<PAGE>
Filed Pursuant to Rule 497(E)
Registration File No.: 2-66268
PROSPECTUS - FEBRUARY 24, 2000
MORGAN STANLEY DEAN WITTER
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TAX-EXEMPT SECURITIES TRUST
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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
<TABLE>
<CAPTION>
<S> <C> <C>
The Fund Investment Objective ....................................... 1
Principal Investment Strategies ............................ 1
Principal Risks ............................................ 2
Past Performance ........................................... 4
Fees and Expenses .......................................... 5
Additional Investment Strategy Information ................. 6
Additional Risk Information ................................ 6
Fund Management ............................................ 7
Shareholder Information Pricing Fund Shares ........................................ 8
How to Buy Shares .......................................... 8
How to Exchange Shares ..................................... 9
How to Sell Shares ......................................... 12
Distributions .............................................. 13
Tax Consequences ........................................... 14
Share Class Arrangements ................................... 15
Financial Highlights .......................................................... 22
Our Family of Funds ............................................... Inside Back Cover
</TABLE>
This Prospectus contains important information about the Fund.
Please read it carefully and keep it for future reference.
<PAGE>
THE FUND
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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
- -------------------------------
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:
[sidebar]
INCOME
An investment objective having the goal of selecting securities to pay out
income rather than rise in price.
[end sidebar]
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 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
1
<PAGE>
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 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.
<TABLE>
<CAPTION>
HOW INTEREST RATES AFFECT BOND PRICES
- ---------------------------------------------------------------------
PRICE PER $1,000 OF A MUNICIPAL BOND
IF INTEREST RATES:
-----------------------------------
INCREASE* DECREASE**
-----------------------------------
YEARS TO BOND
MATURITY MATURITY COUPON 1% 2% 1% 2%
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
2
<PAGE>
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.
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.
3
<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]
ANNUAL TOTAL RETURNS -- CALENDAR YEARS
1990 ........................... 5.86%
'91 ........................... 12.71%
'92 ........................... 9.09%
'93 ........................... 11.23%
'94 ........................... -5.55%
'95 ........................... 17.37%
'96 ........................... 3.61%
'97 ........................... 8.73%
'98 ........................... 6.11%
'99 ........................... -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.
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).
[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]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
- -----------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A1 -6.95% 5.27% 5.73%
- -----------------------------------------------------------------------------------
Class B2 -7.86% -- --
- -----------------------------------------------------------------------------------
Class C2 -4.29% -- --
- -----------------------------------------------------------------------------------
Class D3 -2.71% 6.42% 6.44%
- -----------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index4 -2.06% 6.91% 6.89%
- -----------------------------------------------------------------------------------
</TABLE>
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.
4
<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]
[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]
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
- -----------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on 4.25%(1) None None None
purchases (as a percentage of offering price)
- -----------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering None(2) 5.00%(3) 1.00%(4) None
price or net asset value at redemption)
- -----------------------------------------------------------------------------------------------------------
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.
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:
- --------------------------------------------------- -----------------------------------------
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A $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.
5
<PAGE>
[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 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
6
<PAGE>
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.
[GRAPHIC OMITTED]
FUND MANAGEMENT
- ---------------
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.
[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'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.
7
<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
- -----------------
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.
[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]
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.
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.
8
<PAGE>
[sidebar]
EASYINVEST(SM)
A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
[end sidebar]
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
- -------------------------------------------------------------------------------------
MINIMUM INVESTMENT
-------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
- -------------------------------------------------------------------------------------
<S> <C> <C>
Regular Accounts $1,000 $100
- -------------------------------------------------------------------------------------
EasyInvest(SM)
(Automatically from your checking or savings account or
Money Market Fund) $100* $100*
- -------------------------------------------------------------------------------------
</TABLE>
* Provided your schedule of investments totals $1,000 in twelve months.
There is no minimum investment amount if you purchase Fund shares through: (1)
the Investment Manager's mutual fund asset allocation plan, (2) a program,
approved by the Fund's distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.
INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER INVESTORS/CLASS D
SHARES. To be eligible to purchase Class D shares, you must qualify under one
of the investor categories specified in the "Share Class Arrangements" section
of this Prospectus.
SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to buying
additional Fund shares for an existing account by contacting your Morgan
Stanley Dean Witter Financial Advisor, you may send a check directly to the
Fund. To buy additional shares in this manner:
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.
[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
9
<PAGE>
investment objective(s), policies and investment minimums, and should be read
before investment. Since exchanges are available only into continuously offered
Morgan Stanley Dean Witter Funds, exchanges are not available into any new
Morgan Stanley Dean Witter Fund during its initial offering period, or when
shares of a particular Morgan Stanley Dean Witter Fund are not being offered
for purchase.
EXCHANGE PROCEDURES. You can process an exchange by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Otherwise, you must forward an exchange privilege authorization
form to the Fund's transfer agent -- Morgan Stanley Dean Witter Trust FSB --
and then write the transfer agent or call (800) 869-NEWS to place an exchange
order. You can obtain an exchange privilege authorization form by contacting
your Financial Advisor or other authorized financial representative, or by
calling (800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money Market Fund)
is made on the basis of the next calculated net asset values of the Funds
involved after the exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next calculated net
asset value and the Money Market Fund's shares are purchased at their net asset
value on the following business day.
The Fund may terminate or revise the exchange privilege upon required notice.
The check writing privilege is not available for Money Market Fund shares you
acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley Dean
Witter Trust FSB, we will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. These procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number. Telephone
instructions also may be recorded.
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.
10
<PAGE>
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.
11
<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.
<TABLE>
<CAPTION>
<S> <C>
OPTIONS PROCEDURES
- -------------------------------------------------------------------------------------------------------
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter Financial
Financial Advisor 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;
[GRAPHIC OMITTED] o the dollar amount or the number of shares you wish to sell;
o the Class of shares you wish to sell; and
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 Witter Family of Funds has
Withdrawal Plan a total 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
[GRAPHIC OMITTED] amount is at least $25), on a monthly, quarterly, semi-annual or annual basis,
from any Fund with a balance of at least $1,000. Each time you add a Fund to the
plan, you must meet the plan requirements.
-----------------------------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC may be
waived under certain circumstances. See the Class B waiver categories listed in
the "Share Class Arrangements" section of this Prospectus.
-----------------------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan Stanley
Dean Witter Financial Advisor or call (800) 869-NEWS. You may terminate or
suspend your plan at any time. Please remember that withdrawals from the plan
are sales of shares, not Fund "distributions," and ultimately may exhaust your
account balance. The Fund may terminate or revise the plan at any time.
- -------------------------------------------------------------------------------------------------------
</TABLE>
PAYMENT FOR SOLD SHARES. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.
Payment may be postponed or the right to sell your shares suspended, under
unusual circumstances. If you request to sell shares that were recently
purchased by check, your sale will not be effected until it has been verified
that the check has been honored.
12
<PAGE>
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.
[GRAPHIC OMITTED]
DISTRIBUTIONS
- -------------
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."
[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 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.
13
<PAGE>
[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.
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.
14
<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:
<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1 FEE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
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
- ----------------------------------------------------------------------------------------------
</TABLE>
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.
15
<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
------------------------------------------------
PERCENTAGE OF APPROXIMATE PERCENTAGE
AMOUNT OF 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.
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.
16
<PAGE>
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.
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.
17
<PAGE>
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]
YEAR SINCE PURCHASE PAYMENT MADE CDSC AS A PERCENTAGE OF 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 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
18
<PAGE>
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.
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
19
<PAGE>
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.
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.
20
<PAGE>
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a cash
payment representing an income dividend or capital gain and you reinvest that
amount in the applicable Class of shares by returning the check within 30 days
of the payment date, the purchased shares would not be subject to an initial
sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company Act of
1940 with respect to the distribution of Class A, Class B and Class C shares.
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.
21
<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
JULY 28, 1997*
THROUGH
DECEMBER 31,
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 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.
22
<PAGE>
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31,
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 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.
23
<PAGE>
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31,
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 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.
24
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999 1998* 1997* 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS D
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.01 $12.08 $11.77 $12.09 $11.01
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.59 0.62 0.63 0.65 0.67
Net realized and unrealized gain (loss) (0.91) 0.10 0.36 (0.24) 1.19
-------- --------- -------- -------- --------
Total income (loss) from investment operations (0.32) 0.72 0.99 0.41 1.86
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.59) (0.62) (0.63) (0.65) (0.67)
Net realized gain (0.03) (0.17) (0.05) (0.08) (0.11)
-------- ---------- -------- -------- --------
Total dividends and distributions (0.62) (0.79) (0.68) (0.73) (0.78)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.07 $12.01 $12.08 $11.77 $12.09
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ (2.71)% 6.11% 8.73% 3.61% 17.37%
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses 0.51%(1)(2) 0.50%(1)(2) 0.49% 0.48% 0.48%
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.11%(2) 5.12%(2) 5.34% 5.52% 5.76%
- ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $853,216 $1,023,246 $1,096,998 $1,190,034 $1,325,308
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 13% 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.
25
<PAGE>
NOTES
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26
<PAGE>
NOTES
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27
<PAGE>
NOTES
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28
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers investors a wide
range of investment choices. Come on in and meet the family!
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GROWTH FUNDS GROWTH FUNDS Health Sciences Trust
Aggressive Equity Fund Information Fund
American Opportunities Fund Natural Resource Development Securities
Capital Growth Securities
Developing Growth Securities GLOBAL/INTERNATIONAL FUNDS
Growth Fund Competitive Edge Fund - "Best Ideas" Portfolio
Market Leader Trust European Growth Fund
Mid-Cap Equity Trust Fund of Funds - International Portfolio
Next Generation Trust International Fund
Small Cap Growth Fund International SmallCap Fund
Special Value Fund Japan Fund
21st Century Trend Fund Latin American Growth Fund
Pacific Growth Fund
THEME FUNDS
Financial Services Trust
- ----------------------------------------------------------------------------------------------------------------
GROWTH & INCOME FUNDS Balanced Growth Fund Total Return Trust
Balanced Income Fund Value Fund
Convertible Securities Trust Value-Added Market Series/Equity Portfolio
Dividend Growth Securities
Equity Fund THEME FUNDS
Fund of Funds - Domestic Portfolio
Income Builder Fund Real Estate Fund
Mid-Cap Dividend Growth Securities Utilities Fund
S&P 500 Index Fund
S&P 500 Select Fund GLOBAL FUNDS
Strategist Fund Total Market Index Fund Global Dividend Growth Securities
Global Utilities Fund
- ----------------------------------------------------------------------------------------------------------------
INCOME FUNDS GOVERNMENT INCOME FUNDS GLOBAL INCOME FUNDS
Federal Securities Trust North American Government Income Trust
Short-Term U.S. Treasury Trust World Wide Income Trust
U.S. Government Securities Trust
TAX-FREE INCOME FUNDS
DIVERSIFIED INCOME FUNDS California Tax-Free Income Fund
Diversified Income Trust Hawaii Municipal Trust(FSC)
Limited Term Municipal Trust(NL)
CORPORATE INCOME FUNDS Multi-State Municipal Series Trust(FSC)
High Yield Securities New York Tax-Free Income Fund
Intermediate Income Securities Tax-Exempt Securities Trust
Short-Term Bond Fund(NL)
- ----------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Liquid Asset Fund(MM) California Tax-Free Daily Income Trust(MM)
U.S. Government Money Market Trust(MM) New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
There may be funds created after this Prospectus was published. Please consult
the inside back cover of a new Fund's Prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of Funds are: NL -- No-Load (Mutual) Fund; MM --
Money Market Fund; FSC -- A mutual fund sold with a front-end sales charge and
a distribution (12b-1) fee.
<PAGE>
MORGAN STANLEY DEAN WITTER
TAX-EXEMPT SECURITIES TRUST
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
[sidebar]
TICKER SYMBOLS:
Class A: TAXAX
- ------------------
Class B: TAXBX
- ------------------
Class C: TAXCX
- ------------------
Class D: TAXDX
- ------------------
[end sidebar]
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.
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-2979)
