
5,000 OM Gruppen AB.......................................................................... 64,596
------------
LIFE INSURANCE
34,900 Skandia Forsakrings AB................................................................. 778,410
------------
METALS FABRICATIONS
5,900 SKF AB (B Shares)...................................................................... 120,088
------------
MOTOR VEHICLES
9,900 Volvo AB (A Shares).................................................................... 258,818
20,800 Volvo AB (B Shares).................................................................... 538,709
------------
797,527
------------
OTHER TELECOMMUNICATIONS
6,800 NetCom AB (B Shares)................................................................... 283,029
------------
PACKAGE GOODS/COSMETICS
15,000 Svenska Cellulosa AB................................................................... 405,860
------------
REAL ESTATE
27,760 Castellum AB........................................................................... 240,220
41,760 Diligentia AB.......................................................................... 297,748
25,060 Drott AB (B Shares).................................................................... 241,290
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
15,880 Tornet Fastighnets AB.................................................................. $ 207,093
------------
986,351
------------
STEEL/IRON ORE
8,200 SSAB Svenskt Stal AB (Series A)........................................................ 102,440
------------
TELECOMMUNICATIONS EQUIPMENT
125,000 Ericsson (L.M.) Telephone Co. AB (B Shares)............................................ 5,210,365
------------
TOTAL SWEDEN........................................................................... 14,081,277
------------
SWITZERLAND (5.8%)
AIRLINES
980 SAirGroup.............................................................................. 206,407
------------
BUILDING MATERIALS
430 Holderbank Financiere Glarus AG (B Shares)............................................. 530,400
------------
CONSUMER SPECIALTIES
320 The Swatch Group AG.................................................................... 255,293
------------
DIVERSIFIED COMMERCIAL SERVICES
1,130 Adecco S.A. (Registered Shares)........................................................ 686,154
------------
DIVERSIFIED FINANCIAL SERVICES
2,910 Zurich Allied AG++..................................................................... 1,650,345
------------
DIVERSIFIED MANUFACTURING
370 Alusuisse Lonza Group AG............................................................... 226,129
310 Alusuisse Lonza Group AG (Rights)*..................................................... 181,310
------------
407,439
------------
ELECTRICAL PRODUCTS
17,900 ABB Ltd.++............................................................................. 1,805,645
------------
INTERNATIONAL BANKS
16,400 Credit Suisse Group++.................................................................. 3,157,784
12,500 UBS AG (Registered Shares)*++.......................................................... 3,643,129
------------
6,800,913
------------
MAJOR PHARMACEUTICALS
3,945 Novartis AG (Registered Shares)++...................................................... 5,910,889
86 Roche Holdings AG-Bearer++............................................................. 1,503,319
444 Roche Holdings
AG-Genusshein++...................................................................... 5,339,554
------------
12,753,762
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
METALS FABRICATIONS
200 Georg Fischer AG (Registered Shares)................................................... $ 62,956
------------
MULTI-SECTOR COMPANIES
260 Sulzer AG.............................................................................. 182,822
------------
OTHER SPECIALTY STORES
390 Valora Holding AG...................................................................... 99,441
------------
OTHER TELECOMMUNICATIONS
4,370 Swisscom AG (Registered Shares)*++..................................................... 1,333,946
------------
PACKAGED FOODS
2,285 Nestle S.A. (Registered Shares)++...................................................... 4,414,734
------------
PROPERTY - CASUALTY INSURERS
905 Schweizerische Rueckversicherungs-Gesellschaft (Registered Shares)++................... 1,879,345
------------
TOTAL SWITZERLAND...................................................................... 33,069,602
------------
UNITED KINGDOM (15.3%)
ADVERTISING
33,626 WPP Group PLC.......................................................................... 365,132
------------
AEROSPACE
93,997 British Aerospace PLC.................................................................. 549,358
14,138 Cobham PLC............................................................................. 171,068
6,893 Meggitt Holdings, PLC.................................................................. 17,225
41,936 Rolls-Royce PLC........................................................................ 148,916
6,185 Smiths Industries PLC.................................................................. 83,430
------------
969,997
------------
AIR FREIGHT/DELIVERY SERVICES
1,105 Ocean Group PLC........................................................................ 16,895
------------
AIRLINES
52,929 British Airways PLC.................................................................... 275,621
------------
ALCOHOLIC BEVERAGES
39,562 Bass PLC............................................................................... 434,792
167,534 Diageo PLC............................................................................. 1,693,869
------------
2,128,661
------------
APPAREL
18,995 Baird (William) PLC.................................................................... 18,424
------------
AUTO PARTS: O.E.M.
1,500 BBA Group PLC.......................................................................... 10,481
72,814 GKN PLC................................................................................ 1,165,939
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
7,821 Laird Group PLC........................................................................ $ 33,816
------------
1,210,236
------------
BOOKS/MAGAZINES
7,251 EMAP PLC............................................................................... 94,173
56,494 Reed International PLC................................................................. 329,710
------------
423,883
------------
BUILDING MATERIALS
12,535 Barratt Developments PLC............................................................... 48,840
89,254 Blue Circle Industries PLC............................................................. 414,522
81,131 BPB Industries PLC..................................................................... 478,832
63,560 Hanson PLC............................................................................. 498,430
20,552 RMC Group PLC.......................................................................... 295,641
13,858 Tarmac Group PLC....................................................................... 116,647
------------
1,852,912
------------
BUILDING PRODUCTS
100,319 Caradon PLC............................................................................ 238,316
14,959 Rugby Group PLC........................................................................ 28,036
------------
266,352
------------
CABLE TELEVISION
78,857 British Sky Broadcasting Group PLC..................................................... 847,203
------------
CASINO/GAMBLING
75,349 Hilton Group PLC....................................................................... 229,786
23,545 London Clubs International PLC......................................................... 48,385
------------
278,171
------------
CATALOG/SPECIALTY DISTRIBUTION
49,839 Great Universal Stores PLC............................................................. 378,541
------------
CELLULAR TELEPHONE
1,204,335 Vodafone AirTouch PLC.................................................................. 5,603,193
------------
CLOTHING/SHOE/ACCESSORY STORES
18,031 Next PLC............................................................................... 194,310
------------
DEPARTMENT STORES
16,849 House of Fraser PLC.................................................................... 18,559
134,767 Marks & Spencer, PLC................................................................... 620,359
------------
638,918
------------
DIVERSIFIED COMMERCIAL SERVICES
53,803 British Airport Authority PLC.......................................................... 394,939
33,993 Compass Group PLC...................................................................... 364,367
133,571 Rentokil Initial PLC................................................................... 445,220
------------
1,204,526
------------
DIVERSIFIED FINANCIAL SERVICES
68,832 Abbey National PLC++................................................................... 1,346,602
73,281 Allied Zurich PLC*..................................................................... 885,484
341,409 HSBC Holdings PLC...................................................................... 4,206,767
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
244,220 Lloyds TSB Group PLC................................................................... $ 3,378,603
------------
9,817,456
------------
DIVERSIFIED MANUFACTURING
23,123 Fki Babcock PLC........................................................................ 60,633
27,840 IMI PLC................................................................................ 109,388
30,458 TI Group PLC........................................................................... 205,549
------------
375,570
------------
DRUGSTORE CHAINS
48,400 Boots Co. PLC.......................................................................... 497,310
------------
E.D.P. SERVICES
31,653 Parity Group PLC....................................................................... 106,287
------------
ELECTRIC UTILITIES
62,579 National Power PLC..................................................................... 423,093
61,451 Scottish Power PLC..................................................................... 570,289
32,863 United Utilities PLC................................................................... 325,511
------------
1,318,893
------------
ELECTRONIC DISTRIBUTORS
66,017 Misys PLC.............................................................................. 551,342
------------
ENGINEERING & CONSTRUCTION
8,766 Amec PLC............................................................................... 30,912
42,911 BICC Group (The) PLC................................................................... 76,895
13,858 Carillion PLC.......................................................................... 28,834
16,052 Jarvis PLC............................................................................. 68,679
33,513 Taylor Woodrow PLC..................................................................... 78,786
------------
284,106
------------
ENVIRONMENTAL SERVICES
13,177 Pennon Group PLC....................................................................... 198,216
------------
FINANCIAL PUBLISHING/SERVICES
58,465 Reuters Group PLC...................................................................... 543,539
------------
FOOD CHAINS
51,778 Safeway PLC............................................................................ 162,585
89,685 Sainsbury (J.) PLC..................................................................... 538,532
150,765 Tesco PLC.............................................................................. 448,622
------------
1,149,739
------------
HOME BUILDING
28,305 Beazer Homes, PLC...................................................................... 60,959
7,555 Berkeley Group (The) PLC............................................................... 68,188
------------
129,147
------------
INDUSTRIAL MACHINERY/COMPONENTS
19,607 Berisford PLC.......................................................................... 91,544
193,962 Invensys PLC........................................................................... 953,432
------------
1,044,976
------------
INDUSTRIAL SPECIALTIES
210,951 Pilkington PLC......................................................................... 315,591
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INTEGRATED OIL COMPANIES
798,844 BP Amoco PLC........................................................................... $ 7,755,034
------------
INTERNATIONAL BANKS
69,151 Barclays PLC........................................................................... 2,117,937
112,125 Halifax PLC............................................................................ 1,433,193
------------
3,551,130
------------
INVESTMENT BANKERS/BROKERS/SERVICES
7,489 Schroders PLC.......................................................................... 149,836
------------
LIFE INSURANCE
93,164 Prudential Corp........................................................................ 1,461,928
------------
MAJOR CHEMICALS
35,650 Imperial Chemical Industries PLC....................................................... 354,582
------------
MAJOR PHARMACEUTICALS
68,647 AstraZeneca Group PLC++................................................................ 3,105,788
144,749 Glaxo Wellcome PLC..................................................................... 4,273,894
249,615 SmithKline Beecham PLC................................................................. 3,217,278
------------
10,596,960
------------
MARINE TRANSPORTATION
60,997 Associated British Ports Holdings PLC.................................................. 302,843
36,443 Peninsular & Orient Steam Navigation Co................................................ 516,444
------------
819,287
------------
MILITARY/GOV'T/TECHNICAL
11,426 Racal Electronics PLC.................................................................. 84,342
------------
MOVIES/ENTERTAINMENT
78,374 EMI Group PLC.......................................................................... 615,888
74,730 Rank Group PLC......................................................................... 233,119
------------
849,007
------------
MULTI-LINE INSURANCE
46,551 CGU PLC................................................................................ 678,437
253,896 Legal & General Group PLC.............................................................. 705,414
64,492 Royal & Sun Alliance Insurance Group PLC............................................... 438,943
------------
1,822,794
------------
MULTI-SECTOR COMPANIES
135,013 General Electric Co. PLC............................................................... 1,468,274
------------
MUTUAL FUNDS
63,882 Limit PLC.............................................................................. 155,433
------------
NEWSPAPERS
7,836 Trinity Mirror PLC..................................................................... 72,789
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL & GAS PRODUCTION
29,776 Enterprise Oil PLC..................................................................... $ 211,961
128,949 LASMO PLC.............................................................................. 285,659
------------
497,620
------------
OIL REFINING/MARKETING
38,714 Burmah Castrol PLC..................................................................... 667,008
------------
OIL/GAS TRANSMISSION
191,157 BG PLC................................................................................. 1,061,420
255,341 Centrica PLC........................................................................... 741,962
------------
1,803,382
------------
OTHER METALS/MINERALS
53,215 Rio Tinto PLC.......................................................................... 910,724
------------
OTHER PHARMACEUTICALS
6,590 Scotia Holdings PLC.................................................................... 16,251
------------
OTHER SPECIALTY STORES
12,416 Carpetright PLC........................................................................ 93,487
73,111 Kingfisher PLC......................................................................... 798,692
16,083 Lex Service PLC........................................................................ 122,948
------------
1,015,127
------------
OTHER TRANSPORTATION
28,868 Firstbus PLC........................................................................... 116,275
50,744 Stagecoach Holdings PLC................................................................ 144,322
------------
260,597
------------
PACKAGED FOODS
39,697 Assocated British Food Ltd............................................................. 248,158
178,858 Unilever PLC........................................................................... 1,659,870
------------
1,908,028
------------
PAPER
34,957 Rexam PLC.............................................................................. 143,673
------------
PRECIOUS METALS
32,809 Johnson Matthey PLC.................................................................... 303,941
33,794 Lonmin PLC............................................................................. 340,011
------------
643,952
------------
PRINTING/FORMS
48,252 Arjo Wiggins Appleton PLC.............................................................. 169,758
------------
RAILROADS
23,318 Railtrack Group PLC.................................................................... 472,285
------------
REAL ESTATE
207,321 British Land Company PLC............................................................... 1,491,156
47,430 Capital Shopping Centers PLC........................................................... 314,239
258,160 Grantchester Holdings PLC.............................................................. 572,960
111,530 Great Portland Estates PLC............................................................. 348,375
79,790 Hammerson PLC.......................................................................... 590,227
176,459 Land Securities PLC.................................................................... 2,204,749
141,383 MEPC PLC............................................................................... 979,708
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
49
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
158,660 Slough Estates PLC..................................................................... $ $920,755
------------
7,422,169
------------
RESTAURANTS
87,846 Granada Group PLC...................................................................... 694,655
------------
SPECIALTY CHEMICALS
28,341 Boc Group PLC.......................................................................... 607,102
------------
SPECIALTY FOODS/CANDY
100,005 Cadbury Schweppes PLC.................................................................. 655,578
35,781 Tate & Lyle PLC........................................................................ 233,531
------------
889,109
------------
SPECIALTY STEELS
133,094 Corus Group PLC........................................................................ 253,816
------------
TELECOMMUNICATIONS
255,402 British Telecommunications PLC......................................................... 4,633,386
93,440 Cable & Wireless PLC................................................................... 1,092,205
------------
5,725,591
------------
TOBACCO
73,281 British American Tobacco PLC........................................................... 485,510
------------
TOOLS/HARDWARE
2,694 McKechnie PLC.......................................................................... 17,494
------------
TRUCKING
47,416 NFC PLC................................................................................ 152,786
------------
UTILITIES
28,786 Hyder PLC.............................................................................. 259,100
------------
WATER SUPPLY
23,388 Angian Water PLC....................................................................... 260,306
21,565 Kelda Group PLC........................................................................ 131,176
25,262 Thames Water PLC....................................................................... 365,470
------------
756,952
------------
TOTAL UNITED KINGDOM................................................................... 87,919,232
------------
TOTAL COMMON AND PREFERRED STOCKS AND RIGHTS
(IDENTIFIED COST $465,637,305)......................................................... 496,553,277
------------
</TABLE>
<TABLE>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (14.1%)
U.S. GOVERNMENT AGENCY
$ 81,000 Federal Home Loan Mortgage Corp. 5.16% due 11/01/99 (AMORTIZED COST $81,000,000)....... $ 81,000,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $546,637,305) (B)........................................................ 100.5% 577,553,277
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................ (0.5) (2,642,072)
----- -------------
NET ASSETS................................................................................ 100.0% $ 574,911,205
----- -------------
----- -------------
</TABLE>
- ---------------------
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $45,685,212 and the
aggregate gross unrealized depreciation is $14,769,240, resulting in net
unrealized appreciation of $30,915,972.
++ Some or all of these securities are segregated in connection with open
forward foreign currency contracts.
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
FUTURES CONTRACTS OPEN AT OCTOBER 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF LONG/ DESCRIPTION, DELIVERY MONTH, UNDERLYING FACE UNREALIZED
CONTRACTS SHORT AND YEAR AMOUNT AT VALUE GAIN/LOSS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
3 Short FTSE 100 December/1999 (295,826) $ (14,446)
23 Short FTSE 100 December/1999 (2,276,338) (102,415)
109 Short FTSE 100 December/1999 (10,730,596) (542,624)
112 Long TSE TOPIX 100 December/1999 16,036,095 800,998
58 Long TSE TOPIX 100 December/1999 8,529,904 189,306
29 Long MIB 30 INDEX December/1999 5,337,200 (253,781)
3 Long MIB 30 INDEX December/1999 539,935 (14,064)
153 Long CAC40 10EU December/1999 7,464,227 438,076
165 Long CAC40 10EU December/1999 8,450,837 71,254
62 Long EURX DAX INDEX December/1999 9,031,331 21,250
30 Long EURX DAX INDEX December/1999 4,193,371 186,910
24 Long EURX DAX INDEX December/1999 3,426,541 77,684
38 Long EURX DAX INDEX December/1999 5,549,494 (1,138)
66 Long IBEX 35 PLUS November/1999 6,734,148 84,569
---------
Net unrealized gain.............................................. $ 941,579
=========
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 1999:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION
TO DELIVER FOR DATE (DEPRECIATION)
- ----------------------------------------------------------
<S> <C> <C> <C>
$ 62,681 JPY 6,519,479 11/1/99 $ (96)
$ 5,823,678 HKD 45,245,903 11/2/99 600
JPY 9,404,760 $ 89,740 11/2/99 543
$ 5,728,493 CHF 8,728,103 11/3/99 7,266
$ 882,690 EUR 838,206 11/3/99 1,282
$ 4,615,882 EUR 4,265,000 3/07/00 (76,168)
$ 9,299,931 EUR 8,575,000 3/07/00 (172,605)
$ 13,494,004 EUR 12,700,000 3/07/00 24,017
EUR 5,504,160 $ 5,935,054 3/10/00 75,245
$ 2,587,923 GBP 1,597,908 3/10/00 40,177
$ 1,292,001 EUR 1,205,000 3/17/00 (8,569)
$ 4,750,793 EUR 4,476,390 3/17/00 16,961
$ 13,500,000 EUR 12,555,804 3/17/00 (126,953)
$ 1,250,000 EUR 1,165,936 3/17/00 (8,175)
$ 2,905,255 JPY 314,000,000 3/17/00 178,147
$ 3,032,774 JPY 326,842,000 3/17/00 176,734
$ 4,940,157 JPY 534,772,000 3/17/00 311,172
$ 7,461,832 JPY 782,000,000 3/17/00 217,215
JPY 944,546,336 $ 9,154,000 3/17/00 (121,212)
JPY 12,854,965 $ 125,500 3/17/00 (733)
JPY 938,971,550 $ 9,154,000 3/17/00 (66,469)
JPY 12,922,735 $ 125,500 3/17/00 (1,398)
JPY 292,200,000 $ 2,837,169 3/17/00 (32,163)
JPY 154,734,454 $ 1,519,000 3/17/00 (454)
GBP 4,556,216 $ 7,448,000 3/24/00 (45,243)
GBP 1,385,000 $ 2,269,184 3/24/00 (8,615)
GBP 6,518,000 $ 10,704,837 3/24/00 (14,796)
---------
Net unrealized appreciation......... $ 365,710
=========
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
CHF Swiss Franc.
EUR Euro.
GBP British Pound.
HKD Hong Kong Dollar.
JPY Japanese Yen.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
SUMMARY OF INVESTMENTS OCTOBER 31, 1999
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Advertising....................................................................... $ 365,132 0.1%
Aerospace......................................................................... 1,603,673 0.3
Air Freight/Delivery Services..................................................... 1,224,230 0.2
Airlines.......................................................................... 3,817,425 0.7
Alcoholic Beverages............................................................... 6,540,707 1.1
Apparel........................................................................... 567,549 0.1
Auto Parts: O.E.M................................................................. 2,783,188 0.5
Automotive Aftermarket............................................................ 1,653,884 0.3
Banking........................................................................... 3,076,682 0.5
Beverages - Non-Alcoholic......................................................... 295,856 0.1
Books/Magazines................................................................... 423,883 0.1
Broadcasting...................................................................... 1,163,913 0.2
Building Materials................................................................ 4,980,400 0.9
Building Products................................................................. 1,030,578 0.2
Cable Television.................................................................. 1,238,375 0.2
Casino/Gambling................................................................... 360,090 0.1
Catalog/Specialty Distribution.................................................... 378,541 0.1
Cellular Telephone................................................................ 9,300,420 1.6
Clothing/Shoe/Accessory Stores.................................................... 1,669,654 0.3
Computer Software................................................................. 3,239,398 0.6
Construction/Agricultural Equipment/Trucks........................................ 1,582,988 0.3
Consumer Electronics/Appliances................................................... 7,794,081 1.4
Consumer Specialties.............................................................. 846,294 0.1
Containers/Packaging.............................................................. 464,472 0.1
Department Stores................................................................. 1,023,889 0.2
Diversified Commercial Services................................................... 5,135,004 0.9
Diversified Electronic Products................................................... 20,775,791 3.6
Diversified Financial Services.................................................... 15,450,091 2.7
Diversified Manufacturing......................................................... 7,321,786 1.3
Drugstore Chains.................................................................. 497,310 0.1
E.D.P. Peripherals................................................................ 161,083 0.0
E.D.P. Services................................................................... 1,218,962 0.2
Electric Utilities................................................................ 8,111,241 1.4
Electrical Products............................................................... 5,954,450 1.0
Electronic Components............................................................. 4,047,246 0.7
Electronic Data Processing........................................................ 8,126,908 1.4
Electronic Distributors........................................................... 4,209,209 0.7
Engineering & Construction........................................................ 4,009,793 0.7
Environmental Services............................................................ 407,179 0.1
Farming/Seeds/Milling............................................................. 278,184 0.0
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance Companies................................................................. $ 2,951,373 0.5%
Finance Energy.................................................................... 375,166 0.1
Financial Publishing/Services..................................................... 1,551,850 0.3
Fluid Controls.................................................................... 537,391 0.1
Food Chains....................................................................... 9,675,505 1.7
Food Distributors................................................................. 249,047 0.0
Forest Products................................................................... 54,651 0.0
Home Building..................................................................... 1,330,201 0.2
Hotels/Resorts.................................................................... 831,961 0.1
Industrial Machinery/Components................................................... 4,428,301 0.8
Industrial Specialties............................................................ 603,582 0.1
Integrated Oil Companies.......................................................... 20,031,603 3.5
International Banks............................................................... 57,930,603 10.1
Investment Bankers/Brokers/Services............................................... 3,183,606 0.6
Life Insurance.................................................................... 8,209,024 1.4
Major Chemicals................................................................... 5,851,797 1.0
Major Pharmaceuticals............................................................. 28,403,233 4.9
Marine Transportation............................................................. 1,480,980 0.3
Meat/Poultry/Fish................................................................. 335,135 0.1
Media Conglomerates............................................................... 982,820 0.2
Medical Specialties............................................................... 619,975 0.1
Metals Fabrications............................................................... 729,558 0.1
Military/Gov't/Technical.......................................................... 341,897 0.1
Motor Vehicles.................................................................... 19,358,700 3.4
Movies/Entertainment.............................................................. 1,408,592 0.2
Multi-Line Insurance.............................................................. 11,226,817 2.0
Multi-Sector Companies............................................................ 13,490,802 2.3
Mutual Funds...................................................................... 155,433 0.0
Natural Gas....................................................................... 2,060,371 0.4
Newspapers........................................................................ 1,036,601 0.2
Non - U.S. Utilities.............................................................. 1,733,829 0.3
Office Equipment/Supplies......................................................... 2,472,135 0.4
Office/Plant Automation........................................................... 31,161 0.0
Oil & Gas Production.............................................................. 559,107 0.1
Oil Refining/Marketing............................................................ 4,576,333 0.8
Oil/Gas Transmission.............................................................. 1,803,382 0.3
Other Consumer Services........................................................... 1,412,883 0.2
Other Metals/Minerals............................................................. 1,704,465 0.3
Other Pharmaceuticals............................................................. 4,108,870 0.7
Other Specialty Stores............................................................ 3,510,060 0.6
Other Telecommunications.......................................................... 7,284,130 1.3
Other Transportation.............................................................. 789,609 0.1
Package Goods/Cosmetics........................................................... 4,138,663 0.7
Packaged Foods.................................................................... 9,520,023 1.7
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
SUMMARY OF INVESTMENTS OCTOBER 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paper............................................................................. $ 1,821,500 0.3%
Photographic Products............................................................. 1,636,364 0.3
Precious Metals................................................................... 704,039 0.1
Precision Instruments............................................................. 371,412 0.1
Printing/Forms.................................................................... 1,945,624 0.3
Property - Casualty Insurers...................................................... 3,630,371 0.6
Railroads......................................................................... 3,821,876 0.7
Real Estate....................................................................... 19,819,345 3.4
Recreational Products/Toys........................................................ 2,611,509 0.5
Restaurants....................................................................... 1,365,998 0.2
Semiconductors.................................................................... 2,477,135 0.4
Shoe Manufacturing................................................................ 232,181 0.0
Specialty Chemicals............................................................... 5,873,434 1.0
Specialty Foods/Candy............................................................. 2,198,422 0.4
Specialty Steels.................................................................. 646,823 0.1
Steel/Iron Ore.................................................................... 2,415,696 0.4
Telecommunications................................................................ 36,341,525 6.3
Telecommunications Equipment...................................................... 15,515,350 2.7
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Textiles.......................................................................... $ 1,485,956 0.3%
Tobacco........................................................................... 988,773 0.2
Tools/Hardware.................................................................... 17,494 0.0
Trucking.......................................................................... 152,786 0.0
U.S. Government Agency............................................................ 81,000,000 14.1
Utilities......................................................................... 786,100 0.1
Water Supply...................................................................... 756,952 0.1
Wholesale Distributors............................................................ 2,735,848 0.5
------------ -----
$$577,553,277 100.5%
------------ -----
------------ -----
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Common Stocks..................................................................... $$494,464,067 86.0%
Preferred Stocks.................................................................. 1,883,597 0.4
Rights............................................................................ 205,613 0.0
Short-Term Investments............................................................ 81,000,000 14.1
------------ -----
$$577,553,277 100.5%
------------ -----
------------ -----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $546,637,305).............................................................. $577,553,277
Unrealized appreciation on open forward foreign currency contracts............................ 581,004
Cash (including $788,663 in foreign currency and $8,141,452 segregated in connection with open
futures contracts).......................................................................... 13,177,136
Receivable for:
Shares of beneficial interest sold........................................................ 1,631,282
Variation margin.......................................................................... 940,423
Dividends................................................................................. 776,854
Foreign withholding tax reclaimed......................................................... 37,063
Deferred offering costs....................................................................... 72,374
Prepaid expenses and other assets............................................................. 85,881
------------
TOTAL ASSETS............................................................................. 594,855,294
------------
LIABILITIES:
Unrealized depreciation on open forward foreign currency contracts............................ 215,294
Payable for:
Investments purchased..................................................................... 12,601,174
Shares of beneficial interest repurchased................................................. 5,645,543
Investment management fee................................................................. 470,579
Plan of distribution fee.................................................................. 446,867
Accrued expenses and other payables........................................................... 564,632
------------
TOTAL LIABILITIES........................................................................ 19,944,089
------------
NET ASSETS............................................................................... $574,911,205
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $544,677,938
Net unrealized appreciation................................................................... 32,198,701
Net investment loss........................................................................... (646,146)
Net realized loss............................................................................. (1,319,288)
------------
NET ASSETS............................................................................... $574,911,205
============
CLASS A SHARES:
Net Assets.................................................................................... $38,505,880
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 3,641,765
NET ASSET VALUE PER SHARE................................................................ $10.57
============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)........................................ $11.16
============
CLASS B SHARES:
Net Assets.................................................................................... $465,258,342
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 44,115,027
NET ASSET VALUE PER SHARE................................................................ $10.55
============
CLASS C SHARES:
Net Assets.................................................................................... $69,811,015
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 6,619,416
NET ASSET VALUE PER SHARE................................................................ $10.55
============
CLASS D SHARES:
Net Assets.................................................................................... $1,335,968
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 126,329
NET ASSET VALUE PER SHARE................................................................ $10.58
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 28, 1999* THROUGH OCTOBER 31, 1999
<TABLE>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Dividends (net of $188,107 foreign withholding tax)............................................ $ 2,080,161
Interest....................................................................................... 1,587,720
-----------
TOTAL INCOME.............................................................................. 3,667,881
-----------
EXPENSES
Investment management fee...................................................................... 1,734,026
Plan of distribution fee (Class A shares)...................................................... 28,368
Plan of distribution fee (Class B shares)...................................................... 1,399,606
Plan of distribution fee (Class C shares)...................................................... 219,865
Custodian fees................................................................................. 379,214
Transfer agent fees and expenses............................................................... 240,983
Registration fees.............................................................................. 182,950
Offering costs................................................................................. 81,246
Professional fees.............................................................................. 42,459
Shareholder reports and notices................................................................ 28,130
Trustees' fees and expenses.................................................................... 5,925
Other.......................................................................................... 12,361
-----------
TOTAL EXPENSES............................................................................ 4,355,133
-----------
NET INVESTMENT LOSS....................................................................... (687,252)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments................................................................................ (367,328)
Futures contracts.......................................................................... (378,930)
Foreign exchange transactions.............................................................. (2,740,607)
-----------
NET LOSS.................................................................................. (3,486,865)
-----------
Net unrealized appreciation/depreciation on:
Investments................................................................................ 30,915,972
Futures contracts.......................................................................... 941,579
Translation of forward foreign currency contracts and other assets and liabilities
denominated in foreign currencies........................................................ 341,150
-----------
NET APPRECIATION.......................................................................... 32,198,701
-----------
NET GAIN.................................................................................. 28,711,836
-----------
NET INCREASE................................................................................... $28,024,584
===========
</TABLE>
- ---------------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
FOR THE
PERIOD JUNE
28, 1999*
THROUGH
OCTOBER
31,1999
- ------------------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss........................................................................... $ (687,252)
Net realized loss............................................................................. (3,486,865)
Net unrealized appreciation................................................................... 32,198,701
------------
NET INCREASE............................................................................. 28,024,584
Net increase from transactions in shares of beneficial interest............................... 546,786,621
------------
NET INCREASE............................................................................. 574,811,205
NET ASSETS:
Beginning of period........................................................................... 100,000
------------
END OF PERIOD
(INCLUDING A NET INVESTMENT LOSS OF $646,146)............................................. $574,911,205
============
</TABLE>
- ---------------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter International Fund (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is
long-term capital growth. The Fund seeks to achieve its objective by investing,
under normal circumstances, at least 65% of its total assets in a diversified
portfolio of international common stocks and other equity securities. The Fund
was organized as a Massachusetts business trust on October 23, 1998 and had no
operations other than those relating to organizational matters and issuance of
2,500 shares of beneficial interest by each class for $25,000 to Morgan Stanley
Dean Witter Advisors Inc. ("Investment Manager") to effect the Fund's initial
capitalization. The Fund commenced operations June 28, 1999.
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 (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); (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 Morgan Stanley Dean Witter Investment
Management Inc. (the "Sub-Advisor") 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
57
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, CONTINUED
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 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
except for certain dividends on foreign securities which are recorded as soon as
the fund is informed after the ex-dividend date. Discounts are accreted over the
respective life of the 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. FUTURES CONTRACTS -- A futures contract is an agreement between two parties
to buy and sell financial instruments at a set price on a future date. Upon
entering into such a contract, the Fund is required to pledge to the broker
cash, U.S. Government securities or other liquid portfolio securities equal to
the minimum initial margin requirements of the applicable futures exchange.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract
which is known as variation margin. Such receipts or payments are recorded by
the Fund as unrealized gains or losses. Upon closing of the contract, the Fund
realizes a gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
E. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward foreign currency
contracts are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the
exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses
58
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, CONTINUED
are included in the Statement of Operations as realized and unrealized gain/loss
on foreign exchange transactions. Pursuant to U.S. Federal income tax
regulations, certain foreign exchange gains/losses included in realized and
unrealized gain/loss are included in or are a reduction of ordinary income for
federal income tax purposes. The Fund does not isolate that portion of the
results of operations arising as a result of changes in the foreign exchange
rates from the changes in the market prices of the securities.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate exchange
rates. The resultant unrealized exchange gains and losses are included in the
Statement of Operations as unrealized gain/loss on foreign exchange
transactions. The Fund records realized gains or losses on delivery of the
currency or at the time the forward contract is extinguished (compensated) by
entering into a closing transaction prior to delivery.
G. 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.
H. 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.
I. OFFERING COSTS -- The Investment Manager incurred offering costs on behalf
of the Fund in the amount of approximately $153,000, which was reimbursed for
the full amount thereof. Such expenses were deferred and are being amortized by
the Fund on the straight-line method over a period of approximately one year or
less from the commencement of operations.
59
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS OCTOBER 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 1.00% 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 and
Sub-Advisor. 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 literature and advertising
materials. In addition,
60
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, CONTINUED
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, Sub-Advisor 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 $21,671,679 at October 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 October 31, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the period ended October 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 $1,100,
$235,698, and $29,401, respectively and received $103,705 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 October 31, 1999 aggregated
$526,302,337 and $60,291,640 respectively.
61
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, CONTINUED
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager,
Sub-Advisor and Distributor, is the Fund's transfer agent. At October 31, 1999,
the Fund had transfer agent fees and expenses payable of approximately $43,500.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 28, 1999*
THROUGH
OCTOBER 31, 1999
---------------------------
SHARES AMOUNT
----------- --------------
<S> <C> <C>
CLASS A
Sold............................................................. 5,501,684 $ 55,679,553
Redeemed......................................................... (1,862,419) (19,164,117)
---------- -------------
Net increase - Class A........................................... 3,639,265 36,515,436
---------- -------------
CLASS B
Sold............................................................. 46,196,462 464,151,607
Redeemed......................................................... (2,083,935) (21,345,154)
---------- -------------
Net increase - Class B........................................... 44,112,527 442,806,453
---------- -------------
CLASS C
Sold............................................................. 7,186,009 72,115,535
Redeemed......................................................... (569,093) (5,816,388)
---------- -------------
Net increase - Class C........................................... 6,616,916 66,299,147
---------- -------------
CLASS D
Sold............................................................. 1,075,888 11,093,524
Redeemed......................................................... (952,059) (9,927,939)
---------- -------------
Net increase - Class D........................................... 123,829 1,165,585
---------- -------------
Net increase in Fund............................................. 54,492,537 $ 546,786,621
========== =============
</TABLE>
- ---------------------
* Commencement of operations.
6. FEDERAL INCOME TAX STATUS
As of October 31, 1999, the Fund had temporary book/tax differences primarily
attributable to the mark-to-market of passive foreign investment companies
("PFICs") and open forward foreign currency exchange contracts and capital loss
deferrals on wash sales and permanent book/tax differences primarily
attributable to foreign currency losses, a net operating loss and nondeductible
expenses. To reflect reclassifications arising from the permanent differences,
paid-in-capital was charged $2,208,683, net realized loss was credited
$2,167,577 and net investment loss was credited $41,106.
62
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, CONTINUED
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage foreign currency exposure associated with foreign currency
denominated securities. The Fund may also purchase and sell interest rate,
currency and index futures contracts ("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.
Forward contracts and futures contracts involve elements of market risk in
excess of the amounts reflected in the Statement of Assets and Liabilities. The
Fund bears the risk of an unfavorable change in the foreign exchange rates
underlying the forward contracts or an unfavorable change in the value of the
underlying securities. Risks may also arise upon entering into these contracts
from the potential inability of the counterparties to meet the terms of their
contracts.
At October 31, 1999, there were outstanding forward contracts used to manage
foreign currency exposure and outstanding index futures.
63
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 28, 1999*
THROUGH OCTOBER 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 (0.02) (0.02) 0.01
Net realized and unrealized gain.......................... 0.56 0.57 0.57 0.57
------- -------- ------- ------
Total income from investment operations...................... 0.57 0.55 0.55 0.58
------- -------- ------- ------
Net asset value, end of period............................... $ 10.57 $ 10.55 $ 10.55 $10.58
======= ======== ======= ======
TOTAL RETURN + (1)........................................... 5.70% 5.50% 5.50% 5.80%
RATIOS TO AVERAGE NET ASSETS (2) (3):
Expenses..................................................... 1.81% 2.56% 2.56% 1.56%
Net investment income........................................ 0.31% (0.44)% (0.44)% 0.56%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands...................... $38,506 $465,258 $69,811 $1,336
Portfolio turnover rate (1).................................. 14% 14% 14% 14%
</TABLE>
- ---------------------
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER INTERNATIONAL 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
International Fund (the "Fund") at October 31, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
period June 28, 1999 (commencement of operations) through October 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 October 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
DECEMBER 17, 1999
65
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
PART C OTHER INFORMATION
ITEM 23. EXHIBITS
- -------- -----------------------------------------------------------------
1. Declaration of Trust of the Registrant, dated October 23, 1998,
is incorporated by reference to Exhibit 1 of the Initial
Registration Statement on Form N-1A, filed on October 27, 1998.
2. Amended and Restated By-Laws of the Registrant, dated May 1,
1999, is incorporated by reference to Exhibit 2 of Pre-Effective
Amendment No. 2 to the Registration Statement on Form N-1A, filed
on May 5, 1999.
3. Not Applicable.
4(a). Investment Management Agreement between the Registrant and Morgan
Stanley Dean Witter Advisors Inc., dated May 4, 1999, is
incorporated by reference to Exhibit 4(a) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed
on March 15, 1999.
4(b). Sub-Advisory Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Investment
Management Inc., dated May 4, 1999, is incorporated by reference
to Exhibit 4(b) of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on March 15, 1999.
5(a). Amended Distribution Agreement, dated June 22, 1998, is
incorporated by reference to Exhibit 5(b) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed
on March 15, 1999.
5(b). Omnibus Selected Dealer Agreement between Morgan Stanley Dean
Witter Distributors Inc. and National Financial Services
Corporation, dated October 17, 1998, is incorporated by reference
to Exhibit 5 of Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A, filed on May 5, 1999.
5(c). Selected Dealers Agreement between Morgan Stanley Dean Witter
Distributors Inc. and Dean Witter Reynolds Inc., dated May 4,
1999, filed herein.
6. Not Applicable.
7. Custody Agreement between The Chase Manhattan Bank and the
Registrant is incorporated by reference to Exhibit 7 of
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on March 15, 1999.
8(a). Amended and Restated Transfer Agency and Service Agreement is
incorporated by reference to Exhibit 8(a) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed
on March 15, 1999.
8(b). Amended Services Agreement, dated June 22, 1998, is incorporated
by reference to Exhibit 8(b) of Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A, filed on March 15, 1999.
1
<PAGE>
9(a). Opinion of Barry Fink, Esq., dated March 15, 1999, is
incorporated by reference to Exhibit 9(a) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed
on March 15, 1999.
9(b). Opinion of Lane Altman & Owens LLP, dated March 12, 1999, is
incorporated by reference to Exhibit 9(b) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed
on March 15, 1999.
10. Consent of Independent Accountants, filed herein.
11. Not Applicable.
12. Not Applicable.
13. Plan of Distribution pursuant to Rule 12b-1, dated May 4,
1999, is incorporated by reference to Exhibit 13 of
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on March 15, 1999.
14. Amended Multi-Class Plan pursuant to Rule 18f-3, dated June
22, 1998, is incorporated by reference to Exhibit 15 of
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on March 15, 1999.
Other Powers of Attorney are incorporated by reference to Exhibit
(Other(a)) of Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A, filed on March 15, 1999.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
None
Item 25. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and
under Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was not
unlawful. In addition, indemnification is permitted only if it is determined
that the actions in question did not render them liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be indemnified for the
expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
2
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such trustee,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company Act
of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such Act
remains in effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment advisor. The following information is given regarding
officers of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW
Advisors is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
Closed-End Investment Companies
- -------------------------------
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
3
<PAGE>
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities
Open-end Investment Companies
- -----------------------------
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter 21st Century Trend Fund
(6) Morgan Stanley Dean Witter Aggressive Equity Fund
(7) Morgan Stanley Dean Witter American Opportunities Fund
(8) Morgan Stanley Dean Witter Balanced Growth Fund
(9) Morgan Stanley Dean Witter Balanced Income Fund
(10) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(11) Morgan Stanley Dean Witter California Tax-Free Income Fund
(12) Morgan Stanley Dean Witter Capital Growth Securities
(13) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(14) Morgan Stanley Dean Witter Convertible Securities Trust
(15) Morgan Stanley Dean Witter Developing Growth Securities Trust
(16) Morgan Stanley Dean Witter Diversified Income Trust
(17) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(18) Morgan Stanley Dean Witter Equity Fund
(19) Morgan Stanley Dean Witter European Growth Fund Inc.
(20) Morgan Stanley Dean Witter Federal Securities Trust
(21) Morgan Stanley Dean Witter Financial Services Trust
(22) Morgan Stanley Dean Witter Fund of Funds
(23) Morgan Stanley Dean Witter Global Dividend Growth Securities
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter International Fund
(33) Morgan Stanley Dean Witter International SmallCap Fund
(34) Morgan Stanley Dean Witter Japan Fund
(35) Morgan Stanley Dean Witter Latin American Growth Fund
(36) Morgan Stanley Dean Witter Limited Term Municipal Trust
(37) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
4
<PAGE>
(38) Morgan Stanley Dean Witter Market Leader Trust
(39) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(40) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(41) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(42) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(43) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(44) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(45) Morgan Stanley Dean Witter Next Generation Trust
(46) Morgan Stanley Dean Witter North American Government Income Trust
(47) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(48) Morgan Stanley Dean Witter Real Estate Fund
(49) Morgan Stanley Dean Witter S&P 500 Index Fund
(50) Morgan Stanley Dean Witter S&P 500 Select Fund
(51) Morgan Stanley Dean Witter Select Dimensions Investment Series
(52) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(53) Morgan Stanley Dean Witter Short-Term Bond Fund
(54) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(55) Morgan Stanley Dean Witter Small Cap Growth Fund
(56) Morgan Stanley Dean Witter Special Value Fund
(57) Morgan Stanley Dean Witter Strategist Fund
(58) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(59) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(60) Morgan Stanley Dean Witter Total Market Index Fund
(61) Morgan Stanley Dean Witter Total Return Trust
(62) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(63) Morgan Stanley Dean Witter U.S. Government Securities Trust
(64) Morgan Stanley Dean Witter Utilities Fund
(65) Morgan Stanley Dean Witter Value-Added Market Series
(66) Morgan Stanley Dean Witter Value Fund
(67) Morgan Stanley Dean Witter Variable Investment Series
(68) Morgan Stanley Dean Witter World Wide Income Trust
5
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ----------------------------------------------------------
<S> <C>
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and Director
Director of Morgan Stanley Dean Witter Distributors Inc. ("MSDW
Distributors") and Morgan Stanley Dean Witter Trust FSB
("MSDW Trust"); President, Chief Executive Officer and
Director of Morgan Stanley Dean Witter Services Company
Inc. ("MSDW Services"); President of the Morgan Stanley
Dean Witter Funds; Executive Vice President and Director
of Dean Witter Reynolds Inc. ("DWR"); Director of various
MSDW subsidiaries; Trustee of various Van Kampen investment
companies.
Barry Fink Assistant Secretary of DWR; Executive Vice President,
Executive Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Executive Vice President, Assistant Secretary
and Counsel and Director Assistant General Counsel of MSDW Distributors; Vice
President, Secretary and General Counsel of the Morgan Stanley
Dean Witter Funds.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds;
Executive Vice President Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison President MSDW Trust; Executive Vice President, Chief
Executive Vice President, Administrative Officer and Director of MSDW Services;
Chief Administrative Vice President of the Morgan Stanley Dean Witter Funds.
Officer and Director
Edward C. Oelsner, III
Executive Vice President
Joseph R. Arcieri Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the High
Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Douglas Brown
Senior Vice President
6
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ----------------------------------------------------------
<S> <C>
Rosalie Clough
Senior Vice President
and Director of Marketing
Richard Felegy
Senior Vice President
Sheila A. Finnerty Vice President of Morgan Stanley Dean Witter Prime
Senior Vice President Income Trust.
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW Trust;
Vice President of the Morgan Stanley Dean Witter Funds.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President, Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative Officer -
Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of Sector
Rotation
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Money
Market Group
Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
7
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ----------------------------------------------------------
<S> <C>
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
James Solloway
Senior Vice President
Katherine H. Stromberg Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
and Income Group
Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication
James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the
Tax-Exempt Fixed
Income Group
Raymond A. Basile
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and Accounting
Treasurer Officer of the Morgan Stanley Dean Witter Funds.
Thomas Chronert
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of MSDW Distributors and the Morgan Stanley
Dean Witter Funds.
8
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ----------------------------------------------------------
<S> <C>
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
Michael Interrante First Vice President and Controller of MSDW Services;
First Vice President Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Douglas J. Ketterer
First Vice President
Todd Lebo First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
Lou Anne D. McInnis First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of MSDW Distributors and
and Assistant Secretary the Morgan Stanley Dean Witter Funds.
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of MSDW Distributors and
and Assistant Secretary the Morgan Stanley Dean Witter Funds.
Carl F. Sadler
First Vice President
Ruth Rossi First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
James P. Wallin
First Vice President
Robert Abreu
Vice President
Dale Albright
Vice President
9
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ----------------------------------------------------------
<S> <C>
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Armon Bar-Tur Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Thomas A. Bergeron
Vice President
Philip Bernstein
Vice President
Dale Boettcher
Vice President
Michelina Calandrella
Vice President
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Liam Carroll
Vice President
Philip Casparius
Vice President
Annette Celenza
Vice President
Aaron Clark
Vice President
10
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ----------------------------------------------------------
<S> <C>
William Connerly
Vice President
Michael J. Davey
Vice President
David Dineen
Vice President
Glen H. Frey
Vice President
Jeffrey D. Geffen
Vice President
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity-Burke
Vice President
Peter Gewirtz
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Trey Hancock
Vice President
Laury A. Haskamp
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
11
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ----------------------------------------------------------
<S> <C>
David T. Hoffman
Vice President
Thomas G. Hudson II
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Carol Espejo-Kane
Vice President
Nancy Karole-Kennedy
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Cameron J. Livingstone
Vice President
Nancy Login
Vice President
Sharon Loguercio
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter R. McDowell
Vice President
Albert McGarity
Vice President
12
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ----------------------------------------------------------
<S> <C>
Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P 500
Vice President Select Fund.
Mark Mitchell
Vice President
Julie Morrone Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Hilary A. O'Neill
Vice President
Anne Pickrell
Vice President
Frances Roman
Vice President
Dawn Rorke
Vice President
John Roscoe Vice President of Morgan Stanley Dean Witter
Vice President Real Estate Fund.
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Sally Sancimino
Vice President
Deborah Santaniello
Vice President
13
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ----------------------------------------------------------
<S> <C>
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.
Alison M. Sharkey
Vice President
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Ronald B. Silvestri
Vice President
Robert Stearns
Vice President
Naomi Stein
Vice President
Michael Strayhorn
Vice President
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Robert Vanden Assem
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
</TABLE>
The principal address of MSDW Advisors, MSDW Services, MSDW Distributors,
DWR, and the Morgan Stanley Dean Witter Funds is Two World Trade Center, New
York, New York 10048. The principal address of MSDW is 1585 Broadway, New York,
New York 10036. The principal address of MSDW Trust is 2 Harborside Financial
Center, Jersey City, New Jersey 07311.
14
<PAGE>
Item 27. PRINCIPAL UNDERWRITERS
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter 21st Century Trend Fund
(6) Morgan Stanley Dean Witter Aggressive Equity Fund
(7) Morgan Stanley Dean Witter American Opportunities Fund
(8) Morgan Stanley Dean Witter Balanced Growth Fund
(9) Morgan Stanley Dean Witter Balanced Income Fund
(10) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(11) Morgan Stanley Dean Witter California Tax-Free Income Fund
(12) Morgan Stanley Dean Witter Capital Growth Securities
(13) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(14) Morgan Stanley Dean Witter Convertible Securities Trust
(15) Morgan Stanley Dean Witter Developing Growth Securities Trust
(16) Morgan Stanley Dean Witter Diversified Income Trust
(17) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(18) Morgan Stanley Dean Witter Equity Fund
(19) Morgan Stanley Dean Witter European Growth Fund Inc.
(20) Morgan Stanley Dean Witter Federal Securities Trust
(21) Morgan Stanley Dean Witter Financial Services Trust
(22) Morgan Stanley Dean Witter Fund of Funds
(23) Morgan Stanley Dean Witter Global Dividend Growth Securities
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter International Fund
(33) Morgan Stanley Dean Witter International SmallCap Fund
(34) Morgan Stanley Dean Witter Japan Fund
(35) Morgan Stanley Dean Witter Latin American Growth Fund
(36) Morgan Stanley Dean Witter Limited Term Municipal Trust
(37) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(38) Morgan Stanley Dean Witter Market Leader Trust
(39) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(40) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(41) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(42) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(43) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(44) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(45) Morgan Stanley Dean Witter Next Generation Trust
15
<PAGE>
(46) Morgan Stanley Dean Witter North American Government Income Trust
(47) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(48) Morgan Stanley Dean Witter Prime Income Trust
(49) Morgan Stanley Dean Witter Real Estate Fund
(50) Morgan Stanley Dean Witter S&P 500 Index Fund
(51) Morgan Stanley Dean Witter S&P 500 Select Fund
(52) Morgan Stanley Dean Witter Short-Term Bond Fund
(53) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(54) Morgan Stanley Dean Witter Small Cap Growth Fund
(55) Morgan Stanley Dean Witter Special Value Fund
(56) Morgan Stanley Dean Witter Strategist Fund
(57) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(58) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(59) Morgan Stanley Dean Witter Total Market Index Fund
(60) Morgan Stanley Dean Witter Total Return Trust
(61) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(62) Morgan Stanley Dean Witter U.S. Government Securities Trust
(63) Morgan Stanley Dean Witter Utilities Fund
(64) Morgan Stanley Dean Witter Value-Added Market Series
(65) Morgan Stanley Dean Witter Value Fund
(66) Morgan Stanley Dean Witter Variable Investment Series
(67) Morgan Stanley Dean Witter World Wide Income Trust
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than Mr.
Purcell, who is a Trustee of the Registrant, none of the following persons has
any position or office with the Registrant.
Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
Michael T. Gregg Vice President and Assistant Secretary.
James F. Higgins Director
Philip J. Purcell Director
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
Item 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 29. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service contract.
16
<PAGE>
Item 30. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 31st day of January, 2000.
MORGAN STANLEY DEAN WITTER
INTERNATIONAL FUND
By: /s/ Barry Fink
---------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer Chairman, Chief Executive Officer
and Trustee
By: /s/ Charles A. Fiumefreddo 1/31/00
-----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By: /s/ Thomas F. Caloia 1/31/00
-----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By: /s/ Barry Fink 1/31/00
-----------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder
By: /s/ David M. Butowsky 1/31/00
-----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
EXHIBIT INDEX
5(c). Selected Dealers Agreement between Morgan Stanley
Dean Witter Distributors Inc. and Dean Witter Reynolds
Inc.
10. Consent of Independent Accountants.
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND
SELECTED DEALERS AGREEMENT
Gentlemen:
Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") has a
distribution agreement (the "Distribution Agreement") with Morgan Stanley Dean
Witter International Fund, a Massachusetts business trust (the "Fund"), pursuant
to which it acts as the Distributor for the sale of the Fund's shares of common
stock, par value $0.01 per share (the "Shares"). Under the Distribution
Agreement, the Distributor has the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended. You have
received a copy of the Distribution Agreement between us and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms used herein, including "Prospectus" and "Registration Statement" of
the Fund and "Selected Dealer" shall have the same meaning in this Agreement as
in the Distribution Agreement. As principal, we offer to sell shares to you, as
a Selected Dealer, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act as dealer for your
own account, and in no transaction shall you have any authority to act as agent
for the Fund, for us or for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time to
you. All orders are subject to acceptance or rejection by the Distributor or
the Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values and
subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares except
under circumstances that will result in compliance with the applicable Federal
and state securities laws and that in connection with sales and offers to sell
Shares you will furnish to each person to whom any such sale or offer is made a
copy of the Prospectus (as then amended or supplemented) and will not furnish to
any person any information relating to the Shares, which is inconsistent in any
respect with the information contained in the Prospectus (as then amended or
supplemented) or cause any advertisement to be published by radio or television
or in any newspaper or posted in any public place or use any sales promotional
material without our consent and the consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund and
personal services to Fund shareholders by paying you a sales charge and/or other
commissions, which may be in the form of a gross sales credit and/or an annual
residual commission) and/or a service fee, under the terms and in the percentage
amounts as may be in effect from time to time by the Distributor.
5. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding; e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
6. If any Shares sold to you under the terms of this Agreement are
repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and refund
to us, any commission received by you with respect to such Shares.
7. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in such
printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus. In purchasing Shares through us you shall rely
solely on the representations contained in the Prospectus and supplemental
information above mentioned. Any printed information which we furnish you other
than the Prospectus and the Fund's periodic reports and proxy solicitation
material are our sole responsibility and not the responsibility of the Fund, and
you agree that the Fund shall have no liability or responsibility to you in
these respects unless expressly assumed in connection therewith.
1
<PAGE>
8. You agree to deliver to each of the purchasers from you a copy of the
then current Prospectus at or prior to the time of offering or sale and you
agree thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus, annual or interim reports and proxy solicitation materials of the
Fund will be supplied to you in reasonable quantities upon request.
9. You are hereby authorized (i) to place orders directly with the Fund or
its agent for shares of the Fund to be sold by us subject to the applicable
terms and conditions governing the placement of orders for the purchase of Fund
shares, as set forth in the Distribution Agreement, and (ii) to tender shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in the Distribution Agreement.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us herein. Nothing
contained in this paragraph is intended to operate as, and the provisions of
this paragraph shall not in any way whatsoever constitute, a waiver by you of
compliance with any provision of the Securities Act of 1933, as amended, or of
the rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. All communications to us should be sent to the address shown below.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
15. This Agreement shall become effective as of the date of your acceptance
hereof, provided that you return to us promptly a signed and dated copy.
MORGAN STANLEY DEAN WITTER
DISTRIBUTORS INC.
By /s/ Robert S. Giambrone
---------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
Morgan Stanley Dean Witter
Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: Dean Witter Reynolds Inc.
-------------------------------
By: /s/ Mitchell M. Merin
-------------------------------
Address: 2 World Trade Center
-------------------------------
New York, NY 10048
-------------------------------
Date: May 4, 1999
-------------------------------
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-1A of
our report dated December 17, 1999, relating to the financial statements and
financial highlights of Morgan Stanley Dean Witter International Fund, which
appears in such Registration Statement. We also consent to the references to
us under the headings "Custodian and Independent Accountants" and "Experts"
in such Registration Statement.
/s/ PRICEWATERHOUSE COOPERS LLP
- -------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
January 26, 2000
