<PAGE>
Filed Pursuant to Rule 497(b)
Registration File No.:333-31602
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
OHIO SERIES
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(800) 869-NEWS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 2000
TO THE SHAREHOLDERS OF THE OHIO SERIES, A SERIES OF MORGAN STANLEY DEAN
WITTER MULTI-STATE MUNICIPAL SERIES TRUST:
Notice is hereby given of a Special Meeting of the Shareholders of the
Ohio Series ("Ohio Series"), a portfolio of Morgan Stanley Dean Witter
Multi-State Municipal Series Trust ("Multi-State"), to be held in Conference
Room A, Forty-Fourth Floor, Two World Trade Center, New York, New York 10048,
at 10:00 A.M., New York time, on June 22, 2000, and any adjournments thereof
(the "Meeting"), for the following purposes:
1. To consider and vote upon an Agreement and Plan of Reorganization, dated
January 26, 2000 (the "Reorganization Agreement"), between Multi-State, on
behalf of Ohio Series, and Morgan Stanley Dean Witter Tax-Exempt
Securities Trust ("Tax-Exempt"), pursuant to which substantially all of
the assets of Ohio Series would be combined with those of Tax-Exempt and
shareholders of Ohio Series would become shareholders of Tax-Exempt
receiving Class D shares of Tax-Exempt with a value equal to the value of
their holdings in Ohio Series (the "Reorganization"); and
2. To act upon such other matters as may properly come before the Meeting.
The Reorganization is more fully described in the accompanying Proxy
Statement and Prospectus and a copy of the Reorganization Agreement is
attached as Exhibit A thereto. Shareholders of record at the close of
business on March 17, 2000 are entitled to notice of, and to vote at, the
Meeting. Please read the Proxy Statement and Prospectus carefully before
telling us, through your proxy or in person, how you wish your shares to be
voted. Alternatively, if you are eligible to vote telephonically by touchtone
telephone or electronically on the Internet (as discussed in the enclosed
Proxy Statement) you may do so in lieu of attending the Meeting in person.
THE BOARD OF TRUSTEES OF MULTI-STATE RECOMMENDS YOU VOTE IN FAVOR OF THE
REORGANIZATION. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY.
By Order of the Board of Trustees,
BARRY FINK,
Secretary
April 7, 2000
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO
ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE
TO BE PRESENT IN PERSON, PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY
IN ORDER THAT THE NECESSARY QUORUM BE REPRESENTED AT THE MEETING. THE
ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. AS
DISCUSSED IN THE ENCLOSED PROXY STATEMENT, CERTAIN SHAREHOLDERS WILL BE ABLE
TO VOTE TELEPHONICALLY BY TOUCHTONE TELEPHONE OR ELECTRONICALLY ON THE
INTERNET BY FOLLOWING INSTRUCTIONS ON THEIR PROXY CARDS OR ON THE ENCLOSED
VOTING INFORMATION CARD.
<PAGE>
MORGAN STANLEY DEAN WITTER
TAX-EXEMPT SECURITIES TRUST
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
(800) 869-NEWS
ACQUISITION OF THE ASSETS OF
THE OHIO SERIES, A SERIES OF
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
BY AND IN EXCHANGE FOR CLASS D SHARES OF
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
This Proxy Statement and Prospectus is being furnished to shareholders of
the Ohio Series ("Ohio Series"), a portfolio of Morgan Stanley Dean Witter
Multi-State Municipal Series Trust ("Multi-State"), in connection with an
Agreement and Plan of Reorganization, dated January 26, 2000 (the
"Reorganization Agreement"), pursuant to which substantially all the assets
of Ohio Series will be combined with those of Morgan Stanley Dean Witter
Tax-Exempt Securities Trust ("Tax-Exempt") in exchange for Class D shares of
Tax-Exempt (the "Reorganization"). As a result of this transaction,
shareholders of Ohio Series will become shareholders of Tax-Exempt and will
receive Class D shares of Tax-Exempt with a value equal to the value of their
holdings in Ohio Series. The terms and conditions of this transaction are
more fully described in this Proxy Statement and Prospectus and in the
Reorganization Agreement between Multi-State, on behalf of Ohio Series, and
Tax-Exempt, attached hereto as Exhibit A. The address of Ohio Series is that
of Tax-Exempt set forth above. This Proxy Statement also constitutes a
Prospectus of Tax-Exempt, which is dated April 3, 2000, filed by Tax-Exempt
with the Securities and Exchange Commission (the "Commission") as part of its
Registration Statement on Form N-14 (the "Registration Statement").
Tax-Exempt is an open-end diversified management investment company whose
investment objective is to provide a high level of current income exempt from
federal income tax consistent with preservation of capital. The fund seeks to
achieve its objective by investing at least 80% of its assets in securities
that pay interest exempt from federal income taxes.
This Proxy Statement and Prospectus sets forth concisely information about
Tax-Exempt that shareholders of Ohio Series should know before voting on the
Reorganization Agreement. A copy of the Prospectus for Tax-Exempt dated
February 24, 2000, is attached as Exhibit B and incorporated herein by
reference. Also enclosed and incorporated herein by reference is Tax-Exempt's
Annual Report for the fiscal year ended December 31, 1999. A Statement of
Additional Information relating to the Reorganization, described in this
Proxy Statement and Prospectus (the "Additional Statement"), dated April 3,
2000, has been filed with the Commission and is also incorporated herein by
reference. Also incorporated herein by reference are Multi-State's
Prospectus, dated February 25, 2000, and Annual Report for its fiscal year
ended November 30, 1999. Such documents are available without charge by
calling (800) 869-NEWS (TOLL FREE).
Investors are advised to read and retain this Proxy Statement and Prospectus
for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROXY STATEMENT AND PROSPECTUS IS DATED APRIL 3, 2000.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
INTRODUCTION ............................................................................... 1
General .................................................................................. 1
Record Date; Share Information ........................................................... 1
Proxies .................................................................................. 2
Expenses of Solicitation ................................................................. 2
Vote Required ............................................................................ 3
SYNOPSIS ................................................................................... 3
The Reorganization ....................................................................... 3
Fee Table ................................................................................ 4
Tax Consequences of the Reorganization ................................................... 6
Comparison of Ohio Series and Tax-Exempt.................................................. 6
PRINCIPAL RISK FACTORS ..................................................................... 8
THE REORGANIZATION ......................................................................... 9
The Proposal ............................................................................. 9
The Board's Consideration ................................................................ 9
The Reorganization Agreement ............................................................. 10
Tax Aspects of the Reorganization ........................................................ 12
Description of Shares .................................................................... 13
Capitalization Table (unaudited).......................................................... 13
Appraisal Rights ......................................................................... 13
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS ............................. 13
Investment Objectives and Policies ....................................................... 13
Investment Restrictions .................................................................. 14
ADDITIONAL INFORMATION ABOUT OHIO SERIES AND TAX-EXEMPT..................................... 15
General .................................................................................. 15
Financial Information .................................................................... 15
Management ............................................................................... 15
Description of Securities and Shareholder Inquiries ...................................... 15
Dividends, Distributions and Taxes ....................................................... 15
Purchases, Repurchases and Redemptions ................................................... 15
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ................................................ 16
FINANCIAL STATEMENTS AND EXPERTS ........................................................... 16
LEGAL MATTERS .............................................................................. 16
AVAILABLE INFORMATION ...................................................................... 16
OTHER BUSINESS ............................................................................. 17
Exhibit A -- Agreement and Plan of Reorganization, dated January 26, 2000, by and between
Multi-State, on behalf of Ohio Series, and Tax-Exempt ..................................... A-1
Exhibit B -- Prospectus of Tax-Exempt dated February 24, 2000 ................................ B-1
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
OHIO SERIES
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(800) 869-NEWS
PROXY STATEMENT AND PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 2000
INTRODUCTION
GENERAL
This Proxy Statement and Prospectus is being furnished to the shareholders
of the Ohio Series ("Ohio Series"), a portfolio of Morgan Stanley Dean Witter
Multi-State Municipal Series Trust ("Multi-State"), an open-end
non-diversified management investment company, in connection with the
solicitation by the Board of Trustees of Multi-State (the "Board") of proxies
to be used at the Special Meeting of Shareholders of Ohio Series to be held
in Conference Room A, Forty-Fourth Floor, Two World Trade Center, New York,
New York 10048 at 10:00 A.M., New York time, on June 22, 2000, and any
adjournments thereof (the "Meeting"). It is expected that the mailing of this
Proxy Statement and Prospectus will be made on or about April 12, 2000.
At the Meeting, Ohio Series shareholders ("Shareholders") will consider
and vote upon an Agreement and Plan of Reorganization, dated January 26, 2000
(the "Reorganization Agreement"), between Multi-State, on behalf of Ohio
Series, and Morgan Stanley Dean Witter Tax-Exempt Securities Trust
("Tax-Exempt") pursuant to which substantially all of the assets of Ohio
Series will be combined with those of Tax-Exempt in exchange for Class D
shares of Tax-Exempt. As a result of this transaction, Shareholders will
become shareholders of Tax-Exempt and will receive Class D shares of
Tax-Exempt equal to the value of their holdings in Ohio Series on the date of
such transaction (the "Reorganization"). The Class D shares to be issued by
Tax-Exempt pursuant to the Reorganization (the "Tax-Exempt Shares") will be
issued at net asset value without an initial sales charge. Further
information relating to Tax-Exempt is set forth herein and in Tax-Exempt's
current Prospectus, dated February 24, 2000 ("Tax-Exempt's Prospectus"),
attached to this Proxy Statement and Prospectus and incorporated herein by
reference.
The information concerning Ohio Series contained herein has been supplied
by Multi-State and the information concerning Tax-Exempt contained herein has
been supplied by Tax-Exempt.
RECORD DATE; SHARE INFORMATION
The Board has fixed the close of business on March 17, 2000 as the record
date (the "Record Date") for the determination of the Shareholders entitled
to notice of, and to vote at, the Meeting. As of the Record Date, there were
1,326,552.612 shares of Ohio Series issued and outstanding. Shareholders on
the Record Date are entitled to one vote per share on each matter submitted
to a vote at the Meeting. A majority of the outstanding shares entitled to
vote, represented in person or by proxy, will constitute a quorum at the
Meeting.
1
<PAGE>
No person was known to own of record or beneficially 5% or more of the
outstanding shares of Ohio Series as of the Record Date. As of the Record
Date, the trustees and officers of Multi-State, as a group, owned less than
1% of the outstanding shares of Ohio Series.
The following persons were known to own of record or beneficially 5% or
more of the outstanding shares of a Class of Tax-Exempt as of the Record
Date: Class A -- Morgan Stanley Dean Witter TR FSB, TTEE FBO Richard K. Allen
and Dorothy B. Allen Rev Trust Husband and Wife Share, P.O. Box 503, Jersey
City, NJ 07311 (6.1%); Howard C. Kauffmann & Suzanne M. Kauffmann JT TEN,
2724 Peachtree Road N.W., Atlanta, GA 30305-2978 (5.9%); Sylvia Corcoran and
Edward V. Corcoran JT TEN, 5355 Nautilus Drive, Cape Coral, FL 33904-5973
(5.6%); Robert T. Smylie, 2512 Metropolitan Drive, Trevose, PA 19053-6738
(5.6%); Sharon R. Frank, 338 Waycliffe North, Wayzata, MN 55391-1390 (5.5%).
Class C -- Danilo F. Piccinini & Lola Piccinini JT TEN, P.O. Box 5307, Incline
Vlg, NV 89450-5307 (6.0%). As of the Record Date, the trustees and officers
of Tax-Exempt, as a group, owned less than 1% of the outstanding shares of
Tax-Exempt.
PROXIES
The enclosed form of proxy, if properly executed and returned, will be
voted in accordance with the choice specified thereon. The proxy will be
voted in favor of the Reorganization Agreement unless a choice is indicated
to vote against or to abstain from voting on the Reorganization Agreement.
The Board knows of no business, other than that set forth in the Notice of
Special Meeting of Shareholders, to be presented for consideration at the
Meeting. However, the proxy confers discretionary authority upon the persons
named therein to vote as they determine on other business, not currently
contemplated, which may come before the Meeting. Abstentions and, if
applicable, broker "non-votes" will not count as votes in favor of the
Reorganization Agreement, and broker "non-votes" will not be deemed to be
present at the meeting for purposes of determining whether the Reorganization
Agreement has been approved. Broker "non-votes" are shares held in street
name for which the broker indicates that instructions have not been received
from the beneficial owners or other persons entitled to vote and for which
the broker does not have discretionary voting authority. If a Shareholder
executes and returns a proxy but fails to indicate how the votes should be
cast, the proxy will be voted in favor of the Reorganization Agreement. The
proxy may be revoked at any time prior to the voting thereof by: (i)
delivering written notice of revocation to the Secretary of Multi-State at
Two World Trade Center, New York, New York 10048; (ii) attending the Meeting
and voting in person; or (iii) completing and returning a new proxy (whether
by mail or, as discussed below, by touchtone telephone or the Internet) (if
returned and received in time to be voted). Attendance at the Meeting will
not in and of itself revoke a proxy.
In the event that the necessary quorum to transact business or the vote
required to approve or reject the Reorganization Agreement is not obtained at
the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of the holders of a
majority of shares of Ohio Series present in person or by proxy at the
Meeting. The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of the Reorganization
Agreement and will vote against any such adjournment those proxies required
to be voted against the Reorganization Agreement.
EXPENSES OF SOLICITATION
The expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement and Prospectus, are expected to approximate
$60,000, of which $30,000 will be borne by Morgan Stanley Dean Witter
Advisors Inc. ("MSDW Advisors" or the "Investment Manager") and $30,000 will
be borne by Ohio Series. Ohio Series and Tax-Exempt will bear all of their
respective other expenses associated with the Reorganization. In addition to
the solicitation of proxies by mail, proxies may be solicited by officers of
2
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Multi-State, and officers and regular employees of MSDW Advisors and Morgan
Stanley Dean Witter Trust FSB ("MSDW Trust"), an affiliate of MSDW Advisors,
personally or by mail, telephone, telegraph or otherwise, without
compensation therefor. Brokerage houses, banks and other fiduciaries may be
requested to forward soliciting material to the beneficial owners of shares
and to obtain authorization for the execution of proxies.
Shareholders whose shares are registered with MSDW Trust will be able to
vote their shares by touchtone telephone or by Internet by following the
instructions on the proxy card or on the Voting Information Card accompanying
this Proxy Statement and Prospectus. To vote by touchtone telephone,
Shareholders can call the toll-free number 1-800-690-6903. To vote by
Internet, Shareholders can access the websites www.msdwt.com or
www.proxyvote.com. Telephonic and Internet voting with MSDW Trust presently
are not available to Shareholders whose shares are held in street name.
In certain instances, MSDW Trust, an affiliate of MSDW Advisors, may call
Shareholders to ask if they would be willing to have their votes recorded by
telephone. The telephone voting procedure is designed to authenticate
Shareholders' identities, to allow Shareholders to authorize the voting of
their shares in accordance with their instructions and to confirm that their
instructions have been recorded properly. No recommendation will be made as
to how a Shareholder should vote on the Reorganization Agreement other than
to refer to the recommendation of the Board. Multi-State, on behalf of Ohio
Series, has been advised by counsel that these procedures are consistent with
the requirements of applicable law. Shareholders voting by telephone in this
manner will be asked for their social security number or other identifying
information and will be given an opportunity to authorize proxies to vote
their shares in accordance with their instructions. To ensure that the
Shareholders' instructions have been recorded correctly, they will receive a
confirmation of their instructions in the mail. A special toll-free number
set forth in the confirmation will be available in case the information
contained in the confirmation is incorrect. Although a Shareholder's vote may
be taken by telephone, each Shareholder will receive a copy of this Proxy
Statement and Prospectus and may vote by mail using the enclosed proxy card
or by touchtone telephone or the Internet as set forth above. The last proxy
vote received in time to be voted, whether by proxy card, touchtone telephone
or Internet, will be the vote that is counted and will revoke all previous
votes by the Shareholder.
VOTE REQUIRED
Approval of the Reorganization Agreement by the Shareholders requires the
affirmative vote of a majority (i.e., more than 50%) of the shares of Ohio
Series represented in person or by proxy and entitled to vote at the Meeting,
provided a quorum is present at the Meeting. If the Reorganization Agreement
is not approved by Shareholders, Ohio Series will continue in existence and
the Board will consider alternative actions.
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus. This
synopsis is only a summary and is qualified in its entirety by the more
detailed information contained or incorporated by reference in this Proxy
Statement and Prospectus and the Reorganization Agreement. Shareholders
should carefully review this Proxy Statement and Prospectus and
Reorganization Agreement in their entirety and, in particular, Tax-Exempt's
Prospectus, which is attached to this Proxy Statement and incorporated herein
by reference.
THE REORGANIZATION
The Reorganization Agreement provides for the transfer of substantially
all the assets of Ohio Series, subject to stated liabilities, to Tax-Exempt
in exchange for the Tax-Exempt Shares. The aggregate net asset value of the
Tax-Exempt Shares issued in the exchange will equal the aggregate value of
the net assets of Ohio Series received by Tax-Exempt. On or after the closing
date scheduled for the Reorganization (the "Closing
3
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Date"), Ohio Series will distribute the Tax-Exempt Shares received by Ohio
Series to Shareholders as of the Valuation Date (as defined below under "The
Reorganization Agreement") in complete liquidation of Ohio Series and Ohio
Series will thereafter be dissolved as a portfolio of Multi-State under
Massachusetts law. As a result of the Reorganization, each Shareholder will
receive that number of full and fractional Tax-Exempt Shares equal in value
to such Shareholder's pro rata interest in the net assets of Ohio Series
transferred to Tax-Exempt. Accordingly, as a result of the Reorganization,
each Shareholder of Ohio Series will become a holder of Class D shares of
Tax-Exempt. Shareholders holding their shares of Ohio Series in certificate
form will be asked to surrender their certificates in connection with the
Reorganization. Shareholders who do not surrender their certificates prior to
the Closing Date will still receive their shares of Tax-Exempt; however, such
Shareholders will not be able to redeem, transfer or exchange the Tax-Exempt
Shares received until the old certificates have been surrendered. The Board
has determined that the interests of Shareholders will not be diluted as a
result of the Reorganization.
FOR THE REASONS SET FORTH BELOW UNDER "THE REORGANIZATION --THE BOARD'S
CONSIDERATION," THE BOARD, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED
PERSONS" OF MULTI-STATE, ON BEHALF OF OHIO SERIES ("INDEPENDENT TRUSTEES"),
AS THAT TERM IS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(THE "1940 ACT"), HAS CONCLUDED THAT THE REORGANIZATION IS IN THE BEST
INTERESTS OF OHIO SERIES AND ITS SHAREHOLDERS AND RECOMMENDS APPROVAL OF THE
REORGANIZATION AGREEMENT.
FEE TABLE
Ohio Series and Tax-Exempt each pay expenses for management of their
assets, distribution of their shares and other services, and those expenses
are reflected in the net asset value per share of each fund. Class D shares
of Tax-Exempt do not pay distribution-related fees; however, the other three
Classes offered by Tax-Exempt pay fees for the distribution of their shares.
The following table briefly describes the fees and expenses that a
shareholder of Ohio Series and a Class D shareholder of Tax-Exempt may pay if
they buy and hold shares of each respective fund. These expenses are deducted
from each respective fund's assets and are based on expenses paid by Ohio
Series for its fiscal year ended November 30, 1999, and by Class D shares of
Tax-Exempt for its fiscal year ended December 31, 1999. The table also sets
forth pro forma fees for the surviving combined fund (Tax-Exempt) reflecting
what the fee schedule would have been on December 31, 1999, if the
Reorganization had been consummated twelve (12) months prior to that date and
assuming Class D fees and expenses.
Shareholder Fees
<TABLE>
<CAPTION>
PRO FORMA
OHIO TAX-EXEMPT COMBINED
SERIES (CLASS D) (CLASS D)
----------- -------------- -------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES
(AS A PERCENTAGE OF OFFERING PRICE) 4.0%(1) none none
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED
DIVIDENDS none none none
MAXIMUM CONTINGENT DEFERRED SALES CHARGE (LOAD) (AS A
PERCENTAGE OF THE LESSER OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PROCEEDS) none none none
REDEMPTION FEES none none none
EXCHANGE FEE none none none
</TABLE>
4
<PAGE>
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
<TABLE>
<CAPTION>
PRO FORMA
OHIO TAX-EXEMPT COMBINED
SERIES (CLASS D) (CLASS D)
---------- ------------ -----------
<S> <C> <C> <C>
MANAGEMENT FEES 0.35% 0.44% 0.44%
DISTRIBUTION AND SERVICE (12b-1) FEES 0.14%(2) none none
OTHER EXPENSES 0.32% 0.07% 0.07%
TOTAL ANNUAL FUND OPERATING EXPENSES 0.81% 0.51% 0.51%
</TABLE>
(1) Reduced for purchases of $25,000 and over.
(2) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1
fee payable by Ohio Series is characterized as a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD")
guidelines and are payments made for personal service and/or
maintenance of shareholder accounts.
EXAMPLE
To attempt to show the effect of these expenses on an investment over
time, the hypotheticals shown below have been created. The Example assumes
that an investor invests $10,000 in either Ohio Series or Class D shares of
Tax-Exempt or the new combined fund (Tax-Exempt), that the investment has a
5% return each year and that the operating expenses for each fund remain the
same (as set forth in the chart above). Although a shareholder's actual costs
may be higher or lower, the tables below show a shareholder's costs at the
end of each period based on these assumptions depending upon whether or not a
shareholder sold his shares at the end of each period.
If a Shareholder SOLD His Shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
Ohio Series.................... $479 $648 $831 $1,360
Tax-Exempt (Class D)........... $ 52 $164 $285 $ 640
Pro Forma Combined (Class D)... $ 52 $164 $285 $ 640
</TABLE>
If a Shareholder HELD His Shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
Ohio Series ................... $479 $648 $831 $1,360
Tax-Exempt (Class D)........... $ 52 $164 $285 $ 640
Pro Forma Combined (Class D)... $ 52 $164 $285 $ 640
</TABLE>
5
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The purpose of the foregoing fee table is to assist the investor or
shareholder in understanding the various costs and expenses that an investor
or shareholder in the fund will bear directly or indirectly. For a more
complete description of these costs and expenses, see "Comparison of Ohio
Series and Tax-Exempt -- Investment Management and Distribution Plan Fees,
Other Significant Fees, and Purchases, Exchanges and Redemptions" below.
TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to the Reorganization, Multi-State, on behalf of Ohio
Series, and Tax-Exempt, will receive an opinion of Mayer, Brown & Platt to
the effect that the Reorganization will constitute a tax-free reorganization
for federal income tax purposes, and that no gain or loss will be recognized
by Ohio Series or the shareholders of Ohio Series for federal income tax
purposes as a result of the transactions included in the Reorganization. For
further information about the tax consequences of the Reorganization, see
"The Reorganization -- Tax Aspects of the Reorganization" below.
COMPARISON OF OHIO SERIES AND TAX-EXEMPT
INVESTMENT OBJECTIVES AND POLICIES. Ohio Series and Tax-Exempt have
partially similar investment objectives. Both Ohio Series and Tax-Exempt seek
to provide a high level of current income exempt from federal income tax
consistent with the preservation of capital. However, Ohio Series also seeks,
as its investment objective, a high level of current income exempt from Ohio
state income taxes.
Tax-Exempt seeks to achieve its investment objective by investing at least
80% of its assets in securities that pay interest exempt from federal income
taxes. Ohio Series seeks to achieve its investment objective by investing at
least 80% of its assets in securities, the interest of which is exempt from
federal and Ohio state income taxes. Income dividend distributions of
Tax-Exempt, to the extent derived from municipal obligations, are normally
exempt from federal income taxes. Such income dividend distributions,
however, are normally not exempt from Ohio personal income taxes. Therefore,
shareholders of Ohio Series who become shareholders of Tax-Exempt generally
will be subject to Ohio personal income tax on dividend distributions
received on their Tax-Exempt Shares.
Other than as set forth above, the investment policies of Ohio Series and
Tax-Exempt are substantially similar; the principal differences between them
are described under "Comparison of Investment Objectives, Policies and
Restrictions" below.
INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. Ohio Series and
Tax-Exempt obtain management services from MSDW Advisors. With respect to
Ohio Series, the fund pays MSDW Advisors monthly compensation calculated
daily at an annual rate of 0.35% of the fund's average daily net assets. With
respect to Tax-Exempt, the fund pays MSDW Advisors monthly compensation
calculated daily by applying the following annual rates to the average daily
net assets of the fund: 0.50% of the portion of the daily net assets not
exceeding $500 million; 0.425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.375% of the portion
of the daily net assets exceeding $750 million but not exceeding $1 billion;
0.35% of the portion of the daily net assets exceeding $1 billion but not
exceeding $1.25 billion; and 0.325% of the portion of the daily net assets
exceeding $1.25 billion. Each class of shares of Tax-Exempt is subject to the
same management fee rates.
Multi-State has adopted a distribution plan ("Plan") pursuant to Rule
12b-1 under the 1940 Act whereby each series, including Ohio Series,
reimburses the Distributor and others for the expenses of certain activities
and services incurred by them in connection with the distribution of each
respective series' shares. Reimbursement for these expenses is made in
monthly payments by, in this case, Ohio Series, to the Distributor,
6
<PAGE>
which will in no event exceed amounts equal to payment at the annual rate of
0.15% of the average daily net assets of Ohio Series. There are no 12b-1 fees
applicable to Tax-Exempt's Class D shares. For further information relating
to the 12b-1 fees applicable to each class of Tax-Exempt shares, see the
section entitled "Share Class Arrangements" in Tax-Exempt's Prospectus,
attached hereto.
OTHER SIGNIFICANT FEES. Both Ohio Series and Tax-Exempt pay additional
fees in connection with their operations, including legal, auditing, transfer
agent, trustees fees and custodial fees. See "Synopsis -- Fee Table" above
for the percentage of average net assets represented by such "Other
Expenses."
PURCHASES, EXCHANGES AND REDEMPTIONS. Shares of Ohio Series are sold at
net asset value plus an initial sales charge of up to 4.0%. The initial sales
charge is reduced for certain purchases. Shares of Ohio Series may be
redeemed for cash without redemption or other charge at any time at the net
asset value per share next determined. Class D shares of Tax-Exempt are
currently offered at net asset value and such shares may be redeemed for cash
without redemption or other charge at the net asset value per share next
determined. Normally, Class D shares of Tax-Exempt are offered only to a
limited group of investors. Subsequent to the Reorganization, all Ohio Series
shares will be designated Class D shares of Tax-Exempt. However, additional
investments (except for reinvestment of distributions received on shares
acquired as a result of the Reorganization) in Class D shares of Tax-Exempt
(or in Class D shares of any other Morgan Stanley Dean Witter Fund) by
Shareholders holding such shares may only be made if those Shareholders are
otherwise eligible to purchase Class D shares. Class D shares acquired in the
Reorganization may, however, be exchanged for Class D shares of another
Morgan Stanley Dean Witter Fund pursuant to Class D's exchange privileges
discussed below.
Tax-Exempt offers four classes of shares (Class A, Class B, Class C and
Class D) which differ principally in terms of sales charges, distribution and
service fees and ongoing expenses. For further information relating to each
of the classes of Tax-Exempt's shares, see the section entitled "Share Class
Arrangements" in Tax-Exempt's Prospectus.
Shares of Ohio Series currently may be exchanged for shares of any other
Multi-State series, for Class A shares of any Morgan Stanley Dean Witter Fund
that offers its shares in more than one class, for shares of Morgan Stanley
Dean Witter Hawaii Municipal Trust, Morgan Stanley Dean Witter Short-Term
U.S. Treasury Trust, Morgan Stanley Dean Witter North American Government
Income Trust, Morgan Stanley Dean Witter Limited Term Municipal Trust, Morgan
Stanley Dean Witter Short-Term Bond Fund and for shares of the five Morgan
Stanley Dean Witter Funds that are money market funds. Class D shares of
Tax-Exempt may be exchanged for Class D shares of any other Morgan Stanley
Dean Witter Fund that offers its shares in more than one class, or any of
Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust, Morgan Stanley
Dean Witter North American Government Income Trust, Morgan Stanley Dean
Witter Limited Term Municipal Trust, Morgan Stanley Dean Witter Short-Term
Bond Fund and the five Morgan Stanley Dean Witter Funds that are money market
funds (the foregoing funds are collectively referred to as the "Exchange
Funds"), without the imposition of an exchange fee.
Both Ohio Series and Tax-Exempt provide telephone exchange privileges to
their shareholders. For greater details relating to exchange privileges
applicable to Tax-Exempt, see the section entitled "How to Exchange Shares"
in Tax-Exempt's Prospectus.
Both Ohio Series and Tax-Exempt may redeem involuntarily, at net asset
value, most accounts valued at less than $100. However, both funds offer a
reinstatement privilege whereby a shareholder who has not previously
exercised such privilege whose shares have been redeemed or repurchased may,
within thirty-five days after the date of redemption or repurchase, reinstate
any portion or all of the proceeds thereof in shares of the same class from
which such shares were redeemed or repurchased.
7
<PAGE>
DIVIDENDS. Ohio Series and Tax-Exempt each declare income dividends daily
and pay dividends from net investment income monthly. Both Ohio Series and
Tax-Exempt distribute net capital gains, if any, at least annually in
December. Each, however, may determine either to distribute or to retain all
or part of any net long-term capital gains in any year for reinvestment. With
respect to both Ohio Series and Tax-Exempt, dividends and capital gains
distributions are automatically reinvested in additional shares at net asset
value unless the shareholder elects to receive cash. As discussed above,
Tax-Exempt's income dividend distributions to shareholders are generally
exempt from federal income taxes, whereas Ohio Series' dividend distributions
are generally exempt from federal and Ohio state income taxes.
PRINCIPAL RISK FACTORS
The share price or net asset value of Tax-Exempt and Ohio Series will
fluctuate with changes in the market value of their respective portfolio
securities. The market value of the funds' portfolio securities will increase
or decrease due to a variety of economic, market and political factors,
including changes in prevailing interest rates, which cannot be predicted.
The principal risks of an investment in either Tax-Exempt or Ohio Series are
the risks associated with their respective fixed-income securities which
primarily consist of municipal obligations. Fixed income securities are
subject to two types of risks: credit risk and interest rate risk.
Credit risk refers to the possibility that the issuer of a security will
be unable or unwilling to make interest payments and/or repay the principal
on its debt. In the case of certain municipal obligations known as revenue
bonds, the credit risk refers to the possibility that the user fees from a
project or specified revenue source are insufficient to meet interest and/or
principal payment obligations or the credit impairment of the user. Ohio
Series is subject to the added credit risk of concentrating its investments
in a single state -Ohio. Because Ohio Series concentrates its investments in
securities issued by Ohio state and local governments and government
authorities, Ohio Series will be significantly affected by the political,
economic and regulatory developments concerning those issuers. Should any
difficulties develop concerning Ohio issuers' abilities to pay principal
and/or interest on their debt obligations, the value and yield of Ohio Series
could be adversely affected. Interest rate risk refers to fluctuations in the
value of a fixed-income security resulting from changes in the general level
of interest rates. When the general level of interest rates goes up, the
prices of most fixed-income securities go down. When the general level of
interest rates goes down, the prices of most fixed-income securities go up.
Unlike Tax-Exempt, Ohio Series is classified as "non-diversified" and, as
such, its investments are not required to meet certain diversification
requirements under federal law. Compared with "diversified" funds such as
Tax-Exempt, Ohio Series may invest a greater percentage of its assets in the
securities of an individual issuer. Thus, Ohio Series' assets may be
concentrated in fewer securities than Tax-Exempt. A decline in the value of
those investments may cause Ohio Series' overall value to decline to a
greater degree than Tax-Exempt.
Both Tax-Exempt and Ohio Series may invest a portion of their respective
assets in inverse floating rate municipal obligations which are obligations
that are typically created through a division of a fixed rate municipal
obligation into two separate instruments, a short-term obligation and a
long-term obligation. The interest rates on inverse floating rate municipal
obligations generally move in the reverse direction of market interest rates.
Inverse floating rate municipal obligations offer the potential for higher
income than is available from fixed rate obligations of comparable maturity
and credit rating but they also carry greater risks. In particular, the
prices of inverse floating rate municipal obligations are more volatile,
i.e., they increase and decrease in response to changes in interest rates to
a greater extent than comparable fixed rate obligations.
Both Tax-Exempt and Ohio Series may invest in municipal lease obligations
which are obligations issued by state and local agencies or authorities to
finance equipment and facilities. Certain lease obligations contain clauses
whereby future payments under the lease are dependent upon annual or periodic
legislative
8
<PAGE>
appropriations. If these legislative appropriations do not occur, holders of
such municipal lease obligations may experience difficulty exercising their
rights, including disposition of the property. Both Tax-Exempt and Ohio
Series may also invest in futures obligations which are considered
speculative in nature and involve certain risks.
The foregoing discussion is a summary of the principal risk factors. For a
more complete discussion of the risks of each fund, see "Principal Risks" and
"Additional Risk Information" in the Prospectus of Multi-State and in
Tax-Exempt's Prospectus attached hereto and incorporated herein by reference.
THE REORGANIZATION
THE PROPOSAL
The Board of Trustees of Multi-State, on behalf of Ohio Series, including
the Independent Trustees, having reviewed the financial position of Ohio
Series and the prospects for achieving economies of scale through the
Reorganization and having determined that the Reorganization is in the best
interests of Ohio Series and its Shareholders and that the interests of
Shareholders will not be diluted as a result thereof, recommends approval of
the Reorganization by Shareholders of Ohio Series.
THE BOARD'S CONSIDERATION
At a meeting held on January 26, 2000, the Board, including all of the
Independent Trustees, unanimously approved the Reorganization Agreement and
determined to recommend that Shareholders approve the Reorganization
Agreement. In reaching this decision, the Board made an extensive inquiry
into a number of factors, particularly the comparative expenses currently
incurred in the operations of Ohio Series and the Class D shares of
Tax-Exempt. The Board also considered other factors, including, but not
limited to: the shrinking asset base of Ohio Series which may affect the
long-term economic viability of the fund because of higher costs and
disadvantageous economies of scale (as of December 31, 1999, Ohio Series had
approximately $15.4 million in net assets compared to Tax-Exempt's $1 billion
in net assets); a comparison of the differences in the investment objectives,
policies, restrictions and portfolios of Ohio Series and Tax-Exempt
particularly, that Tax-Exempt seeks income exempt from federal income taxes,
whereas Ohio Series seeks income exempt from both federal and Ohio state
income taxes; the terms and conditions of the Reorganization which would
affect the price of shares to be issued in the Reorganization; the tax-free
nature of the Reorganization; and any direct or indirect costs to be incurred
by Ohio Series and Tax-Exempt in connection with the Reorganization.
In recommending the Reorganization to Shareholders, the Board of
Multi-State, on behalf of Ohio Series, considered that the Reorganization
would have the following benefits to Shareholders:
1. Once the Reorganization is consummated, the expenses which would be
borne by Class D shareholders of the "combined fund" are expected to be
significantly lower on a percentage basis than the expenses per share of Ohio
Series although the investment management fee of Tax-Exempt is higher than
the investment management fee of Ohio Series. The combined fund's expenses
would be lower in part because Class D shares of Tax-Exempt bear no 12b-1
fees, whereas Ohio Series pays a 12b-1 fee of up to 0.15% of its average net
assets. Furthermore, the estimated current rate of other expenses to be paid
by Class D of the surviving Tax-Exempt (0.07% of average daily net assets)
would be lower than the rate of other expenses currently paid by Ohio Series
(0.32% of average daily net assets). In addition, to the extent that the
Reorganization would result in Shareholders becoming shareholders of a
combined larger fund, further economies of scale could be achieved since
various fixed expenses (e.g., auditing and legal) can be spread over a larger
number of shares. The Board noted that the expense ratio for Ohio Series was
higher ( 0.81% for its fiscal year ended November 30, 1999) than the expense
ratio for Class D shares of Tax-Exempt (0.51% for its fiscal year ended
December 31, 1999).
9
<PAGE>
2. Shareholders would have the ability to exchange their Class D shares of
Tax-Exempt acquired as a result of the Reorganization into Class D shares of
any Morgan Stanley Dean Witter Multi-Class Fund. Currently, Shareholders may
only exchange into Class A shares of any Morgan Stanley Dean Witter
Multi-Class Fund. Class D shares bear lower expenses than Class A shares.
3. The Reorganization is intended to qualify as a tax-free reorganization
for federal income tax purposes, pursuant to which no gain or loss will be
recognized by Ohio Series or its Shareholders for Federal income tax purposes
as a result of transactions included in the Reorganization.
The Board of Trustees of Tax-Exempt, including a majority of the
Independent Trustees of Tax-Exempt, also have determined that the
Reorganization is in the best interests of Tax-Exempt and its shareholders
and that the interests of existing shareholders of Tax-Exempt will not be
diluted as a result thereof. The transaction will enable Tax-Exempt to
acquire investment securities which are consistent with Tax-Exempt's
investment objective, without the costs attendant to the purchase of such
securities in the market. Finally, the Board considered that even if the
benefits enumerated above are not realized, the costs to the Fund are
sufficiently minor to warrant taking the opportunity to realize those
benefits.
THE REORGANIZATION AGREEMENT
The terms and conditions under which the Reorganization would be
consummated, as summarized below, are set forth in the Reorganization
Agreement. This summary is qualified in its entirety by reference to the
Reorganization Agreement, a copy of which is attached as Exhibit A to this
Proxy Statement and Prospectus.
The Reorganization Agreement provides that (i) Ohio Series will transfer
all of its assets, including portfolio securities, cash (other than cash
amounts retained by Ohio Series as a "Cash Reserve" in the amount sufficient
to discharge its liabilities not discharged prior to the Valuation Date (as
defined below) and for expenses of the dissolution), cash equivalents and
receivables to Tax-Exempt on the Closing Date in exchange for the assumption
by Tax-Exempt of stated liabilities of Ohio Series, including all expenses,
costs, charges and reserves, as reflected on an unaudited statement of assets
and liabilities of Ohio Series prepared by the Treasurer of Multi-State, on
behalf of Ohio Series, as of the Valuation Date (as defined below) in
accordance with generally accepted accounting principles consistently applied
from the prior audited period, and the delivery of the Tax-Exempt Shares;
(ii) such Tax-Exempt Shares would be distributed to Shareholders on the
Closing Date or as soon as practicable thereafter; (iii) Ohio Series would be
dissolved; and (iv) the outstanding shares of Ohio Series would be canceled.
The number of Tax-Exempt Shares to be delivered to Ohio Series will be
determined by dividing the aggregate net asset value of the shares of Ohio
Series acquired by Tax-Exempt by the net asset value per share of the Class D
shares of Tax-Exempt; these values will be calculated as of the close of
business of the New York Stock Exchange on the third business day following
the receipt of the requisite approval by Shareholders of the Reorganization
Agreement or at such other time as Ohio Series and Tax-Exempt may agree (the
"Valuation Date"). As an illustration, assume that on the Valuation Date, the
shares of Ohio Series had an aggregate net asset value (not including any
Cash Reserve of Ohio Series) of $100,000. If the net asset value per Class D
share of Tax-Exempt were $10 per share at the close of business on the
Valuation Date, the number of Class D shares of Tax-Exempt to be issued would
be 10,000 ($100,000 / $10). These 10,000 Class D shares of of Tax-Exempt
would be distributed to the former shareholders of Ohio Series. This example
is given for illustration purposes only and does not bear any relationship to
the dollar amounts or shares expected to be involved in the Reorganization.
On the Closing Date or as soon as practicable thereafter, Ohio Series will
distribute pro rata to its Shareholders of record as of the close of business
on the Valuation Date, the Tax-Exempt Shares it receives.
10
<PAGE>
Each Shareholder will receive Class D shares of Tax-Exempt that corresponds
to the shares of Ohio Series currently held by that Shareholder. Tax-Exempt
will cause its transfer agent to credit and confirm an appropriate number of
Tax-Exempt Shares to each Shareholder. Certificates for Tax-Exempt Shares
will be issued only upon written request of a Shareholder and only for whole
shares, with fractional shares credited to the name of the Shareholder on the
books of Tax-Exempt. Shareholders who wish to receive certificates
representing their Tax-Exempt Shares must, after receipt of their
confirmations, make a written request to Tax-Exempt's transfer agent Morgan
Stanley Dean Witter Trust FSB, Harborside Financial Center, Jersey City, New
Jersey 07311. Shareholders of Ohio Series holding their shares in certificate
form will be asked to surrender such certificates in connection with the
Reorganization. Shareholders who do not surrender their certificates prior to
the Closing Date will still receive their shares of Tax-Exempt; however, such
Shareholders will not be able to redeem, transfer or exchange the Tax-Exempt
Shares received until the old certificates have been surrendered.
The Closing Date will be the next business day following the Valuation
Date. The consummation of the Reorganization is contingent upon the approval
of the Reorganization by the Shareholders and the receipt of the other
opinions and certificates set forth in Sections 6, 7 and 8 of the
Reorganization Agreement and the occurrence of the events described in those
Sections, certain of which may be waived by Ohio Series or Tax-Exempt. The
Reorganization Agreement may be amended in any mutually agreeable manner. All
expenses of this solicitation, including the cost of preparing and mailing
this Proxy Statement and Prospectus, will be borne, as set forth in this
Proxy Statement and Prospectus under "Expenses of Solicitation," by Ohio
Series and MSDW Advisors, which expenses are expected to approximate $60,000.
Ohio Series and Tax-Exempt will bear all of their respective other expenses
associated with the Reorganization.
The Reorganization Agreement may be terminated and the Reorganization
abandoned at any time, before or after approval by Shareholders or by mutual
consent of Multi-State, on behalf of Ohio Series, and Tax-Exempt. In
addition, either party may terminate the Reorganization Agreement upon the
occurrence of a material breach of the Reorganization Agreement by the other
party or if, by September 30, 2000, any condition set forth in the
Reorganization Agreement has not been fulfilled or waived by the party
entitled to its benefits.
Under the Reorganization Agreement, within one year after the Closing
Date, Multi-State, on behalf of Ohio Series, shall: either pay or make
provision for all of its liabilities and distribute any remaining amount of
the Cash Reserve (after paying or making provision for such liabilities and
the estimated cost of making the distribution) to former Shareholders of Ohio
Series that received Tax-Exempt Shares. Ohio Series shall be dissolved as a
portfolio of Multi-State under Massachusetts law promptly following the
distributions of shares of Tax-Exempt to Shareholders of record of Ohio
Series.
The effect of the Reorganization is that Shareholders who vote their
shares in favor of the Reorganization Agreement are electing to sell their
shares of Ohio Series (at net asset value on the Valuation Date calculated
after subtracting any Cash Reserve) and reinvest the proceeds in Tax-Exempt
Shares at net asset value and without recognition of taxable gain or loss for
Federal income tax purposes. See "Tax Aspects of the Reorganization" below.
As noted in "Tax Aspects of the Reorganization" below, if Ohio Series
recognizes net gain from the sale of securities prior to the Closing Date,
such gain, to the extent not offset by capital loss carryforwards, will be
distributed to Shareholders prior to the Closing Date and will be taxable to
Shareholders as capital gain.
Shareholders will continue to be able to redeem their shares of Ohio
Series at net asset value next determined after receipt of the redemption
request until the close of business on the business day next preceding the
Closing Date. Redemption requests received by Multi-State, on behalf of Ohio
Series, thereafter will be treated as requests for redemption of shares of
Tax-Exempt.
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<PAGE>
TAX ASPECTS OF THE REORGANIZATION
At least one but not more than 20 business days prior to the Valuation
Date, Ohio Series will declare and pay a dividend or dividends which,
together with all previous such dividends, will have the effect of
distributing to Shareholders all of Ohio Series' investment company taxable
income for all periods since the inception of Ohio Series through and
including the Valuation Date (computed without regard to any dividends paid
deduction), and all of Ohio Series' net capital gain, if any, realized in
such periods (after reduction for any capital loss carryforward).
The Reorganization is intended to qualify for Federal income tax purposes
as a tax-free reorganization under Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code").
As a condition to the Reorganization, Multi-State, on behalf of Ohio
Series, and Tax-Exempt will receive an opinion of Mayer, Brown & Platt to the
effect that, based on certain assumptions, facts, the terms of the
Reorganization Agreement and representations set forth in the Reorganization
Agreement or otherwise provided by Multi-State, on behalf of Ohio Series, and
Tax-Exempt (including a representation to the effect that Tax-Exempt has no
plan or intention to sell or otherwise dispose of more than fifty percent of
the assets of Ohio Series acquired in the Reorganization except for
dispositions made in the ordinary course of business):
1. The transfer of Ohio Series' assets in exchange for the Tax-Exempt
Shares and the assumption by Tax-Exempt of certain stated liabilities of Ohio
Series followed by the distribution by Ohio Series of the Tax-Exempt Shares
to Shareholders in exchange for their Ohio Series shares pursuant to and in
accordance with the terms of the Reorganization Agreement will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code, and
Ohio Series and Tax-Exempt will each be a "party to a reorganization" within
the meaning of Section 368(b) of the Code;
2. No gain or loss will be recognized by Tax-Exempt upon the receipt of
the assets of Ohio Series solely in exchange for the Tax-Exempt Shares and
the assumption by Tax-Exempt of the stated liabilities of Ohio Series;
3. No gain or loss will be recognized by Ohio Series upon the transfer of
the assets of Ohio Series to Tax-Exempt in exchange for the Tax-Exempt Shares
and the assumption by Tax-Exempt of the stated liabilities or upon the
distribution of Tax-Exempt Shares to Shareholders in exchange for their Ohio
Series shares;
4. No gain or loss will be recognized by Shareholders upon the exchange of
the shares of Ohio Series for the Tax-Exempt Shares;
5. The aggregate tax basis for the Tax-Exempt Shares received by each of
the Shareholders pursuant to the Reorganization will be the same as the
aggregate tax basis of the shares in Ohio Series held by each such
Shareholder immediately prior to the Reorganization;
6. The holding period of the Tax-Exempt Shares to be received by each
Shareholder will include the period during which the shares in Ohio Series
surrendered in exchange therefor were held (provided such shares in Ohio
Series were held as capital assets on the date of the Reorganization);
7. The tax basis of the assets of Ohio Series acquired by Tax-Exempt will
be the same as the tax basis of such assets of Ohio Series immediately prior
to the Reorganization; and
8. The holding period of the assets of Ohio Series in the hands of
Tax-Exempt will include the period during which those assets were held by
Ohio Series.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE EFFECT, IF
ANY, OF THE PROPOSED TRANSACTION IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
BECAUSE THE FOREGOING DISCUSSION ONLY RELATES TO THE FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED TRANSACTION, SHAREHOLDERS SHOULD ALSO CONSULT
THEIR TAX ADVISORS AS TO STATE AND LOCAL TAX CONSEQUENCES, IF ANY, OF THE
PROPOSED TRANSACTION.
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DESCRIPTION OF SHARES
Class D shares of Tax-Exempt to be issued pursuant to the Reorganization
Agreement will, when issued, be fully paid and non-assessable by Tax-Exempt
and transferable without restrictions and will have no preemptive rights. As
stated above, Class D shares of Tax-Exempt are not subject to any sales
charge on purchase or redemption or any 12b-1 fee.
CAPITALIZATION TABLE (UNAUDITED)
The following table sets forth the capitalization of Tax-Exempt and Ohio
Series as of January 31, 2000 and on a pro forma combined basis as if the
Reorganization had occurred on that date:
<TABLE>
<CAPTION>
NET ASSET
SHARES VALUE
NET ASSETS OUTSTANDING PER SHARE
-------------- ------------- -----------
<S> <C> <C> <C>
Ohio Series .................................... $ 15,265,391 1,517,050 $10.06
Tax-Exempt:
(Class A)...................................... $ 17,997,261 1,638,873 $10.98
(Class B)...................................... $ 137,547,537 12,473,473 $11.03
(Class C)...................................... $ 9,761,306 887,027 $11.00
(Class D)...................................... $ 834,614,583 76,058,734 $10.97
Total Tax-Exempt (Class A - D) ................. $ 999,920,687 -- --
------------- -----------
Combined Fund (pro forma)(Tax-Exempt after the
Reorganization)
(Class A)...................................... $ 17,997,261 1,638,873 $10.98
(Class B)...................................... $ 137,547,537 12,473,473 $11.03
(Class C)...................................... $ 9,761,306 887,027 $11.00
(Class D)...................................... $ 849,879,974 77,450,292 $10.97
Total Combined Fund (pro forma)(Class A - D) ... $1,015,186,078 -- --
------------- -----------
</TABLE>
APPRAISAL RIGHTS
Shareholders will have no appraisal rights in connection with the
Reorganization.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES AND POLICIES
Ohio Series and Tax-Exempt have partially similar investment objectives.
Ohio Series seeks to provide a high level of current income exempt from both
federal and Ohio state income taxes, consistent with preservation of capital.
Tax-Exempt seeks to provide a high level of current income exempt from
federal income tax consistent with preservation of capital.
Both Ohio Series and Tax-Exempt invest at least 80% of their respective
assets in securities that pay interest exempt from federal income taxes, and
with respect to Ohio Series, Ohio state income taxes, in accordance with
their respective investment objectives set forth above. Tax-Exempt invests at
least 75% of its assets in (i) municipal bonds rated within the three highest
grades by either Moody's Investors Service ("Moody's"), Standard & Poor's
Corporation ("S&P") or Fitch IBCA, Inc. ("Fitch"); (ii) municipal notes rated
within the two highest grades by Moody's, S&P or Fitch, or, if not rated,
have outstanding bonds within the three highest grades by Moody's, S&P or
Fitch; and (iii) municipal commercial paper rated within the highest
13
<PAGE>
grade by such organizations. By contrast, Ohio Series may invest any amount
of its assets in municipal bonds rated within the four highest rating
categories, and in municipal notes rated within the two highest rating
categories but, if unrated, they must have bonds outstanding rated within the
four highest categories. Like Tax-Exempt, Ohio Series may invest without
limitation in municipal notes rated within the highest rating category. In
addition, Tax-Exempt is permitted to invest up to 5% of its assets in
municipal obligations rated below investment grade, commonly known as "junk
bonds," whereas, Ohio Series may not invest in municipal obligations rated
below investment grade. Unrated securities may only be purchased by either
Ohio Series or Tax-Exempt if such securities are judged by the Investment
Manager to be of comparable quality to the rated securities described above.
Both Ohio Series and Tax-Exempt may invest up to 10% of their respective
assets in inverse floating rate municipal obligations. The interest rates on
these obligations generally move in the reverse direction of market interest
rates. If market interest rates fall, the interest rates on the obligations
will increase and if market interest rates increase, the interest rates on
the obligations will fall.
Both Ohio Series and Tax-Exempt may invest up to 20% of their respective
assets in taxable money market instruments. Ohio Series may invest up to 20%
of its assets in tax-exempt securities of other states and municipalities.
(Tax-Exempt may invest any amount of its assets in municipal obligations of
any state.)
Ohio Series may invest any amount of its assets in securities that pay
interest subject to the "alternative minimum tax" ("AMT") with the result
that some taxpayers may have to pay tax on income distributions from the Ohio
Series. Tax-Exempt may only invest up to 20% of its assets in securities
subject to the AMT unless the fund has adopted a temporary defensive posture
as set forth below.
Both Ohio Series and Tax-Exempt may take temporary "defensive" positions
that are inconsistent with each fund's principal investment strategies in
attempting to respond to adverse market conditions. In doing so, Ohio Series
may invest any amount of its assets in taxable money market securities or, in
the highest grade municipal obligations issued by states other than Ohio
where interest on such obligations would normally be exempt from federal
income tax but not from Ohio income tax. In addition, during such a defensive
posture, Tax-Exempt may also invest any amount of its assets in taxable
securities, or in tax-exempt securities subject to the AMT.
Both Ohio Series and Tax-Exempt may (i) purchase securities on a
when-issued or delayed delivery basis, (ii) purchase or sell securities on a
forward commitment basis, (iii) purchase variable and floating rate municipal
obligations, (iv) enter into repurchase agreements subject to certain
procedures designed to minimize risks associated with such agreements, (v)
purchase industrial revenue bonds, including lease obligations, and private
activity bonds, (vi) invest in zero coupon securities, (vii) lend their
portfolio securities and (viii) enter into options and futures transactions.
Additionally, Tax-Exempt may purchase securities on a when, as and if issued
basis.
The foregoing discussion is a summary of the principal differences and
similarities between the investment policies of the funds. For a more
complete discussion of each fund's policies, see "Principal Investment
Strategies" and "Additional Investment Strategy Information" in Tax-Exempt's
Prospectus and "Principal Investment Strategy" and "Additional Investment
Strategy Information" in Multi-State's Prospectus; and "Description of the
Fund and Its Investments and Risks" in Tax-Exempt's Statement of Additional
Information and "Description of the Fund and the Investments and Risks of the
Series" in Multi-State's Statement of Additional Information.
INVESTMENT RESTRICTIONS
The investment restrictions adopted by Ohio Series and Tax-Exempt as
fundamental policies are substantially similar and are summarized under the
caption "Description of the Fund and Its Investments and
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<PAGE>
Risks -- Fund Policies/Investment Restrictions" in their respective
Statements of Additional Information. A fundamental investment restriction
cannot be changed without the vote of the majority of the outstanding voting
securities of a fund, as defined in the 1940 Act. The material differences
are as follows: (a) Tax-Exempt may not invest more than 5% of the value of
its total assets in the securities of any one issuer (other than U.S.
Government securities); Ohio Series, because it is a non-diversified fund,
has no such investment restriction but limits its investments of 5% or more
in the securities of any one issuer as to 50% of its total assets in order to
qualify as a regulated investment company under Subchapter M of the Code; (b)
Tax-Exempt may not purchase more than 10% of all outstanding taxable debt
securities of any one issuer (other than obligations issued or guaranteed by
the U.S. Government or its agencies or instrumentalities); Ohio Series has no
such investment restriction; and (c) Tax-Exempt may not invest more than 5%
of the value of its total assets in taxable securities of issuers (other than
U.S. Government securities) that have a record, together with predecessors,
of less than three years of continuous operation; Ohio Series has no such
investment restriction.
ADDITIONAL INFORMATION ABOUT OHIO SERIES
AND TAX-EXEMPT
GENERAL
For a discussion of the organization and operation of Tax-Exempt and Ohio
Series, see "Fund Management" and "Investment Objective" in their respective
Prospectuses.
FINANCIAL INFORMATION
For certain financial information about Tax-Exempt and Ohio Series, see
"Financial Highlights" and "Past Performance" in their respective
Prospectuses.
MANAGEMENT
For information about the respective Board of Trustees, Investment
Manager, and the Distributor of Tax-Exempt and Ohio Series, see "Fund
Management" in their respective Prospectuses.
DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES
For a description of the nature and most significant attributes of shares
of Ohio Series and Tax-Exempt, and information regarding shareholder
inquiries, see "Capital Stock and Other Securities" in their respective
Statements of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
For a discussion of Tax-Exempt's and Ohio Series' policies with respect to
dividends, distributions and taxes, see "Distributions" and "Tax
Consequences" in their respective Prospectuses as well as the discussion
herein under "Synopsis -- Purchases, Exchanges and Redemptions."
PURCHASES, REPURCHASES AND REDEMPTIONS
For a discussion of how Tax-Exempt's and Ohio Series' shares may be
purchased, repurchased and redeemed, see "How to Buy Shares," "How to
Exchange Shares" and "How to Sell Shares" in their respective Prospectuses.
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For a discussion of Tax-Exempt's performance, see management's letter to
shareholders in its Annual Report for its fiscal year ended December 31, 1999
accompanying this Proxy Statement and Prospectus. For a discussion of the
performance of Ohio Series, see Multi-State's Annual Report for its fiscal
year ended November 30, 1999.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of Tax-Exempt, for the year ended December 31,
1999, and Ohio Series, for the year ended November 30, 1999 that are
incorporated by reference in the Statement of Additional Information relating
to the Registration Statement on Form N-14 of which this Proxy Statement and
Prospectus forms a part, have been audited by PricewaterhouseCoopers LLP,
independent accountants. The financial statements have been incorporated by
reference in reliance upon such reports given upon the authority of
PricewaterhouseCoopers LLP as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Tax-Exempt will
be passed upon by Mayer, Brown & Platt, New York, New York. Such firm will
rely on Massachusetts counsel as to matters of Massachusetts law.
AVAILABLE INFORMATION
Additional information about Ohio Series and Tax-Exempt is available, as
applicable, in the following documents which are incorporated herein by
reference: (i) Tax-Exempt's Prospectus dated February 24, 2000, attached to
this Proxy Statement and Prospectus, which Prospectus forms a part of
Post-Effective Amendment No. 23 to Tax-Exempt's Registration Statement on
Form N-1A (File Nos. 2-66268; 811-2979); (ii) Tax-Exempt's Annual Report for
its fiscal year ended December 31, 1999, accompanying this Proxy Statement
and Prospectus; (iii) Multi-State's Prospectus dated February 25, 2000, which
Prospectus forms a part of Post-Effective Amendment No. 12 to Multi-State's
Registration Statement on Form N-1A (File Nos. 33-37562; 811-6208); and (iv)
Multi-State's Annual Report for its fiscal year ended November 30, 1999. The
foregoing documents may be obtained without charge by calling (800) 869-NEWS
(toll-free).
Ohio Series and Tax-Exempt are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and in accordance
therewith, file reports and other information with the Commission. Proxy
material, reports and other information about Ohio Series and Tax-Exempt
which are of public record can be inspected and copied at public reference
facilities maintained by the Commission at Room 1204, Judiciary Plaza, 450
Fifth Street, NW, Washington, D.C. 20549 and certain of its regional offices,
and copies of such materials can be obtained at prescribed rates from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549.
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OTHER BUSINESS
Management of Ohio Series knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not
known at the time of the solicitation may come before the Meeting, the proxy
as solicited confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the intention of the persons named as attorneys-in-fact in
the proxy to vote this proxy in accordance with their judgment on such
matters.
By Order of the Board of Trustees
Barry Fink,
Secretary
April 7, 2000
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
26th day of January, 2000, by and between MORGAN STANLEY DEAN WITTER
TAX-EXEMPT SECURITIES TRUST, a Massachusetts business trust ("Tax-Exempt")
and MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST, a
Massachusetts business trust ("Multi-State"), on behalf of its series, OHIO
SERIES ("Ohio Series"). (Where appropriate, references to Ohio Series mean
Multi-State, on behalf of Ohio Series.)
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treas. Reg. 1.368-2(g), for a
reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986,
as amended (the "Code"). The reorganization ("Reorganization") will consist
of the transfer to Tax-Exempt of substantially all of the assets of Ohio
Series in exchange for the assumption by Tax-Exempt of all stated liabilities
of Ohio Series and the issuance by Tax-Exempt of Class D shares of beneficial
interest, par value $0.01 per share (the "Tax-Exempt Shares"), to be
distributed, after the Closing Date hereinafter referred to, to the
shareholders of Ohio Series in liquidation of Ohio Series as provided herein,
all upon the terms and conditions hereinafter set forth in this Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF OHIO SERIES
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, Ohio Series agrees to
assign, deliver and otherwise transfer the Ohio Series Assets (as defined in
paragraph 1.2) to Tax-Exempt and Tax-Exempt agrees in exchange therefor to
assume all of Ohio Series stated liabilities on the Closing Date as set forth
in paragraph 1.3(a) and to deliver to Ohio Series the number of Tax-Exempt
Shares, including fractional Tax-Exempt Shares, determined in the manner set
forth in paragraph 2.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 ("Closing").
1.2 (a) The "Ohio Series Assets" shall consist of all property, including
without limitation, all cash (other than the "Cash Reserve" (as defined in
paragraph 1.3(b)), cash equivalents, securities and dividend and interest
receivables owned by Ohio Series, and any deferred or prepaid expenses shown
as an asset on Ohio Series' books on the Valuation Date.
(b) On or prior to the Valuation Date, Multi-State will provide Tax-Exempt
with a list of all of Ohio Series assets to be assigned, delivered and
otherwise transferred to Tax-Exempt and of the stated liabilities to be
assumed by Tax-Exempt pursuant to this Agreement. Ohio Series reserves the
right to sell any of the securities on such list but will not, without the
prior approval of Tax-Exempt, acquire any additional securities other than
securities of the type in which Tax-Exempt is permitted to invest and in
amounts agreed to in writing by Tax-Exempt. Tax-Exempt will, within a
reasonable time prior to the Valuation Date, furnish Ohio Series with a
statement of Tax-Exempt's investment objectives, policies and restrictions
and a list of the securities, if any, on the list referred to in the first
sentence of this paragraph that do not conform to Tax-Exempt's investment
objective, policies and restrictions. In the event that Ohio Series holds any
investments that Tax-Exempt is not permitted to hold, Ohio Series will
dispose of such securities on or prior to the Valuation Date. In addition, if
it is determined that the portfolios of Ohio Series and Tax-Exempt, when
aggregated,
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would contain investments exceeding certain percentage limitations imposed upon
Tax-Exempt with respect to such investments, Ohio Series if requested by
Tax-Exempt will, on or prior to the Valuation Date, dispose of and/or reinvest a
sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Closing Date (as defined in paragraph 3.1).
1.3 (a) Ohio Series will endeavor to discharge all of its liabilities and
obligations on or prior to the Valuation Date. Tax-Exempt will assume all
stated liabilities, which includes, without limitation, all expenses, costs,
charges and reserves reflected on an unaudited Statement of Assets and
Liabilities of Ohio Series prepared by the Treasurer of Multi-State, on
behalf of Ohio Series, as of the Valuation Date in accordance with generally
accepted accounting principles consistently applied from the prior audited
period.
(b) On the Valuation Date, Ohio Series may establish a cash reserve, which
shall not exceed 5% of Ohio Series' net assets as of the close of business on
the Valuation Date ("Cash Reserve") to be retained by Ohio Series and used
for the payment of its liabilities not discharged prior to the Valuation Date
and for the expenses of dissolution.
1.4 In order for Ohio Series to comply with Section 852(a)(1) of the Code
and to avoid having any investment company taxable income or net capital gain
(as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively) in
the short taxable year ending with its dissolution, Ohio Series will on or
before the Valuation Date (a) declare a dividend in an amount large enough so
that it will have declared dividends of all of its investment company taxable
income and net capital gain, if any, for such taxable year (determined
without regard to any deduction for dividends paid) and (b) distribute such
dividend.
1.5 On the Closing Date or as soon as practicable thereafter, Ohio Series
will distribute Tax-Exempt Shares received by Ohio Series pursuant to
paragraph 1.1 pro rata to its shareholders of record determined as of the
close of business on the Valuation Date ("Ohio Series Shareholders"). Each
Ohio Series Shareholder will receive Class D shares of Tax-Exempt. Such
distribution will be accomplished by an instruction, signed by the Secretary
of Multi-State, to transfer Tax-Exempt Shares then credited to Ohio Series'
account on the books of Tax-Exempt to open accounts on the books of
Tax-Exempt in the names of the Ohio Series Shareholders and representing the
respective pro rata number of Tax-Exempt Shares due such Ohio Series
Shareholders. All issued and outstanding shares of Ohio Series simultaneously
will be canceled on Ohio Series' books; however, share certificates
representing interests in Ohio Series will represent a number of Tax-Exempt
Shares after the Closing Date as determined in accordance with paragraph 2.3.
Tax-Exempt will issue certificates representing Tax-Exempt Shares in
connection with such exchange only upon the written request of a Ohio Series
Shareholder.
1.6 Ownership of Tax-Exempt Shares will be shown on the books of
Tax-Exempt's transfer agent. Tax-Exempt Shares will be issued in the manner
described in Tax-Exempt's current Prospectus and Statement of Additional
Information.
1.7 Any transfer taxes payable upon issuance of Tax-Exempt Shares in a
name other than the registered holder of Tax-Exempt Shares on Ohio Series'
books as of the close of business on the Valuation Date shall, as a condition
of such issuance and transfer, be paid by the person to whom Tax-Exempt
Shares are to be issued and transferred.
1.8 Any reporting responsibility of Multi-State, on behalf of Ohio Series,
is and shall remain the responsibility of Multi-State up to and including the
date on which Ohio Series is dissolved pursuant to paragraph 1.9.
1.9 Within one year after the Closing Date, Ohio Series shall pay or make
provision for the payment of all its liabilities and taxes, and distribute to
the shareholders of Ohio Series as of the close of business on the
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Valuation Date any remaining amount of the Cash Reserve (as reduced by the
estimated cost of distributing it to shareholders). If and to the extent that
any trust, escrow account, or other similar entity continues after the close of
such one-year period in connection either with making provision for payment of
liabilities or taxes or with distributions to shareholders of Ohio Series, such
entity shall either (i) qualify as a liquidating trust under Section 7701 of the
Code (and applicable Treasury Regulations thereunder) or other entity which does
not constitute a continuation of Ohio Series for federal income tax purposes, or
(ii) be subject to a waiver under Section 368(a)(2)(G)(ii) of the complete
distribution requirement of Section 368(a)(2)(G)(i) of the Code. Ohio Series
shall be dissolved as a portfolio of Multi-State under Massachusetts law,
promptly following the making of all distributions pursuant to paragraph 1.5
(and, in any event, within one year after the Closing Date).
1.10 Copies of all books and records maintained on behalf of Ohio Series
in connection with its obligations under the Investment Company Act of 1940,
as amended (the "1940 Act"), the Code, state blue sky laws or otherwise in
connection with this Agreement will promptly after the Closing be delivered
to officers of Tax-Exempt or their designee and Tax-Exempt or its designee
shall comply with applicable record retention requirements to which Ohio
Series is subject under the 1940 Act.
2. VALUATION
2.1 The value of the Ohio Series Assets shall be the value of such assets
computed as of 4:00 p.m. on the New York Stock Exchange on the third business
day following the receipt of the requisite approval by shareholders of Ohio
Series of this Agreement or at such time on such earlier or later date after
such approval as may be mutually agreed upon in writing (such time and date
being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in Tax-Exempt's then current Prospectus and Statement of
Additional Information.
2.2 The net asset value of a Tax-Exempt Share shall be the net asset value
per share computed on the Valuation Date, using the valuation procedures set
forth in Tax-Exempt's then current Prospectus and Statement of Additional
Information.
2.3 The number of Tax-Exempt Shares (including fractional shares, if any)
to be issued hereunder shall be determined, with respect to each class, by
dividing the aggregate net asset value of each class of Ohio Series shares
(determined in accordance with paragraph 2.1) by the net asset value per
share of Class D shares of Tax-Exempt (determined in accordance with
paragraph 2.2). For purposes of this paragraph, the aggregate net asset value
of the shares of Ohio Series shall not include the amount of the Cash
Reserve.
2.4 All computations of value shall be made by Morgan Stanley Dean Witter
Services Company Inc. ("MSDW Services") in accordance with its regular
practice in pricing Tax-Exempt. Tax-Exempt shall cause MSDW Services to
deliver a copy of its valuation report at the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing shall take place on the next business day following the
Valuation Date (the "Closing Date"). The Closing shall be held as of 9:00
a.m. Eastern time, or at such other time as the parties may agree. The
Closing shall be held in a location mutually agreeable to the parties hereto.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of 9:00 a.m. Eastern time on the Closing Date unless
otherwise provided.
3.2 Portfolio securities held by Ohio Series and represented by a
certificate or other written instrument shall be presented by it or on its
behalf to The Bank of New York (the "Custodian"), as custodian for
Tax-Exempt, for examination no later than five business days preceding the
Valuation Date. Such portfolio
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securities (together with any cash or other assets) shall be delivered by
Ohio Series to the Custodian for the account of Tax-Exempt on or before the
Closing Date in conformity with applicable custody provisions under the 1940
Act and duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof in accordance with the custom of brokers.
The portfolio securities shall be accompanied by all necessary Federal and
state stock transfer stamps or a check for the appropriate purchase price of
such stamps. Portfolio securities and instruments deposited with a securities
depository (as defined in Rule 17f-4 under the 1940 Act) shall be delivered
on or before the Closing Date by book-entry in accordance with customary
practices of such depository and the Custodian. The cash delivered shall be
in the form of a Federal Funds wire, payable to the order of "The Bank of New
York, Custodian for Morgan Stanley Dean Witter Tax-Exempt Securities Trust."
3.3 In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall
be disrupted so that, in the judgment of both Tax-Exempt and Ohio Series,
accurate appraisal of the value of the net assets of Tax-Exempt or the Ohio
Series Assets is impracticable, the Valuation Date shall be postponed until
the first business day after the day when trading shall have been fully
resumed without restriction or disruption and reporting shall have been
restored.
3.4 If requested, Multi-State shall deliver to Tax-Exempt or its designee
(a) at the Closing, a list, certified by its Secretary, of the names,
addresses and taxpayer identification numbers of the Ohio Series Shareholders
and the number and percentage ownership of outstanding Ohio Series shares
owned by each such Ohio Series Shareholder, all as of the Valuation Date, and
(b) as soon as practicable after the Closing, all original documentation
(including Internal Revenue Service forms, certificates, certifications and
correspondence) relating to the Ohio Series Shareholders' taxpayer
identification numbers and their liability for or exemption from back-up
withholding. Tax-Exempt shall issue and deliver to such Secretary a
confirmation evidencing delivery of Tax-Exempt Shares to be credited on the
Closing Date to Ohio Series or provide evidence satisfactory to Ohio Series
that such Tax-Exempt Shares have been credited to Ohio Series' account on the
books of Tax-Exempt. At the Closing, each party shall deliver to the other
such bills of sale, checks, assignments, share certificates, if any, receipts
or other documents as such other party or its counsel may reasonably request.
4. COVENANTS OF TAX-EXEMPT AND OHIO SERIES
4.1 Except as otherwise expressly provided herein with respect to Ohio
Series, Tax-Exempt and Ohio Series each will operate its business in the
ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and other distributions.
4.2 Tax-Exempt will prepare and file with the Securities and Exchange
Commission ("Commission") a registration statement on Form N-14 under the
Securities Act of 1933, as amended ("1933 Act"), relating to Tax-Exempt
Shares ("Registration Statement"). Multi-State will provide Tax-Exempt with
the Proxy Materials as described in paragraph 4.3 below, for inclusion in the
Registration Statement. Multi-State will further provide Tax-Exempt with such
other information and documents relating to Ohio Series as are reasonably
necessary for the preparation of the Registration Statement.
4.3 Multi-State will call a meeting of the Ohio Series shareholders to
consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein. Multi-State will
prepare the notice of meeting, form of proxy and proxy statement
(collectively, "Proxy Materials") to be used in connection with such meeting;
provided that Tax-Exempt will furnish Multi-State with its currently
effective prospectus for inclusion in the Proxy Materials and with such other
information relating to Tax-Exempt as is reasonably necessary for the
preparation of the Proxy Materials.
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4.4 Multi-State will assist Tax-Exempt in obtaining such information as
Tax-Exempt reasonably requests concerning the beneficial ownership of Ohio
Series shares.
4.5 Subject to the provisions of this Agreement, Tax-Exempt and
Multi-State will each take, or cause to be taken, all action, and do or cause
to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this
Agreement.
4.6 Multi-State shall furnish or cause to be furnished to Tax-Exempt
within 30 days after the Closing Date a statement of Ohio Series' assets and
liabilities as of the Closing Date, which statement shall be certified by
Multi-State's Treasurer and shall be in accordance with generally accepted
accounting principles consistently applied. As promptly as practicable, but
in any case within 60 days after the Closing Date, Ohio Series shall furnish
Tax-Exempt, in such form as is reasonably satisfactory to Tax-Exempt, a
statement certified by Multi-State's Treasurer of earnings and profits of
Ohio Series for Federal income tax purposes that will be carried over to
Tax-Exempt pursuant to Section 381 of the Code.
4.7 As soon after the Closing Date as is reasonably practicable,
Multi-State (a) shall prepare and file all Federal and other tax returns and
reports of Ohio Series required by law to be filed with respect to all
periods ending on or before the Closing Date but not theretofore filed and
(b) shall pay all Federal and other taxes shown as due thereon and/or all
Federal and other taxes that were unpaid as of the Closing Date, including
without limitation, all taxes for which the provision for payment was made as
of the Closing Date (as represented in paragraph 5.2(k)).
4.8 Tax-Exempt agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act and the 1940 Act and to
make such filings required by the state Blue Sky and securities laws as it
may deem appropriate in order to continue its operations after the Closing
Date.
5. REPRESENTATIONS AND WARRANTIES
5.1 Tax-Exempt represents and warrants to Multi-State, on behalf of Ohio
Series, as follows:
(a) Tax-Exempt is a validly existing Massachusetts business trust with
full power to carry on its business as presently conducted;
(b) Tax-Exempt is a duly registered, open-end, management investment
company, and its registration with the Commission as an investment company
under the 1940 Act and the registration of its shares under the 1933 Act
are in full force and effect;
(c) All of the issued and outstanding shares of Tax-Exempt have been
offered and sold in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities laws.
Shares of Tax-Exempt are registered in all jurisdictions in which they are
required to be registered under state securities laws and other laws, and
said registrations, including any periodic reports or supplemental
filings, are complete and current, all fees required to be paid have been
paid, and Tax-Exempt is not subject to any stop order and is fully
qualified to sell its shares in each state in which its shares have been
registered;
(d) The current Prospectus and Statement of Additional Information of
Tax-Exempt conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the regulations thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
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(e) Tax-Exempt is not in, and the execution, delivery and performance of
this Agreement will not result in a, material violation of any provision
of Tax-Exempt's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which
Tax-Exempt is a party or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against Tax-Exempt or any of its properties or
assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and
Tax-Exempt knows of no facts that might form the basis for the institution
of such proceedings and is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body which
materially and adversely affects, or is reasonably likely to materially
and adversely effect, its business or its ability to consummate the
transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights for the year
ended December 31, 1999, of Tax-Exempt audited by PricewaterhouseCoopers
LLP (copies of which have been furnished to Ohio Series), fairly present,
in all material respects, Tax-Exempt's financial condition as of such date
in accordance with generally accepted accounting principles, and its
results of such operations, changes in its net assets and financial
highlights for such period, and as of such date there were no known
liabilities of Tax-Exempt (contingent or otherwise) not disclosed therein
that would be required in accordance with generally accepted accounting
principles to be disclosed therein;
(h) All issued and outstanding Tax-Exempt Shares are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership
thereof, except as set forth under the caption "Additional Information" in
Tax-Exempt's current Prospectus incorporated by reference in the
Registration Statement. Tax-Exempt does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of its shares;
(i) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of Tax-Exempt, and
this Agreement constitutes a valid and binding obligation of Tax-Exempt
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors rights and to general equity principles. No
other consents, authorizations or approvals are necessary in connection
with Tax-Exempt's performance of this Agreement;
(j) Tax-Exempt Shares to be issued and delivered to Ohio Series, for the
account of the Ohio Series Shareholders, pursuant to the terms of this
Agreement will at the Closing Date have been duly authorized and, when so
issued and delivered, will be duly and validly issued Tax-Exempt Shares,
and will be fully paid and non-assessable with no personal liability
attaching to the ownership thereof, except as set forth under the caption
"Capital Stock and Other Securities" in Tax-Exempt's current Statement of
Additional Information incorporated by reference in the Statement of
Additional Information to this Registration Statement;
(k) All material Federal and other tax returns and reports of Tax-Exempt
required by law to be filed on or before the Closing Date have been filed
and are correct, and all Federal and other taxes shown as due or required
to be shown as due on said returns and reports have been paid or provision
has been made for the payment thereof, and to the best of Tax-Exempt's
knowledge, no such return is currently under audit and no assessment has
been asserted with respect to any such return;
(l) For each taxable year since its inception, Tax-Exempt has met the
requirements of Subchapter M of the Code for qualification and treatment
as a "regulated investment company" and neither the
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execution or delivery of nor the performance of its obligations under
this Agreement will adversely affect, and no other events are reasonably
likely to occur which will adversely affect the ability of Tax-Exempt to
continue to meet the requirements of Subchapter M of the Code;
(m) Since December 31, 1999 there has been no change by Tax-Exempt in
accounting methods, principles, or practices, including those required by
generally accepted accounting principles;
(n) The information furnished or to be furnished by Tax-Exempt for use in
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with Federal securities and other laws and regulations
applicable thereto; and
(o) The Proxy Materials to be included in the Registration Statement
(only insofar as they relate to Tax-Exempt) will, on the effective date of
the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not materially
misleading.
5.2 Multi-State, on behalf of Ohio Series, represents and warrants to
Tax-Exempt as follows:
(a) Multi-State is a series of a validly existing Massachusetts business
trust with full power to carry on its business as presently conducted;
(b) Multi-State is a duly registered, open-end, management investment
company, and its registration with the Commission as an investment company
under the 1940 Act and the registration of its shares under the 1933 Act
are in full force and effect;
(c) All of the issued and outstanding shares of beneficial interest of
Ohio Series have been offered and sold in compliance in all material
respects with applicable requirements of the 1933 Act and state securities
laws. Shares of Ohio Series are registered in all jurisdictions in which
they are required to be registered and said registrations, including any
periodic reports or supplemental filings, are complete and current, all
fees required to be paid have been paid, and Multi-State is not subject to
any stop order and is fully qualified to sell its shares in each state in
which its shares have been registered;
(d) The current Prospectus and Statement of Additional Information of
Multi-State conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(e) Multi-State is not, and the execution, delivery and performance of
this Agreement will not result, in a material violation of any provision
of Multi-State's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which
Multi-State is a party or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against Ohio Series or any of its properties or
assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and
Multi-State knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to
materially and adversely effect, its business or its ability to consummate
the transactions herein contemplated;
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(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights of Multi-State
for the year ended November 30, 1999, audited by PricewaterhouseCoopers
LLP (copies of which have been or will be furnished to Tax-Exempt) fairly
present, in all material respects, Ohio Series' financial condition as of
such date, and its results of operations, changes in its net assets and
financial highlights for such period in accordance with generally accepted
accounting principles, and as of such date there were no known liabilities
of Ohio Series (contingent or otherwise) not disclosed therein that would
be required in accordance with generally accepted accounting principles to
be disclosed therein;
(h) Multi-State has no material contracts or other commitments (other
than this Agreement) that will be terminated with liability to it prior to
the Closing Date;
(i) All issued and outstanding shares of Ohio Series are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the ownership
thereof, except as set forth under the caption "Capital Stock and Other
Securities" in Multi-State's current Statement of Additional Information
incorporated by reference in the Statement of Additional Information to
this Registration Statement. Ohio Series does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of its
shares, nor is there outstanding any security convertible to any of its
shares. All such shares will, at the time of Closing, be held by the
persons and in the amounts set forth in the list of shareholders submitted
to Tax-Exempt pursuant to paragraph 3.4;
(j) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on
the part of Multi-State, and subject to the approval of Ohio Series'
shareholders, this Agreement constitutes a valid and binding obligation of
Multi-State, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general equity
principles. No other consents, authorizations or approvals are necessary
in connection with Multi-State's performance of this Agreement;
(k) All material Federal and other tax returns and reports of Ohio Series
required by law to be filed on or before the Closing Date shall have been
filed and are correct and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports have been paid or
provision has been made for the payment thereof, and to the best of Ohio
Series' knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any such return;
(l) For each taxable year since its inception, Ohio Series, has met all
the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of Ohio Series to continue to meet
the requirements of Subchapter M of the Code;
(m) At the Closing Date, Multi-State will have good and valid title to
the Ohio Series Assets, subject to no liens (other than the obligation, if
any, to pay the purchase price of portfolio securities purchased by Ohio
Series which have not settled prior to the Closing Date), security
interests or other encumbrances, and full right, power and authority to
assign, deliver and otherwise transfer such assets hereunder, and upon
delivery and payment for such assets, Tax-Exempt will acquire good and
marketable title thereto, subject to no restrictions on the full transfer
thereof, including any restrictions as might arise under the 1933 Act;
(n) On the effective date of the Registration Statement, at the time of
the meeting of Ohio Series' shareholders and on the Closing Date, the
Proxy Materials (exclusive of the currently effective
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<PAGE>
Tax-Exempt Prospectus contained therein) will (i) comply in all material
respects with the provisions of the 1933 Act, the Securities Exchange Act
of 1934, as amended ("1934 Act") and the 1940 Act and the regulations
thereunder and (ii) not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. Any other information furnished
by Multi-State for use in the Registration Statement or in any other manner
that may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete and shall comply in all material
respects with applicable Federal securities and other laws and regulations
thereunder;
(o) Ohio Series will, on or prior to the Valuation Date, declare one or
more dividends or other distributions to shareholders that, together with
all previous dividends and other distributions to shareholders, shall have
the effect of distributing to the shareholders all of its investment
company taxable income and net capital gain, if any, through the Valuation
Date (computed without regard to any deduction for dividends paid);
(p) Multi-State has maintained or has caused to be maintained on its
behalf all books and accounts as required of a registered investment
company in compliance with the requirements of Section 31 of the 1940 Act
and the Rules thereunder; and
(q) Ohio Series is not acquiring Tax-Exempt Shares to be issued hereunder
for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF OHIO SERIES
The obligations of Multi-State to consummate the transactions provided for
herein shall be subject, at its election, to the performance by Tax-Exempt of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of Tax-Exempt contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as
if made on and as of the Closing Date;
6.2 Tax-Exempt shall have delivered to Ohio Series, a certificate of its
President and Treasurer, in a form reasonably satisfactory to Multi-State and
dated as of the Closing Date, to the effect that the representations and
warranties of Tax-Exempt made in this Agreement are true and correct at and
as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as Multi-State
shall reasonably request;
6.3 Multi-State, on behalf of Ohio Series, shall have received a favorable
opinion from Mayer, Brown & Platt, counsel to Tax-Exempt, dated as of the
Closing Date, to the effect that:
(a) Tax-Exempt is a validly existing Massachusetts business trust, and
has the power to own all of its properties and assets and to carry on its
business as presently conducted (Massachusetts counsel may be relied upon
in delivering such opinion); (b) Tax-Exempt is a duly registered,
open-end, management investment company, and its registration with the
Commission as an investment company under the 1940 Act is in full force
and effect; (c) this Agreement has been duly authorized, executed and
delivered by Tax-Exempt and, assuming that the Registration Statement
complies with the 1933 Act, the 1934 Act and the 1940 Act and regulations
thereunder and assuming due authorization, execution and delivery of this
Agreement by Ohio Series, is a valid and binding obligation of Tax-Exempt
enforceable against Tax-Exempt in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorgani-
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zation, moratorium and other laws relating to or affecting creditors
rights and to general equity principles; (d) Tax-Exempt Shares to be
issued to Ohio Series Shareholders as provided by this Agreement are duly
authorized and upon such delivery will be validly issued, fully paid and
non-assessable (except as set forth under the caption "Capital Stock and
Other Securities" in Tax-Exempt's Statement of Additional Information),
and no shareholder of Tax-Exempt has any preemptive rights to subscription
or purchase in respect thereof (Massachusetts counsel may be relied upon
in delivering such opinion); (e) the execution and delivery of this
Agreement did not, and the consummation of the transactions contemplated
hereby will not, violate Tax-Exempt's Declaration of Trust or By-Laws
(Massachusetts counsel may be relied upon in delivering such opinion); and
(f) to the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States or
any state is required for the consummation by Tax-Exempt of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required
under state securities laws; and
6.4 As of the Closing Date, there shall have been no material change in
the investment objective, policies and restrictions nor any increase in the
investment management fees from those described in Tax-Exempt's Prospectus
dated February 24, 2000 and Statement of Additional Information dated
February 24, 2000.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TAX-EXEMPT
The obligations of Tax-Exempt to complete the transactions provided for
herein shall be subject, at its election, to the performance by Multi-State,
on behalf of Ohio Series, of all the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the
following conditions:
7.1 All representations and warranties of Multi-State contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as
if made on and as of the Closing Date;
7.2 Multi-State shall have delivered to Tax-Exempt at the Closing a
certificate of its President and its Treasurer, in form and substance
satisfactory to Tax-Exempt and dated as of the Closing Date, to the effect
that the representations and warranties of Multi-State made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as Tax-Exempt shall reasonably request;
7.3 Multi-State shall have delivered to Tax-Exempt a statement of the Ohio
Series Assets and its liabilities, together with a list of Ohio Series'
portfolio securities and other assets showing the respective adjusted bases
and holding periods thereof for income tax purposes, as of the Closing Date,
certified by the Treasurer of Multi-State;
7.4 Multi-State shall have delivered to Tax-Exempt within three business
days after the Closing a letter from PricewaterhouseCoopers LLP dated as of
the Closing Date stating that (a) such firm has performed a limited review of
the Federal and state income tax returns of Multi-State for each of the last
three taxable years and, based on such limited review, nothing came to their
attention that caused them to believe that such returns did not properly
reflect, in all material respects, the Federal and state income tax
liabilities of Ohio Series for the periods covered thereby, (b) for the
period from November 30, 1999 to and including the Closing Date, such firm
has performed a limited review (based on unaudited financial data) to
ascertain the amount of applicable Federal, state and local taxes and has
determined that same either have been paid or reserves have been established
for payment of such taxes, and, based on such limited review, nothing came to
their attention that caused them to believe that the taxes paid or reserves
set aside for payment of such taxes were not adequate
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<PAGE>
in all material respects for the satisfaction of all Federal, state and
local tax liabilities for the period from November 30, 1999 to and including
the Closing Date and (c) based on such limited reviews, nothing came to their
attention that caused them to believe that Ohio Series would not qualify as a
regulated investment company for Federal income tax purposes for any such
year or period;
7.5 Tax-Exempt shall have received at the Closing a favorable opinion from
Mayer, Brown & Platt, counsel to Multi-State, dated as of the Closing Date to
the effect that:
(a) Multi-State is a validly existing Massachusetts business trust and
has the power to own all of its properties and assets and to carry on its
business as presently conducted (Massachusetts counsel may be relied upon
in delivering such opinion); (b) Multi-State is a duly registered,
open-end, management investment company under the 1940 Act, and its
registration with the Commission as an investment company under the 1940
Act is in full force and effect; (c) this Agreement has been duly
authorized, executed and delivered by Multi-State and, assuming that the
Registration Statement complies with the 1933 Act, the 1934 Act and the
1940 Act and the regulations thereunder and assuming due authorization,
execution and delivery of this Agreement by Tax-Exempt, is a valid and
binding obligation of Multi-State enforceable against Multi-State in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors rights and to general equity principles; (d) the
execution and delivery of this Agreement did not, and the consummation of
the transactions contemplated hereby will not, violate Multi-State's
Declaration of Trust or By-Laws (Massachusetts counsel may be relied upon
in delivering such opinion); and (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental
authority of the United States or any state is required for the
consummation by Multi-State of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act and the
1940 Act and such as may be required under state securities laws; and
7.6 On the Closing Date, the Ohio Series Assets shall include no assets
that Tax-Exempt, by reason of limitations of the fund's Declaration of Trust
or otherwise, may not properly acquire.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF TAX-EXEMPT
AND OHIO SERIES
The obligations of Multi-State, on behalf of Ohio Series, and Tax-Exempt
hereunder are each subject to the further conditions that on or before the
Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of Ohio Series in accordance with the provisions of Multi-State's Declaration
of Trust, and certified copies of the resolutions evidencing such approval
shall have been delivered to Tax-Exempt;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities, including
"no-action" positions of and exemptive orders from such Federal and state
authorities) deemed necessary by Tax-Exempt or Multi-State to permit
consummation, in all material respects, of the transactions contemplated
herein shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve risk of a material adverse effect
on the assets or properties of Tax-Exempt or Ohio Series;
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<PAGE>
8.4 The Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act;
8.5 Ohio Series shall have declared and paid a dividend or dividends
and/or other distribution or distributions that, together with all previous
such dividends or distributions, shall have the effect of distributing to the
Ohio Series Shareholders all of Ohio Series' investment company taxable
income (computed without regard to any deduction for dividends paid) and all
of its net capital gain (after reduction for any capital loss carry-forward
and computed without regard to any deduction for dividends paid) for all
taxable years ending on or before the Closing Date; and
8.6 The parties shall have received the opinion of the law firm of Mayer,
Brown & Platt (based on such representations as such law firm shall
reasonably request), addressed to Tax-Exempt and Multi-State, on behalf of
Ohio Series, which opinion may be relied upon by the shareholders of Ohio
Series, substantially to the effect that, for Federal income tax purposes:
(a) The transfer of Ohio Series' assets in exchange for Tax-Exempt Shares
and the assumption by Tax-Exempt of certain stated liabilities of Ohio
Series followed by the distribution by Ohio Series of Tax-Exempt Shares to
the Ohio Series Shareholders in exchange for their Ohio Series shares
pursuant to and in accordance with the terms of the Reorganization
Agreement will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code, and Ohio Series and Tax-Exempt will each be a
"party to a reorganization" within the meaning of Section 368(b) of the
Code;
(b) No gain or loss will be recognized by Tax-Exempt upon the receipt of
the assets of Ohio Series solely in exchange for Tax-Exempt Shares and the
assumption by Tax-Exempt of the stated liabilities of Ohio Series;
(c) No gain or loss will be recognized by Ohio Series upon the transfer
of the assets of Ohio Series to Tax-Exempt in exchange for Tax-Exempt
Shares and the assumption by Tax-Exempt of the stated liabilities or upon
the distribution of Tax-Exempt Shares to the Ohio Series Shareholders in
exchange for their Ohio Series shares;
(d) No gain or loss will be recognized by the Ohio Series Shareholders
upon the exchange of the Ohio Series shares for Tax-Exempt Shares;
(e) The aggregate tax basis for Tax-Exempt Shares received by each Ohio
Series Shareholder pursuant to the reorganization will be the same as the
aggregate tax basis of the Ohio Series Shares held by each such Ohio
Series Shareholder immediately prior to the Reorganization;
(f) The holding period of Tax-Exempt Shares to be received by each Ohio
Series Shareholder will include the period during which the Ohio Series
Shares surrendered in exchange therefor were held (provided such Ohio
Series Shares were held as capital assets on the date of the
Reorganization);
(g) The tax basis of the assets of Ohio Series acquired by Tax-Exempt
will be the same as the tax basis of such assets to Ohio Series
immediately prior to the Reorganization; and
(h) The holding period of the assets of Ohio Series in the hands of
Tax-Exempt will include the period during which those assets were held by
Ohio Series.
Notwithstanding anything herein to the contrary, neither Tax-Exempt nor
Ohio Series may waive the conditions set forth in this paragraph 8.6.
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<PAGE>
9. FEES AND EXPENSES
9.1 (a) Tax-Exempt shall bear its expenses incurred in connection with the
entering into, and carrying out of, the provisions of this Agreement,
including legal, accounting, Commission registration fees and Blue Sky
expenses. Ohio Series and Morgan Stanley Dean Witter Advisors Inc. shall
bear, as set forth in the Proxy Statement and Prospectus contained in the
Registration Statement, certain expenses incurred in connection with the
entering into and carrying out of the provisions of this Agreement, including
legal and accounting fees, printing, filing and proxy solicitation expenses
incurred in connection with the consummation of the transactions contemplated
herein. Ohio Series shall bear any other expenses in connection with the
provisions of this Agreement including certain other legal and accounting
fees and portfolio transfer taxes (if any) incurred in connection with the
consummation of the transactions contemplated herein.
(b) In the event the transactions contemplated herein are not consummated
by reason of Ohio Series being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure of any condition to
Ohio Series' obligations specified in this Agreement), Ohio Series' only
obligation hereunder shall be to reimburse Tax-Exempt for all reasonable
out-of-pocket fees and expenses incurred by Tax-Exempt in connection with
those transactions.
(c) In the event the transactions contemplated herein are not consummated
by reason of Tax-Exempt being either unwilling or unable to go forward (other
than by reason of the nonfulfillment or failure of any condition to
Tax-Exempt's obligations specified in this Agreement), Tax-Exempt's only
obligation hereunder shall be to reimburse Ohio Series for all reasonable
out-of-pocket fees and expenses incurred by Ohio Series in connection with
those transactions.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 This Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
herein, except that the representations, warranties and covenants of
Multi-State hereunder shall not survive the dissolution and complete
liquidation of Ohio Series in accordance with Section 1.9.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Multi-State, on behalf of Ohio
Series, and Tax-Exempt;
(b) by either Tax-Exempt or Multi-State, on behalf of Ohio Series, by
notice to the other, without liability to the terminating party on account
of such termination (providing the terminating party is not otherwise in
material default or breach of this Agreement) if the Closing shall not
have occurred on or before September 30, 2000; or
(c) by either Tax-Exempt or Multi-State, on behalf of Ohio Series, in
writing without liability to the terminating party on account of such
termination (provided the terminating party is not otherwise in material
default or breach of this Agreement), if (i) the other party shall fail to
perform in any material respect its agreements contained herein required
to be performed on or prior to the Closing Date, (ii) the other party
materially breaches any of its representations, warranties or covenants
contained herein, (iii) the Ohio Series shareholders fail to approve this
Agreement at any meeting called for such purpose
A-13
<PAGE>
at which a quorum was present or (iv) any other condition herein expressed
to be precedent to the obligations of the terminating party has not been met
and it reasonably appears that it will not or cannot be met.
11.2 (a) Termination of this Agreement pursuant to paragraphs 11.1 (a) or
(b) shall terminate all obligations of the parties hereunder and there shall
be no liability for damages on the part of Tax-Exempt or Multi-State, or the
trustees or officers of Tax-Exempt or Multi-State, to any other party or its
trustees or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1 (c) shall
terminate all obligations of the parties hereunder and there shall be no
liability for damages on the part of Tax-Exempt or Multi-State, or the
trustees or officers of Tax-Exempt or Multi-State, except that any party
in breach of this Agreement shall, upon demand, reimburse the
non-breaching party for all reasonable out-of-pocket fees and expenses
incurred in connection with the transactions contemplated by this
Agreement, including legal, accounting and filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties.
13. MISCELLANEOUS
13.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by
any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
13.5 The obligations and liabilities of Tax-Exempt hereunder are solely
those of Tax-Exempt. It is expressly agreed that no shareholder, nominee,
trustee, officer, agent, or employee of Tax-Exempt shall be personally liable
hereunder. The execution and delivery of this Agreement have been authorized
by the trustees of Tax-Exempt and signed by authorized officers of Tax-Exempt
acting as such, and neither such authorization by such trustees nor such
execution and delivery by such officers shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally.
13.6 The obligations and liabilities of Multi-State hereunder are solely
those of Multi-State. It is expressly agreed that no shareholder, nominee,
trustee, officer, agent, or employee of Ohio Series shall be personally
liable hereunder. The execution and delivery of this Agreement have been
authorized by the trustees of Multi-State and signed by authorized officers
of Multi-State acting as such, and neither such authorization by such
trustees nor such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any liability on any
of them personally.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by a duly authorized officer.
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
on behalf of OHIO SERIES
By: /s/ CHARLES A. FIUMEFREDDO
---------------------------------------
Name: Charles A. Fiumefreddo
Title: Chairman
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
By: /s/ BARRY FINK
---------------------------------------
Name: Barry Fink
Title: Vice President
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<PAGE>
PROSPECTUS - FEBRUARY 24, 2000
Exhibit B
MORGAN STANLEY DEAN WITTER
- --------------------------------------------------------------------------------
TAX-EXEMPT SECURITIES TRUST
[GRAPHIC OMITTED]
A MUTUAL FUND THAT SEEKS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM
FEDERAL INCOME TAX, CONSISTENT WITH THE PRESERVATION OF CAPITAL
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
The Fund Investment Objective .......................... 1
Principal Investment Strategies ............... 1
Principal Risks ............................... 2
Past Performance .............................. 4
Fees and Expenses ............................. 6
Additional Investment Strategy Information .... 7
Additional Risk Information ................... 8
Fund Management ............................... 9
Shareholder Information Pricing Fund Shares ........................... 10
How to Buy Shares ............................. 10
How to Exchange Shares ........................ 12
How to Sell Shares ............................ 14
Distributions ................................. 16
Tax Consequences .............................. 16
Share Class Arrangements ...................... 18
Financial Highlights ............................................... 25
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.
<PAGE>
THE FUND
[GRAPHIC OMITTED]
INVESTMENT OBJECTIVE
- --------------------
Morgan Stanley Dean Witter Tax-Exempt Securities Trust (the "Fund") seeks to
provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital.
[GRAPHIC OMITTED]
PRINCIPAL INVESTMENT STRATEGIES
- -------------------------------
(sidebar)
INCOME
An investment objective having the goal of selecting securities to pay out
income rather than rise in price.
(end sidebar)
The Fund will normally invest at least 80% of its total assets in securities
that pay interest exempt from federal income taxes. The Fund's "Investment
Manager," Morgan Stanley Dean Witter Advisors Inc., generally invests the Fund's
assets in municipal obligations. Municipal obligations are bonds, notes or
short-term commercial paper issued by state governments, local governments, and
their respective agencies. At least 75% of these municipal obligations will have
the following ratings at the time of purchase:
o municipal bonds -- within the three highest grades by
Moody's Investors Service Inc.
("Moody's"), Standard & Poor's
Corporation ("S&P"), or Fitch IBCA,
Inc. ("Fitch");
o municipal notes -- within the two highest grades or, if
not rated, have outstanding bonds
within the three highest grades by
Moody's, S&P or Fitch; and
o municipal commercial paper -- within the highest grade by
Moody's, S&P or Fitch.
The Fund may invest up to 25% of its assets in municipal obligations that are
rated below the limits stated above or are not rated by those rating agencies.
However, the Fund may only invest up to 5% of its assets in municipal
obligations rated below investment grade or, if unrated, of comparable quality
as determined by the Investment Manager (commonly known as "junk bonds").
The Fund may invest up to 10% of its assets in inverse floating rate municipal
obligations. The interest rates on these obligations generally move in the
reverse direction of market interest rates. If market interest rates fall, the
interest rate on the obligations will increase and if market interest rates
increase, the interest rate on the obligations will fall.
The Fund may invest up to 20% of its assets in taxable money market instruments
or securities that pay interest income subject to the "alternative minimum tax,"
and some
1
<PAGE>
taxpayers may have to pay tax on a Fund distribution of this income. The Fund
therefore may not be a suitable investment for these investors. See the "Tax
Consequences" section for more details.
Municipal bonds, notes and commercial paper are commonly classified as either
"general obligation" or "revenue." General obligation bonds, notes, and
commercial paper are secured by the issuer's faith and credit including its
taxing power, for payment of principal and interest. Revenue bonds, notes and
commercial paper, however, are generally payable from a specific source of
income. They are issued to fund a wide variety of public and private projects in
sectors such as transportation, education and industrial development. Included
within the revenue category are participations in lease obligations. The Fund's
municipal obligation investments may include zero coupon securities, which are
purchased at a discount and accrue interest, but make no interest payments until
maturity.
In pursuing the Fund's investment objective, the Investment Manager has
considerable leeway in deciding which investments it buys, holds or sells on a
day-to-day basis -- and which investment strategies it uses. For example, the
Investment Manager in its discretion may determine to use some permitted
investment strategies while not using others.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
- ---------------
There is no assurance that the Fund will achieve its investment objective. The
Fund's share price and yield 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.
Credit and Interest Rate Risks. Municipal obligations, like other debt
securities, are subject to two types of risks: 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. In the
case of revenue bonds, notes or commercial paper, for example, the credit risk
is the possibility that the user fees from a project or other specified revenue
sources are insufficient to meet interest and/or principal payment obligations.
The issuers of private activity bonds, used to finance projects in sectors such
as industrial development and pollution control, also may be negatively impacted
by the general credit of the user of the project.
Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When the
general level of interest rates goes up, the prices of most fixed-income
securities go down. When the general level of interest rates goes down, the
prices of most fixed-income securities go up. Zero coupon securities are
typically subject to greater price fluctuations than comparable
2
<PAGE>
securities that pay current interest. As a general illustration of the
relationship between fixed-income securities and interest rates, the following
table shows how interest rates affect bond prices.
HOW INTEREST RATES AFFECT BOND PRICES
PRICE PER $1,000 OF A MUNICIPAL BOND
IF INTEREST RATES:
INCREASE* DECREASE**
YEARS TO
MATURITY BOND MATURITY COUPON 1% 2% 1% 2%
1 2000 3.95% $990 $981 $1,010 $1,020
5 2004 4.70% $957 $916 $1,045 $1,093
10 2009 5.05% $926 $858 $1,082 $1,171
20 2019 5.80% $892 $799 $1,128 $1,278
30 2029 5.95% $875 $773 $1,155 $1,350
Source: Municipal Market Data (a division of Thomson Financial Municipal Group);
"Aaa" yield curve as of 12/31/99. The table is not representative of price
changes for inverse floating rate municipal obligations which typically respond
to changes in interest rates to a greater extent than comparable obligations. In
addition, the table is an illustration and does not represent expected yields or
share price changes of any Morgan Stanley Dean Witter mutual fund.
* Assumes no effect from market discount calculation.
**Assumes bonds are non-callable.
The Fund is not limited as to the maturities of the municipal obligations in
which it may invest. Thus, a rise in the general level of interest rates may
cause the price of the Fund's portfolio securities to fall substantially.
Inverse Floating Rate Municipal Obligations. The inverse floating rate municipal
obligations in which the Fund may invest are typically created through a
division of a fixed rate municipal obligation into two separate instruments, a
short-term obligation and a long-term obligation. The interest rate on the
short-term obligation is set at periodic auctions. The interest rate on the
long-term obligation is the rate the issuer would have paid on the fixed income
obligation: (i) plus the difference between such fixed rate and the rate on the
short-term obligation, if the short-term rate is lower than the fixed rate; or
(ii) minus such difference if the interest rate on the short-term obligation is
higher than the fixed rate. Inverse floating rate municipal obligations offer
the potential for higher income than is available from fixed rate obligations of
comparable maturity and credit rating. They also carry greater risks. In
particular, the prices of inverse floating rate municipal obligations are more
volatile, i.e., they increase and decrease in response to changes in interest
rates to a greater extent than comparable fixed rate obligations.
3
<PAGE>
Other Risks. The performance of the Fund also will depend on whether the
Investment Manager is successful in pursuing the Fund's investment strategy. The
Fund is also subject to other risks from its permissible investments including
the risks associated with its lease obligations investments. 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.
4
<PAGE>
[GRAPHIC OMITTED]
PAST PERFORMANCE
- ----------------
The bar chart and table below provide some indication of the risks of investing
in the Fund. The Fund's past performance does not indicate how the Fund will
perform in the future.
(sidebar)
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's Class D shares has varied
from year to year over the past 10 calendar years.
(end sidebar)
[GRAPHIC OMITTED]
ANNUAL TOTAL RETURNS--CALENDAR YEARS
YEAR PERCENTAGE
1990 5.86%
1991 12.71%
1992 9.09%
1993 11.23%
1994 -5.55%
1995 17.37%
1996 3.61%
1997 8.73%
1998 6.11%
1999 -2.71%
The bar chart reflects the performance of Class D shares. All shares held prior
to the Fund adopting its Multi-Class Structure on July 28, 1997 were designated
Class D Shares. Prior to that date, shares were subject to a front-end sales
charge, which is not reflected in the bar chart. The performance of the other
Classes will differ because the Classes have different ongoing fees.
(sidebar)
AVERAGE ANNUAL TOTAL RETURNS
This table compares the Fund's average annual returns with those of a broad
measure of market performance over time. The Fund's returns include the maximum
applicable sales charge for each Class and assume you sold your shares at the
end of each period.
(end sidebar)
During the periods shown in the bar chart, the highest return for a calendar
quarter was 6.89% (quarter ended March 31, 1995) and the lowest return for a
calendar quarter was -5.50% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Class A(1) -6.95% 5.27% 5.73%
Class B(2) -7.86% -- --
Class C(2) -4.29% -- --
Class D(3) -2.71% 6.42% 6.44%
Lehman Brothers Municipal Bond Index(4) -2.06% 6.91% 6.89%
1 Prior to July 28, 1997 the Fund offered only one class of shares. Because
the distribution arrangement for Class A most closely resembled the
distribution arrangement applicable prior to the implementation of multiple
classes (i.e., Class A is sold with a front-end sales charge), historical
performance information has been restated to reflect the actual maximum
sales charge applicable to Class A (i.e., 4.25%) as compared to the 4.00%
sales charge in effect prior to July 28, 1997. In addition, Class A shares
are now subject to an ongoing 12b-1 fee which is reflected in the restated
performance for that class.
2 Classes B and C commenced operations on July 28, 1997.
3 Because all shares of the Fund held prior to July 28, 1997 were designated
Class D shares, the Fund's historical performance has been restated to
reflect the absence of any sales charge.
4 The Lehman Brothers Municipal Bond Index tracks the performance of Municipal
bonds with maturities of 2 years or more and a minimum credit rating of Baa
or BBB, as measured by Moody's Investor Service, Inc. or Standard & Poor's
Corp. The Index does not include any expenses, fees, or changes. The Index
is unmanaged and should not be considered an investment.
5
<PAGE>
[GRAPHIC OMITTED]
FEES AND EXPENSES
- -----------------
The table below briefly describes the fees and expenses that you may pay if you
buy and hold shares of the Fund. The Fund offers four Classes of shares: Classes
A, B, C and D. Each Class has a different combination of fees, expenses and
other features. The Fund does not charge account or exchange fees. See the
"Share Class Arrangements" section for further fee and expense information.
(sidebar)
SHAREHOLDER FEES
These fees are paid directly from your investment.
(end sidebar)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
SHAREHOLDER FEES
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 4.25%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) None2 5.00%3 1.00%4 None
(sidebar)
ANNUAL FUND OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended December 31, 1999.
(end sidebar)
ANNUAL FUND OPERATING EXPENSES
Management fee 0.44% 0.44% 0.44% 0.44%
Distribution and service (12b-1) fees 0.13% 0.60% 0.70% None
Other expenses 0.07% 0.07% 0.07% 0.07%
Total annual Fund operating expenses 0.64% 1.11% 1.21% 0.51%
</TABLE>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the time of purchase
are subject to a contingent deferred sales charge ("CDSC") of 1.00% that
will be imposed if you sell your shares within one year after purchase,
except for certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of
the CDSC.
4 Only applicable if you sell your shares within one year after purchase.
6
<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 (redeem) your shares at the end of each period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A $488 $621 $767 $1,189 $488 $621 $767 $1,189
CLASS B $613 $653 $812 $1,352 $113 $353 $612 $1,352
CLASS C $223 $384 $665 $1,466 $123 $384 $665 $1,466
CLASS D $52 $164 $285 $640 $52 $164 $285 $640
</TABLE>
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
[GRAPHIC OMITTED]
ADDITIONAL INVESTMENT STRATEGY INFORMATION
- ------------------------------------------
This section provides additional information relating to the Fund's principal
strategies.
Lease Obligations. Included within the revenue bonds category are participations
in lease obligations or installment purchase contracts of municipalities.
Generally, state and local agencies or authorities issue lease obligations to
acquire equipment and facilities for public and private purposes.
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 taxable securities, or in tax-exempt securities subject
to the federal alternative minimum tax for individual shareholders when the
Investment Manager believes it is advisable to do so. Although taking a
defensive posture is designed to protect the Fund from an anticipated market
downturn, it could have the effect of reducing the Fund's ability to provide
tax-exempt income. When the Fund takes a defensive position, it may not achieve
its investment objective.
The percentage limitations relating to the composition of the Fund's portfolio
apply at the time the Fund acquires an investment and refer to the Fund's net
assets, unless otherwise noted. Subsequent percentage changes that result from
market fluctuations
7
<PAGE>
will not require the Fund to sell any portfolio security. The Fund may change
its principal investment strategies without shareholder approval; however, you
would be notified of any changes.
[GRAPHIC OMITTED]
ADDITIONAL RISK INFORMATION
- ---------------------------
This section provides additional information relating to the principal risks of
investing in the Fund.
Bond Insurance Risk. Many of the municipal obligations the Fund invests in will
be covered by insurance at the time of issuance or at a later date. Such
insurance covers the remaining term of the security. Insured municipal
obligations would generally be assigned a lower rating if the rating were based
primarily on the credit quality of the issuer without regard to the insurance
feature. If the claims-paying ability of the insurer were downgraded, the
ratings on the municipal obligations it insures may also be downgraded.
Lease Obligations. Lease obligations may have risks not normally associated with
general obligation or other revenue bonds. Leases and installment purchase or
conditional sale contracts (which may provide for title to the leased asset to
pass eventually to the issuer) have developed, in part, as a means for
governmental issuers to acquire property and equipment without the necessity of
complying with the constitutional and statutory requirements generally
applicable for the issuance of debt. Certain lease obligations contain
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for that purpose by the appropriate legislative body on an annual
or other periodic basis. Consequently, continued lease payments on those lease
obligations containing "non-appropriation" clauses are dependent on future
legislative actions. If these legislative actions do not occur, the holders of
the lease obligation may experience difficulty in exercising their rights,
including disposition of the property.
8
<PAGE>
[GRAPHIC OMITTED]
FUND MANAGEMENT
- ----------------
(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 January 31, 2000.
(end sidebar)
The Fund has retained the Investment Manager -- Morgan Stanley Dean Witter
Advisors Inc. -- to provide administrative services, manage its business affairs
and invest its assets, including the placing of orders for the purchase and sale
of portfolio securities. The Investment Manager is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services. Its main business office is
located at Two World Trade Center, New York, NY 10048.
The Fund's portfolio is managed within the Investment Manager's Tax-Exempt
Group. James F. Willison, Senior Vice President and Director of the Tax-Exempt
Fixed-Income Group of the Investment Manager has been a primary portfolio
manager of the Fund since its inception. Joseph R. Arcieri, Senior Vice
President of the Investment Manager, has been a primary portfolio manager of the
Fund since February 1997. Mr. Willison and Mr. Arcieri have been portfolio
managers with the Investment Manager for over five years.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund, and for Fund
expenses assumed by the Investment Manager. The fee is based on the Fund's
average daily net assets. For the fiscal year ended December 31, 1999, the Fund
accrued total compensation to the Investment Manager amounting to 0.44% of the
Fund's average daily net assets.
9
<PAGE>
SHAREHOLDER INFORMATION
[GRAPHIC OMITTED]
PRICING FUND SHARES
- -------------------
The price of Fund shares (excluding sales charges), called "net asset value," is
based on the value of the Fund's portfolio securities. While the assets of each
Class are invested in a single portfolio of securities, the net asset value of
each Class will differ because the Classes have different ongoing distribution
fees.
The net asset value per share of the Fund is determined once daily at 4:00 p.m.
Eastern time on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York Stock Exchange is
closed.
The Fund's portfolio securities (except for short-term taxable debt securities
and certain other investments) are valued by an outside independent pricing
service. The service uses a computerized grid matrix of tax-exempt securities
and its evaluations in determining what it believes is the fair value of the
portfolio securities. The Fund's Board of Trustees believes that timely and
reliable market quotations are generally not readily available to the Fund to
value tax-exempt securities and the valuations that the pricing service supplies
are more likely to approximate the fair value of the securities.
An exception to the Fund's general pricing policy concerns its short-term debt
securities. Debt securities with remaining maturities of sixty days or less at
the time of purchase are valued at amortized cost. However, if the cost does not
reflect the securities' market value, these securities will be valued at their
fair value.
[GRAPHIC OMITTED]
HOW TO BUY SHARES
- -----------------
(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)
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. Your Financial Advisor or other authorized financial representative
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.
10
<PAGE>
When you buy Fund shares, the shares are purchased at the next share price
calculated (less any applicable front-end sales charge for Class A shares) after
we receive your purchase order. Your payment is due on the third business day
after you place your purchase order. We reserve the right to reject any order
for the purchase of Fund shares.
(sidebar)
EASYINVEST(SM)
A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
(end sidebar)
MINIMUM INVESTMENT AMOUNTS
MINIMUM INVESTMENT
INVESTMENT OPTIONS INITIAL ADDITIONAL
Regular Accounts $1,000 $100
EasyInvest(SM)
(Automatically from your
checking or savings account
or Money Market Fund) $100* $100*
* Provided your schedule of investments totals $1,000 in twelve months.
There is no minimum investment amount if you purchase Fund shares through: (1)
the Investment Manager's mutual fund asset allocation plan, (2) a program,
approved by the Fund's distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.
Investment Options for Certain Institutional and Other Investors/Class D Shares.
To be eligible to purchase Class D shares, you must qualify under one of the
investor categories specified in the "Share Class Arrangements" section of this
Prospectus.
Subsequent Investments Sent Directly to the Fund. In addition to buying
additional Fund shares for an existing account by contacting your Morgan Stanley
Dean Witter Financial Advisor, you may send a check directly to the Fund. To buy
additional shares in this manner:
o Write a "letter of instruction" to the Fund specifying the name(s) on the
account, the account number, the social security or tax identification number,
the Class of shares you wish to purchase and the investment amount (which
would include any applicable front-end sales charge). The letter must be
signed by the account owner(s).
o Make out a check for the total amount payable to: Morgan Stanley Dean Witter
Tax-Exempt Securities Trust.
o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O. Box
1040, Jersey City, NJ 07303.
11
<PAGE>
[GRAPHIC OMITTED]
HOW TO EXCHANGE SHARES
- ----------------------
Permissible Fund Exchanges. You may exchange shares of any Class of the Fund for
the same Class of any other continuously offered Multi-Class Fund, or for shares
of a No-Load Fund, a Money Market Fund, North American Government Income Trust
or Short-Term U.S. Treasury Trust, without the imposition of an exchange fee.
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
12
<PAGE>
requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number. Telephone
instructions also may be recorded.
Telephone instructions will be accepted if received by the Fund's transfer agent
between 9:00 a.m. and 4:00 p.m. Eastern time on any day the New York Stock
Exchange is open for business. During periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be difficult
to implement, although this has not been the case with the Fund in the past.
Margin Accounts. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the exchange of such shares.
Tax Considerations of Exchanges. If you exchange shares of the Fund for shares
of another Morgan Stanley Dean Witter Fund there are important tax
considerations. For tax purposes, the exchange out of the Fund is considered a
sale of Fund shares -- and the exchange into the other Fund is considered a
purchase. As a result, you may realize a capital gain or loss.
You should review the "Tax Consequences" section and consult your own tax
professional about the tax consequences of an exchange.
Limitations on Exchanges. Certain patterns of 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 further discussion of how applicable contingent deferred
sales charges (CDSCs) are calculated for shares of one Morgan Stanley Dean
Witter Fund that are exchanged for shares of another.
For further information regarding exchange privileges, you should contact your
Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.
13
<PAGE>
[GRAPHIC OMITTED]
HOW TO SELL SHARES
- ------------------
You can sell some or all of your Fund shares at any time. If you sell Class A,
Class B or Class C shares, your net sale proceeds are reduced by the amount of
any applicable CDSC. Your shares will be sold at the next price calculated after
we receive your order to sell as described below.
OPTIONS PROCEDURES
Contact Your To sell your shares, simply call your Morgan Stanley
Financial Advisor Dean Witter Financial Advisor or other authorized
financial representative.
[GRAPHIC OMITTED] Payment will be sent to the address to which the account
is registered or deposited in your brokerage account.
By Letter You can also sell your shares by writing a
"letter of instruction" that includes:
o your account number;
o the dollar amount or the number
of shares you wish to sell;
o the Class of shares you wish to sell; and
[GRAPHIC OMITTED] o the signature of each owner as it appears on the
account.
If you are requesting payment to anyone other than the
registered owner(s) or that payment be sent to any
address other than the address of the registered
owner(s) or pre-designated bank account, you will need a
signature guarantee. You can obtain a signature
guarantee from an eligible guarantor acceptable to
Morgan Stanley Dean Witter Trust FSB. (You should
contact Morgan Stanley Dean Witter Trust FSB at (800)
869-NEWS for a determination as to whether a particular
institution is an eligible guarantor.) A notary public
cannot provide a signature guarantee. Additional
documentation may be required for shares held by a
corporation, partnership, trustee or executor.
Mail the letter to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 983, Jersey City, NJ 07303. If you hold
share certificates, you must return the certificates,
along with the letter and any required additional
documentation.
A check will be mailed to the name(s) and address in
which the account is registered, or otherwise according
to your instructions.
Systematic If your investment in all of the Morgan Stanley Dean
Withdrawal Plan Witter Family of Funds has a total Withdrawal Plan
[GRAPHIC OMITTED] market value of at least $10,000, you may elect to
withdraw amounts of $25 or more, or in any whole
percentage of a Fund's balance (provided the amount is
at least $25), on a monthly, 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.
--------------------------------------------------------
14
<PAGE>
Payment for Sold Shares. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.
Payment may be postponed or the right to sell your shares suspended, under
unusual circumstances. If you request to sell shares that were recently
purchased by check, your sale will not be effected until it has been verified
that the check has been honored.
Reinstatement Privilege. If you sell Fund shares and have not previously
exercised the reinstatement privilege, you may, within 35 days after the date of
sale, invest any portion of the proceeds in the same Class of Fund shares at
their net asset value and receive a pro rata credit for any CDSC paid in
connection with the sale.
Involuntary Sales. The Fund reserves the right, on sixty days' notice, to sell
the shares of any shareholder (other than shares held in an IRA or 403(b)
Custodial Account) whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through EasyInvest(SM), if after
12 months the shareholder has invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we will notify you
and allow you sixty days to make an additional investment in an amount that will
increase the value of your account to at least the required amount before the
sale is processed. No CDSC will be imposed on any involuntary sale.
Margin Accounts. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the sale of such shares.
15
<PAGE>
[GRAPHIC OMITTED]
DISTRIBUTIONS
- -------------
(sidebar)
TARGETED DIVIDENDS(SM)
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of another Morgan Stanley Dean Witter Fund
that you own. Contact your Morgan Stanley Dean Witter Financial Advisor for
further information about this service.
(end sidebar)
The Fund passes substantially all of its earnings from income and capital gains
along to its investors as "distributions." The Fund earns 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 declared on each day the New York Stock Exchange is open
for business, and are distributed to shareholders monthly. Capital gains, if
any, are usually distributed in June and December. The Fund, however, may retain
and reinvest any long-term capital gains. The Fund may at times make payments
from sources other than income or capital gains that represent a return of a
portion of your investment.
Distributions are reinvested automatically in additional shares of the same
Class and automatically credited to your account, unless you request in writing
that all distributions be paid in cash. If you elect the cash option, processing
of your dividend checks begins immediately following the monthly payment date,
and the Fund will mail a monthly dividend check to you normally during the first
seven days of the following month. No interest will accrue on uncashed checks.
If you wish to change how your distributions are paid, your request should be
received by the Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at
least five business days prior to the record date of the distributions.
[GRAPHIC OMITTED]
TAX CONSEQUENCES
- ----------------
As with any investment, you should consider how your Fund investment will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.
You need to be aware of the possible tax consequences when:
o The Fund makes distributions; and
o You sell Fund shares, including an exchange to another Morgan Stanley Dean
Witter Fund.
16
<PAGE>
Taxes on Distributions. Your income dividend distributions are normally exempt
from federal income taxes -- to the extent they are derived from municipal
obligations. Income derived from other portfolio securities may be subject to
federal, state and/or local income taxes.
Income derived from some municipal securities is subject to the federal
"alternative minimum tax." Certain tax-exempt securities whose proceeds are used
to finance private, for-profit organizations are subject to this special tax
system that ensures that individuals pay at least some federal taxes. Although
interest on these securities is generally exempt from federal income tax, some
taxpayers who have many tax deductions or exemptions nevertheless may have to
pay tax on the income.
If you borrow money to purchase shares of the Fund, the interest on the borrowed
money is generally not deductible for personal income tax purposes.
If the Fund makes any capital gain distributions, those distributions will
normally be subject to federal income tax when they are paid, whether you take
them in cash or reinvest them in the Fund shares. Any long-term capital gain
distributions are taxable to you as long-term capital gains, no matter how long
you have owned shares in the Fund.
The Fund may derive gains in part from municipal obligations the Fund purchased
below their principal or face values. All, or a portion, of these gains may be
taxable to you as ordinary income rather than capital gains.
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.
17
<PAGE>
[GRAPHIC OMITTED]
SHARE CLASS ARRANGEMENTS
- ------------------------
The Fund offers several Classes of shares having different distribution
arrangements designed to provide you with different purchase options according
to your investment needs. Your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative can help you decide which Class may be
appropriate for you.
The general public is offered three Classes: Class A shares, Class B shares and
Class C shares, which differ principally in terms of sales charges and ongoing
expenses. A fourth Class, Class D shares, is offered only to a limited category
of investors. Shares that you acquire through reinvested distributions will not
be subject to any front-end sales charge or CDSC -- contingent deferred sales
charge. Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide for the
distribution financing of shares of that Class.
The chart below compares the sales charge and maximum annual 12b-1 fee
applicable to each Class:
MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1 FEE
A Maximum 4.25% initial sales charge reduced for
purchases 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 0.60%
C 1.0% CDSC during the first year 0.70%
D None None
CLASS A SHARES Class A shares are sold at net asset value plus an initial sales
charge of up to 4.25%. 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.
18
<PAGE>
The offering price of Class A shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:
(sidebar)
FRONT-END SALES CHARGE OR FSC
An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges -- the Combined Purchase Privilege, Right of Accumulation
and Letter of Intent.
(end sidebar)
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
AMOUNT OF PERCENTAGE OF APPROXIMATE PERCENTAGE
SINGLE TRANSACTION PUBLIC OFFERING PRICE OF NET AMOUNT INVESTED
<S> <C> <C>
Less than $25,000 4.25% 4.44%
$25,000 but less than $50,000 4.00% 4.17%
$50,000 but less than $100,000 3.50% 3.63%
$100,000 but less than $250,000 2.75% 2.83%
$250,000 but less than $1 million 1.75% 1.78%
$1 million and over 0 0
</TABLE>
The reduced sales charge schedule is applicable to purchases of Class A shares
in a single transaction by:
o A single account (including an individual, trust or fiduciary account).
o Family member accounts (limited to husband, wife and children under the age of
21).
o Pension, profit sharing or other employee benefit plans of companies and their
affiliates.
o Tax-exempt organizations.
o Groups organized for a purpose other than to buy mutual fund shares.
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.
19
<PAGE>
You must notify your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative (or Morgan Stanley Dean Witter Trust FSB if
you purchase directly through the Fund), at the time a purchase order is placed,
that the purchase qualifies for the reduced charge under the Right of
Accumulation. Similar notification must be made in writing when an order is
placed by mail. The reduced sales charge will not be granted if: (i)
notification is not furnished at the time of the order; or (ii) a review of the
records of Dean Witter Reynolds or other authorized dealer of Fund shares or the
Fund's transfer agent does not confirm your represented holdings.
Letter of Intent. The schedule of reduced sales charges for larger purchases
also will be available to you if you enter into a written "letter of intent." A
letter of intent provides for the purchase of Class A shares of the Fund or
other Multi-Class Funds or shares of FSC Funds within a thirteen-month period.
The initial purchase under a letter of intent must be at least 5% of the stated
investment goal. To determine the applicable sales charge reduction, you may
also include: (1) the cost of shares of other Morgan Stanley Dean Witter Funds
which were previously purchased at a price including a front-end sales charge
during the 90-day period prior to the distributor receiving the letter of
intent, and (2) the cost of shares of other Funds you currently own acquired in
exchange for shares of Funds purchased during that period at a price including a
front-end sales charge. You can obtain a letter of intent by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not achieve the stated
investment goal within the thirteen-month period, you are required to pay the
difference between the sales charges otherwise applicable and sales charges
actually paid, which may be deducted from your investment.
Other Sales Charge Waivers. In addition to investments of $1 million or more,
your purchase of Class A shares is not subject to a front-end sales charge (or a
CDSC upon sale) if your account qualifies under one of the following categories:
o A trust for which Morgan Stanley Dean Witter Trust FSB provides discretionary
trustee services.
o Persons participating in a fee-based investment program (subject to all of its
terms and conditions, including termination fees, mandatory sale or transfer
restrictions on termination) approved by the Fund's distributor pursuant to
which they pay an asset-based fee for investment advisory, administrative and/
or brokerage services.
o 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.
20
<PAGE>
o Current or retired Directors/Trustees of the Morgan Stanley Dean Witter Funds,
such persons' spouses and children under the age of 21, and trust accounts for
which any of such persons is a beneficiary.
o Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries, such persons' spouses and children
under the age of 21, and trust accounts for which any of such persons is a
beneficiary.
CLASS B SHARES Class B shares are offered at net asset value with no initial
sales charge but are subject to a contingent deferred sales charge, or CDSC, as
set forth in the table below. For the purpose of calculating the CDSC, shares
are deemed to have been purchased on the last day of the month during which they
were purchased.
(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)
CDSC AS A PERCENTAGE OF
YEAR SINCE PURCHASE PAYMENT MADE AMOUNT REDEEMED
First 5.0%
Second 4.0%
Third 3.0%
Fourth 2.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
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. A lower CDSC schedule applies in most cases to shares of the
Fund acquired in connection with the reorganization of Dean Witter National
Municipal Trust and the Fund on November 7, 1997.
CDSC Waivers. A CDSC, if otherwise applicable, will be waived in the case of:
o Sales of shares held at the time you die or become disabled (within the
definition in Section 72(m)(7) of the Internal Revenue Code which relates to
the ability to engage in gainful employment), if the shares are:
(i) registered either in your name (not a trust) or in the names of you and
your spouse as joint tenants with right of survivorship; or (ii) held in a
qualified corporate or self-employed retirement plan, IRA or 403(b) Custodial
Account, provided in either case that the sale is requested within one year of
your death or initial determination of disability.
o Sales in connection with the following retirement plan "distributions:" (i)
lump-sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or, in the case of a "key employee" of a
"top
21
<PAGE>
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).
o Sales of shares in connection with the Systematic Withdrawal Plan of up
to 12% annually of the value of each Fund from which plan sales are
made. The percentage is determined on the date you establish the
Systematic Withdrawal Plan and based on the next calculated share price.
You may have this CDSC waiver applied in amounts up to 1% per month, 3%
per quarter, 6% semi-annually or 12% annually. Shares with no CDSC will
be sold first, followed by those with the lowest CDSC. As such, the
waiver benefit will be reduced by the amount of your shares that are not
subject to a CDSC. If you suspend your participation in the plan, you
may later resume plan payments without requiring a new determination of
the account value for the 12% CDSC waiver.
o Sales of shares if you simultaneously invest the proceeds in the
Investment Manager's mutual fund asset allocation program, pursuant
to which investors pay an asset-based fee. Any shares you acquire
in connection with the Investment Manager's mutual fund asset
allocation program are subject to all of the terms and conditions
of that program, including termination fees, mandatory sale or
transfer restrictions on termination.
All waivers will be granted only following the Fund's distributor receiving
confirmation of your entitlement. If you believe you are eligible for a CDSC
waiver, please contact your Financial Advisor or call (800) 869-NEWS.
Distribution Fee. Class B shares are also subject to an annual 12b-1 fee of
0.60% of the average daily net assets of Class B.
Conversion Feature. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales charge. The
ten year period runs from the last day of the month in which the shares were
purchased, or in the case of Class B shares acquired through an exchange, from
the last day of the month in which the original Class B shares were purchased;
the shares will convert to Class A shares based on their relative net asset
values in the month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically reinvested
distributions will convert to Class A shares on the same basis. (Class B shares
held before May 1, 1997, however, will convert to Class A shares in May 2007.)
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.
22
<PAGE>
If you exchange your Class B shares for shares of a Money Market Fund, a No-Load
Fund, North American Government Income Trust or Short-Term U.S. Treasury Trust,
the holding period for conversion is frozen as of the last day of the month of
the exchange and resumes on the last day of the month you exchange back into
Class B shares.
Exchanging Shares Subject to a CDSC. There are special considerations when you
exchange Fund shares that are subject to a CDSC. When determining the length of
time you held the shares and the corresponding CDSC rate, any period (starting
at the end of the month) during which you held shares of a fund that does not
charge a CDSC will not be counted. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into a fund that does
not charge a CDSC.
For example, if you held Class B shares of the Fund for one year, exchanged to
Class B of another Morgan Stanley Dean Witter Multi-Class Fund for another year,
then sold your shares, a CDSC rate of 4% would be imposed on the shares based on
a two year holding period -- one year for each Fund. However, if you had
exchanged the shares of the Fund for a Money Market Fund (which does not charge
a CDSC) instead of the Multi-Class Fund, then sold your shares, a CDSC rate of
5% would be imposed on the shares based on a one year holding period. The one
year in the Money Market Fund would not be counted. Nevertheless, if shares
subject to a CDSC are exchanged for a Fund that does not charge a CDSC, you will
receive a credit when you sell the shares equal to the distribution (12b-1)
fees, if any, you paid on those shares while in that Fund up to the amount of
any applicable CDSC.
In addition, shares that are exchanged into or from a Morgan Stanley Dean Witter
Fund subject to a higher CDSC rate will be subject to the higher rate, even if
the shares are re-exchanged into a Fund with a lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no initial sales
charge but are subject to a CDSC of 1.0% on sales made within one year after the
last day of the month of purchase. The CDSC will be assessed in the same manner
and with the same CDSC waivers as with Class B shares.
Distribution Fee. Class C shares are subject to an annual distribution (12b-1)
fee of up to 0.70% 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.
23
<PAGE>
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 and the
following investor categories:
o Investors participating in the Investment Manager's mutual fund asset
allocation program (subject to all of its terms and conditions, including
termination fees, mandatory sale or transfer restrictions on termination)
pursuant to which they pay an asset-based fee.
o Persons participating in a fee-based investment program (subject to all of its
terms and conditions, including termination fees, mandatory sale or transfer
restrictions on termination) approved by the Fund's distributor pursuant to
which they pay an asset-based fee for investment advisory, administrative and/
or brokerage services.
o Certain unit investment trusts sponsored by Dean Witter Reynolds.
o Certain other open-end investment companies whose shares are distributed by
the Fund's distributor.
o Investors who were shareholders of the Dean Witter Retirement Series on
September 11, 1998 for additional purchases for their former Dean Witter
Retirement Series accounts.
Meeting Class D Eligibility Minimums. To meet the $5 million 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.
24
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 fiscal years of the Fund. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost
on an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE JULY 28, 1997*
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
<S> <C> <C> <C>
CLASS A
SELECTED PER-SHARE DATA:
Net asset value, beginning of period $12.02 $12.09 $12.00
Income (loss) from investment operations:
Net investment income 0.58 0.59 0.25
Net realized and unrealized gain (loss) (0.91) 0.10 0.14
-------- -------- -----
Total income (loss) from investment operations (0.33) 0.69 0.39
Less dividends and distributions from:
Net investment income (0.58) (0.59) (0.25)
Net realized gain (0.03) (0.17) (0.05)
-------- -------- ------
Total dividends and distributions (0.61) (0.76) (0.30)
Net asset value, end of period $11.08 $12.02 $12.09
TOTAL RETURN+ (2.82)% 5.86% 3.31%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.64%(4)(5) 0.74%(4)(5) 0.76%(2)(3)
Net investment income 4.98%(5) 4.88%(5) 4.96%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $17,198 $15,041 $3,857
Portfolio turnover rate 13% 15% 16%
</TABLE>
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
(4) Does not reflect the effect of expense offset of 0.01%.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
25
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE JULY 28, 1997*
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
<S> <C> <C> <C>
CLASS B
SELECTED PER-SHARE DATA:
Net asset value, beginning of period $12.07 $12.14 $12.00
-------- -------- --------
Income (loss) from investment operations:
Net investment income 0.53 0.55 0.23
Net realized and unrealized gain (loss) (0.91) 0.10 0.19
-------- -------- --------
Total income (loss) from investment operations (0.38) 0.65 0.42
-------- -------- --------
Less dividends and distributions from:
Net investment income (0.53) (0.55) (0.23)
Net realized gain (0.03) (0.17) (0.05)
-------- -------- --------
Total dividends and distributions (0.56) (0.72) (0.28)
-------- -------- --------
Net asset value, end of period $11.13 $12.07 $12.14
TOTAL RETURN+ (3.25)% 5.47% 3.57%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.11%(4)(5) 1.10%(4)(5) 1.14%(2)(3)
Net investment income 4.51%(5) 4.52%(5) 4.87%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $139,786 $132,303 $95,573
Portfolio turnover rate 13% 15% 16%
</TABLE>
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
(4) Does not reflect the effect of expense offset of 0.01%.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
26
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE JULY 28, 1997*
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
<S> <C> <C> <C>
CLASS C
SELECTED PER-SHARE DATA:
Net asset value, beginning of period $12.04 $12.11 $12.00
Income (loss) from investment operations:
Net investment income 0.51 0.53 0.23
Net realized and unrealized gain (loss) (0.91) 0.10 0.16
-------- --------- ---------
Total income (loss) from investment
operations (0.40) 0.63 0.39
Less dividends and distributions from:
Net investment income (0.51) (0.53) (0.23)
Net realized gain (0.03) (0.17) (0.05)
-------- --------- ---------
Total dividends and distributions (0.54) (0.70) (0.28)
Net asset value, end of period $11.10 $12.04 $12.11
TOTAL RETURN+ (3.37)% 5.36% 3.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.21%(4)(5) 1.20%(4)(5) 1.20%(2)(3)
Net investment income 4.41%(5) 4.34%(5) 4.41%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $10,025 $7,599 $2,953
Portfolio turnover rate 13% 15% 16%
</TABLE>
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
(4) Does not reflect the effect of expense offset of 0.01%.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
27
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1999
<S> <C>
CLASS D
SELECTED PER-SHARE DATA:
Net asset value, beginning of period $12.01
Income (loss) from investment operations:
Net investment income 0.59
Net realized and unrealized gain (loss) (0.91)
------
Total income (loss) from investment operations (0.32)
Less dividends and distributions from:
Net investment income (0.59)
Net realized gain (0.03)
------
Total dividends and distributions (0.62)
Net asset value, end of period $11.07
TOTAL RETURN+ (2.71)%
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.51%(1)(2)
Net investment income 5.11%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $853,216
Portfolio turnover rate 13%
<CAPTION>
YEARS ENDED DECEMBER 31 1998* 1997* 1996 1995
<S> <C> <C> <C> <C>
CLASS D
SELECTED PER-SHARE DATA:
Net asset value, beginning of period $12.08 $11.77 $12.09 $11.01
Income (loss) from investment operations:
Net investment income 0.62 0.63 0.65 0.67
Net realized and unrealized gain (loss) 0.10 0.36 (0.24) 1.19
-------- ---------- ---------- ----------
Total income (loss) from investment operations 0.72 0.99 0.41 1.86
Less dividends and distributions from:
Net investment income (0.62) (0.63) (0.65) (0.67)
Net realized gain (0.17) (0.05) (0.08) (0.11)
----------- ---------- ---------- ----------
Total dividends and distributions (0.79) (0.68) (0.73) (0.78)
Net asset value, end of period $12.01 $12.08 $11.77 $ 12.09
TOTAL RETURN+ 6.11% 8.73% 3.61% 17.37%
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.50%(1)(2) 0.49% 0.48% 0.48%
Net investment income 5.12%(2) 5.34% 5.52% 5.76%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $1,023,246 $1,096,998 $1,190,034 $1,325,308
Portfolio turnover rate 15% 16% 18% 21%
</TABLE>
* Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class D shares.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Does not reflect the effect of expense offset of 0.01%.
(2) Reflects overall Fund ratios for investment income and non-class specific
expenses.
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 & INCOME FUNDS
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Equity Fund
Fund of Funds -- Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Market Index Fund
Total Return Trust
Value Fund
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
Global Utilities Fund
- --------------------------------------------------------------------------------
INCOME FUNDS
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund(NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust(FSC)
Limited Term Municipal Trust(NL)
Multi-State Municipal Series Trust(FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund(MM)
U.S. Government Money Market Trust(MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust(MM)
New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
There may be funds created after this Prospectus was published. Please consult
the inside back cover of a new Fund's Prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of Funds are: NL -- No-Load (Mutual) Fund; MM --
Money Market Fund; FSC -- A mutual fund sold with a front-end sales charge and
a distribution (12b-1) fee.
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PROSPECTUS - FEBRUARY 24, 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 EDGAR Database on the
SEC's Internet site (www.sec.gov), and copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the
following e-mail address: [email protected], or by writing the Public
Reference Section of the SEC, Washington, DC 20549-0102.
TICKER SYMBOLS:
Class A: TAXAX Class C: TAXCX
Class B: TAXBX Class D: TAXDX
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-2979)
Morgan Stanley Dean Witter
TAX-EXEMPT SECURITIES TRUST
[GRAPHIC OMITTED]
A MUTUAL FUND THAT SEEKS TO
PROVIDE A HIGH LEVEL OF CURRENT
INCOME EXEMPT FROM FEDERAL
INCOME TAX, CONSISTENT WITH
THE PRESERVATION OF CAPITAL
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MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
MICHIGAN SERIES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 2000
The undersigned shareholder of Michigan Series ("Michigan Series"), a
portfolio of Morgan Stanley Dean Witter Multi-State Municipal Series Trust,
does hereby appoint Barry Fink, Ronald E. Robison and Joseph J. McAlinden and
each of them, as attorneys-in-fact and proxies of the undersigned, each with
the full power of substitution, to attend the Special Meeting of Shareholders
of Michigan Series to be held on June 22, 2000, in Conference Room A,
Forty-Fourth Floor, Two World Trade Center, New York, New York at 10:00 A.M.,
New York time, and at all adjournments thereof and to vote the shares held in
the name of the undersigned on the record date for said meeting for the
Proposal specified on the reverse side hereof. Said attorneys-in-fact shall
vote in accordance with their best judgment as to any other matter.
(Continued on reverse side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE PROPOSAL SET FORTH ON THE REVERSE HEREOF AND AS RECOMMENDED BY THE
BOARD OF TRUSTEES.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
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PLEASE MARK VOTES
AS TO VOTE BY MAIL, PLEASE COMPLETE AND RETURN THIS CARD
YOU ALSO MAY VOTE A PROXY BY TOUCH-TONE PHONE OR BY INTERNET IN THE EXAMPLE
USING
X
(SEE ENCLOSED VOTING INFORMATION CARD FOR FURTHER INSTRUCTIONS) BLACK OR BLUE
INK
TO VOTE A PROXY BY PHONE, call Toll-Free: 1-800-690-6903
TO VOTE A PROXY BY INTERNET, visit our Website(s): WWW/MSDWT.COM or
WWW.PROXYVOTE.COM
FOR AGAINST ABSTAIN
The Proposal:
Approval of the Agreement and Plan of
Reorganization, dated as of January 26, 2000, pursuant to which substantially
all of the assets of Michigan Series would be combined with those of Morgan
Stanley Dean Witter Tax-Exempt Securities Trust and shareholders of Michigan
Series would become shareholders of Morgan Stanley Dean Witter Tax-Exempt
Securities Trust receiving Class D shares in Morgan Stanley Dean Witter
Tax-Exempt Securities Trust with a value equal to the value of their holdings
in Michigan Series.
Please sign personally. If the shares are registered in more than one name,
each joint owner or each fiduciary should sign personally. Only authorized
officers should sign for corporations.
Please make sure to sign and date this Proxy using black or blue ink.
Date-----------------------------------------
---------------------------------------------
---------------------------------------------
Shareholder sign in the box above
---------------------------------------------
---------------------------------------------
Co-Owner (if any) sign in the box above
- - PLEASE FOLD AND DETACH AT PERFORATION ALONG DOTTED LINES - --
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
MICHIGAN SERIES
IMPORTANT
USE ONE OF THE THREE EASY WAYS TO VOTE YOUR PROXY
1. BY MAIL. PLEASE DATE, SIGN AND RETURN THE ABOVE PROXY CARD IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
2. BY INTERNET. HAVE YOUR PROXY CARD AT HAND. GO TO THE "VOTE YOUR PROXY HERE"
LINK ON THE WEBSITE WWW.MSDWT.COM OR WWW.PROXYVOTE.COM. ENTER YOUR 12
DIGIT CONTROL NUMBER LOCATED ON THE PROXY CARD AND FOLLOW THE SIMPLE
INSTRUCTIONS.
3. BY TELEPHONE. HAVE YOUR PROXY CARD AT HAND. CALL 1-800-690-6903 ON A
TOUCH-TONE PHONE. ENTER YOUR 12-DIGIT CONTROL NUMBER LOCATED ON THE PROXY
CARD AND FOLLOW THE SIMPLE RECORDED INSTRUCTIONS.
00024
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MORGAN STANLEY DEAN WITTER FUNDS
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OFFERS TWO NEW WAYS TO VOTE YOUR PROXY
24 HOURS A DAY, 7 DAYS A WEEK
You can now vote your proxy in a matter of minutes with the ease and
convenience of the Internet or the telephone. You may still vote by mail.
But remember, if you are voting by Internet or telephone, do not mail the
proxy.
TO VOTE BY INTERNET:
1. Read the enclosed Proxy Statement and have your Proxy Card available.
2. Go to the "Proxy Voting" link on www.msdwt.com or to website
www.proxyvote.com.
3. Enter the 12-digit Control Number found on your Proxy Card.
4. Follow the simple instructions.
TO VOTE BY TELEPHONE:
1. Read the enclosed Proxy Statement and have your Proxy Card available.
2. Call toll-free 1-800-690-6903.
3. Enter the 12-digit Control Number found on your Proxy Card.
4. Follow the simple recorded instructions.
Your Proxy Vote is Important!
Thank You for Submitting Your Proxy.
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