<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 2000
REGISTRATION NO. 2-67087
811-3031
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 25 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 26 [X]
---------------------
MORGAN STANLEY DEAN WITTER
TAX-FREE DAILY INCOME TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
COPY TO:
STUART M. STRAUSS, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
---------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
immediately upon filing pursuant to paragraph (b)
---
X on February 28, 2000 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)
---
on (date) pursuant to paragraph (a) of rule 485.
---
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS - FEBRUARY 28, 2000
Morgan Stanley Dean Witter
----------------------------------------------------------------
TAX-FREE DAILY INCOME TRUST
A MONEY MARKET FUND THAT SEEKS TO PROVIDE AS HIGH A LEVEL OF DAILY INCOME
EXEMPT FROM FEDERAL INCOME TAX AS IS CONSISTENT WITH
STABILITY OF PRINCIPAL AND LIQUIDITY
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of
this Prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
Contents
<TABLE>
<S> <C>
The Fund Investment Objective..............................1
Principal Investment Strategies...................1
Principal Risks...................................2
Past Performance..................................3
Fees and Expenses.................................4
Fund Management...................................5
Shareholder Information Pricing Fund Shares...............................6
How to Buy Shares.................................6
How to Exchange Shares............................9
How to Sell Shares...............................11
Distributions....................................13
Tax Consequences.................................14
Financial Highlights ................................................15
Financial Statements-
December 31, 1999 ................................................16
Our Family of Funds ................................ Inside Back Cover
This Prospectus contains important information about
the Fund. Please read it carefully and keep it for
future reference.
</TABLE>
<PAGE>
The Fund
[GRAPHIC OMITTED]
INVESTMENT OBJECTIVE
- --------------------------------
Morgan Stanley Dean Witter Tax-Free Daily Income Trust (the "Fund") is
a money market fund that seeks to provide as high a level of daily
income exempt from federal income tax as is consistent with stability
of principal and liquidity.
[GRAPHIC OMITTED]
PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------
The Fund will invest in high quality, short-term
securities that are normally municipal obligations that
pay interest exempt from federal income taxes. The
Fund's "Investment Manager," Morgan Stanley Dean Witter
Advisors Inc., seeks to maintain the Fund's share price
at $1.00. The share price remaining stable at $1.00
means that the Fund would preserve the principal value
of your investment.
[sidebar open]
MONEY MARKET
A mutual fund having the goal to select securities to provide current income
while seeking to maintain a stable share price of $1.00.
[end sidebar]
[sidebar open]
YIELD
The Fund's yield reflects the actual income the Fund pays to you expressed as a
percentage of the Fund's share price. Because the Fund's income from its
portfolio securities will fluctuate, the income it in turn distributes to you
and the Fund's yield will vary.
[end sidebar]
Municipal obligations are securities issued by state
and local governments, and their agencies. These
securities typically are "general obligation" or
"revenue" bonds, notes or commercial paper. The general
obligation securities are secured by the issuer's faith
and credit including its taxing power for payment of
principal and interest. Revenue bonds, however, are
generally payable from a specific revenue source. They
are issued for a wide variety of projects such as
financing public utilities, hospitals, housing,
airports, highways and educational facilities. Included
within the revenue bonds category are participations in
lease obligations and installment purchase contracts of
municipalities. The Fund's municipal obligation
investments may include zero coupon securities, which
are purchased at a discount and accrue interest but
make no interest payment until maturity. The Fund may
invest up to 20% of its assets in taxable money market
securities or in securities that pay interest income
subject to the federal "alternative minimum tax," and
some taxpayers may have to pay tax on a Fund
distribution of this income.
The Fund has a fundamental policy of investing at least 80% of its
total assets in securities the interest on which is exempt from
federal income tax, and which are not subject to the federal
"alternative minimum tax." The fundamental policy may not be changed
without shareholder approval.
1
<PAGE>
[GRAPHIC OMITTED]
PRINCIPAL RISKS
- --------------------------
There is no assurance that the Fund will achieve its investment
objective.
Credit and Interest Rate Risks. Principal risks of investing in the
Fund are associated with its municipal investments. Municipal
obligations, as with all 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 repay the principal on
its debt. Interest rate risk, another risk of debt securities, refers
to fluctuations in the value of a fixed-income security resulting from
changes in the general level of interest rates.
The Investment Manager, however, actively manages the Fund's assets to
reduce the risk of losing any principal investment as a result of
credit or interest rate risks. The Fund's assets are reviewed to
maintain or improve creditworthiness. In addition, federal regulations
require money market funds, such as the Fund, to invest only in debt
obligations of high quality and short maturities.
Shares of the Fund are not bank deposits and are not insured or
guaranteed by the FDIC or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per
share, if it is unable to do so, it is possible to lose money by
investing in the Fund.
2
<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.
ANNUAL TOTAL RETURNS -- CALENDAR YEARS
[BAR CHART OMITTED]
1990 5.48%
1991 4.02%
1992 2.39%
1993 1.85%
1994 2.25%
1995 3.22%
1996 2.83%
1997 2.98%
1998 2.80%
1999 2.53%
During the periods shown in the bar chart, the highest return for a
calendar quarter was 1.40% (quarter ended December 31, 1990) and the
lowest return for a calendar quarter was 0.43% (quarter ended March
31, 1994).
[sidebar open]
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's shares has varied from year
to year over the past 10 calendar years.
[end sidebar]
[sidebar open]
AVERAGE ANNUAL
TOTAL RETURNS
This table shows the Fund's average annual returns.
[end sidebar]
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
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<TABLE>
<CAPTION>
Past 1 Year Past 5 Years Past 10 Years
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Free Daily Income Trust 2.53% 2.87% 3.03%
- -----------------------------------------------------------------------------------
</TABLE>
3
<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 is a no-load
fund. The Fund does not impose any sales charges and does not charge
account or exchange fees.
<TABLE>
<CAPTION>
<S> <C>
Annual Fund Operating Expenses
- ------------------------------------------------------------
Management fee 0.50%
- ------------------------------------------------------------
Distribution and service (12b-1) fees 0.10%
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Other expenses 0.13%
- ------------------------------------------------------------
Total annual Fund operating expenses 0.73%
- ------------------------------------------------------------
</TABLE>
[sidebar open]
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]
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.
This example shows what expenses you could pay over time. 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 table below
shows your costs at the end of each period based on these assumptions.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------
$74 $233 $405 $904
- --------------------------------------------------------------------
</TABLE>
4
<PAGE>
[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 open]
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 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 0.50% of the Fund's average daily net assets.
5
<PAGE>
Shareholder Information
[GRAPHIC OMITTED]
PRICING FUND SHARES
- -------------------------------
The price of Fund shares, called "net asset value," is based on the
amortized cost of the Fund's portfolio securities. The amortized cost
valuation method involves valuing a debt obligation in reference to
its cost, rather than market forces.
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.
[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 in
several ways. When you buy Fund shares, the shares are
purchased at the next share price calculated after we
receive your investment in proper form accompanied by
federal or other immediately available funds. You begin
earning dividends the business day after the shares are
purchased. We reserve the right to reject any order for
the purchase of Fund shares.
[sidebar open]
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]
MINIMUM INVESTMENT AMOUNTS
- ------------------------------------------
<TABLE>
<CAPTION>
Minimum Investment
----------------------------
Investment Options Initial Additional
- -------------------------------------------------
<S> <C> <C>
Regular Accounts: $5,000 $100
EasyInvest(SM) Not
Available $100
(Automatically from your checking or
savings account)
- -------------------------------------------------
</TABLE>
There is no minimum investment amount if you purchase Fund shares
through: (1) the Investment Manager's mutual fund asset allocation
plan, (2) a program, approved by the Fund's distributor, in which you
pay an asset-based fee for advisory, administrative and/or brokerage
services, or (3) employer-sponsored employee benefit plan accounts.
6
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT
OPTIONS PROCEDURES
- --------------------- -----------------------------------------------------------------------------------------
<S> <C>
Contact Your New Accounts and Subsequent Investments
Financial Advisor You may buy Fund shares by contacting your Morgan Stanley Dean Witter Financial
[GRAPHIC OMITTED] Advisor or other authorized financial representative. Your Financial Advisor will assist
you, step-by-step, with the procedures to invest in the Fund.
- ---------------------------------------------------------------------------------------------------------------
By Mail New Accounts
[GRAPHIC OMITTED] To open a new account to buy Fund shares:
o Complete and sign the attached Application.
o Make out a check for the investment amount to: Morgan Stanley Dean Witter
Tax-Free Daily Income Trust.
o Mail the Application and check to Morgan Stanley Dean
Witter Trust FSB at P.O. Box 1040, Jersey City, NJ 07303.
-----------------------------------------------------------------------------------------
Subsequent Investments
To buy additional shares for an existing Fund account:
o Write a "letter of instruction" to the Fund
specifying the name(s) on the account, the account number
and the social security or tax identification number, and
the additional investment amount. The letter must be
signed by the account owner(s).
o Make out a check for the investment amount to: Morgan Stanley Dean Witter
Tax-Free Daily Income Trust.
o Mail the letter and check to Morgan Stanley Dean
Witter Trust FSB at the same address as for new accounts.
- ---------------------------------------------------------------------------------------------------------------
By Wire New Accounts
To open a new account to buy Fund shares:
o Mail the attached Application, completed and signed,
to Morgan Stanley Dean Witter Trust FSB at P.O. Box 1040,
Jersey City, NJ 07303.
o Before sending instructions by wire, call us at (800)
869-NEWS advising us of your purchase and to confirm we
have received your Application (at that time we will
provide you with a new account number).
o Wire the instructions specifying the name of the Fund
and your account number, along with the additional
investment amount, to The Bank of New York, for credit to
the account of "Morgan Stanley Dean Witter Trust FSB,
Harborside Financial Center, Plaza Two, Jersey City, NJ
07303, Account No. 8900188413."
(When you buy Fund shares, wire purchase instructions
received by Morgan Stanley Dean Witter Trust FSB prior to
12:00 noon Eastern time are normally effective that day
and wire purchase instructions received after 12:00 noon
are normally effective the next business day.)
-----------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment
Options Procedures
- ------------------- -------------------------------------------------------------------------------------
<S> <C>
By Wire, Subsequent Investments
continued To buy additional shares for an existing Fund account:
o Before sending instructions by wire, call us at (800) 869-NEWS advising us of
your purchase.
o Wire the instructions specifying the name of the Fund and your account
number, along with the investment amount, to The Bank of New York, for
credit to the account of Morgan Stanley Dean Witter Trust FSB in the same
manner as opening an account.
(Also, when you buy additional Fund shares, wire purchase
instructions received by Morgan Stanley Dean Witter Trust
FSB prior to 12:00 noon Eastern time are normally
effective that day and wire purchase instructions received
after 12:00 noon are normally effective the next business
day.)
-------------------------------------------------------------------------------------
EasyInvest(SM) New Accounts
(Automatically This program is not available to open a new Fund account or a new account of another
from your Money Market Fund.
checking or -------------------------------------------------------------------------------------
savings account) Subsequent Investments
[GRAPHIC OMITTED] EasyInvest(SM) is a purchase plan that allows you to transfer money
automatically from your checking or savings account to an existing Fund account
on a semi-monthly, monthly or quarterly basis. Contact your Morgan Stanley Dean
Witter Financial Advisor for further information about this service.
-------------------------------------------------------------------------------------
</TABLE>
Additional Purchase Information. If you are a customer of Dean Witter
Reynolds or another authorized dealer of Fund shares, you may upon
request: (a) have the proceeds from the sale of listed securities
invested in Fund shares the day after you receive the proceeds; and
(b) pay for the purchase of certain listed securities by automatic
sale of Fund shares that you own. If you are a customer of Dean Witter
Reynolds or another authorized dealer of the Fund's shares, you may
have cash balances in your securities account of $1,000 or more
automatically invested in shares of the Fund on the next business day
after the balance is accrued in your account. Cash balances of less
than $1,000 may be automatically invested in Fund shares on a weekly
basis.
Plan of Distribution. The Fund has adopted a Plan of Distribution in
accordance with Rule 12b-1 under the Investment Company Act of 1940.
The Plan allows the Fund to pay distribution fees for the sale and
distribution of Fund shares. It also allows the Fund to pay for
services to shareholders. 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 and may cost you more than paying other
types of sales charges.
8
<PAGE>
[GRAPHIC OMITTED]
HOW TO EXCHANGE SHARES
- ------------------------------------
Permissible Fund Exchanges. You may only exchange shares of the Fund
for shares of other continuously offered Morgan Stanley Dean Witter
Funds if the Fund shares were acquired in an exchange of shares
initially purchased in a Multi-Class Fund or an FSC Fund (subject to a
front-end sales charge). In that case, the shares may be subsequently
re-exchanged for shares of the same Class of any Multi-Class Fund or
FSC Fund or for shares of another Money Market Fund, a No-Load Fund,
North American Government Income Trust or Short-Term U.S. Treasury
Trust. Of course, if an exchange is not permitted, you may sell shares
of the Fund and buy another Fund's shares with the proceeds.
See the inside back cover of this Prospectus for each Morgan Stanley
Dean Witter fund's designation as a Multi-Class Fund, FSC 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 are treated as Class A shares of a Multi-Class Fund.
The current prospectus for each fund describes its investment
objective(s), policies and investment minimums, and should be read
before investing. 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
9
<PAGE>
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.
Exchanging Shares of Another Fund Subject to a Contingent Deferred
Sales Charge ("CDSC"). There are special considerations when you
exchange shares subject to a CDSC of another Morgan Stanley Dean
Witter Fund for shares of the Fund. 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 the
Fund will not be counted. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into the
Fund. Nevertheless, if shares subject to a CDSC are exchanged for
shares of the Fund, 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 the Fund up to the amount of any applicable CDSC. See
the prospectus of the fund that charges the CDSC for more details.
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.
For further information regarding exchange privileges, you should
contact your Morgan Stanley Dean Witter Financial Advisor or call
(800) 869-NEWS.
10
<PAGE>
[GRAPHIC OMITTED]
HOW TO SELL SHARES
- -------------------------------
You can sell some or all of your Fund shares at any time. Your shares
will be sold at the next share price calculated after we receive your
order to sell as described below.
<TABLE>
<CAPTION>
Options Procedures
- --------------------- -------------------------------------------------------------------------------------------
<S> <C>
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter Financial Advisor or
Financial Advisor other authorized financial representative.
[GRAPHIC OMITTED] -------------------------------------------------------------------------------------------
Payment will be sent to the address to which the account is registered or deposited in
your Dean Witter Reynolds brokerage account.
- --------------------- -------------------------------------------------------------------------------------------
Check-writing You may order a supply of blank checks by requesting them on the investment application or
Option by contacting your Morgan Stanley Dean Witter Financial Advisor.
[GRAPHIC OMITTED] -------------------------------------------------------------------------------------------
Checks may be written in any amount not less than $500. You must sign checks exactly as
their shares are registered. If the account is a joint account, the check may contain
one signature unless the joint owners have specified on an investment application that
all owners are required to sign checks. Only accounts in which no share certificates
have been issued are eligible for the checkwriting privilege.
-------------------------------------------------------------------------------------------
Payment of check proceeds normally will be made on the next business day after we
receive your check in proper form. Shares purchased by check (including a certified or
bank cashier's check) are not normally available to cover redemption checks until
fifteen days after Morgan Stanley Dean Witter Trust FSB receives the check used for
investment. A check will not be honored in an amount exceeding the value of the account
at the time the check is presented for payment.
- ------------------------------------------------------------------------------------------------------------------
By Letter You may also sell your shares by writing a "letter of instruction" that includes:
[GRAPHIC OMITTED] o your account number;
o the dollar amount or the number 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.
-------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Options Procedures
- ------------------- ------------------------------------------------------------------------------------------
<S> <C>
Systematic If your investment in all of the Morgan Stanley Dean Witter Family of Funds has a total
Withdrawal Plan market value of at least $10,000, you may elect to withdraw amounts of $25 or more,
[GRAPHIC OMITTED] 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.
------------------------------------------------------------------------------------------
When you sell Fund shares through the Systematic Withdrawal Plan, the shares may be
subject to a contingent deferred sales charge ("CDSC") if they were obtained in exchange
for shares subject to a CDSC of another Morgan Stanley Dean Witter Fund. The CDSC,
however, will be waived in an amount up to 12% annually of the Fund's value, although Fund
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. See the Prospectus of the Fund that charges the CDSC for more details.
------------------------------------------------------------------------------------------
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.
------------------------------------------------------------------------------------------
By Telephone To sell shares by telephone or wire, first complete a telephone redemption application
or Wire designating a bank account. Redemptions for more than $1,000 will be wired to your bank
[GRAPHIC OMITTED] account (your bank may charge a fee for this service). For redemptions for less than
$1,000, a check will be mailed to your bank acount. If you hold share certificates, you
may not redeem those shares by this method. For more information or to request a
telephone redemption application, call Morgan Stanley Dean Witter Trust FSB at
(800) 869-NEWS.
------------------------------------------------------------------------------------------
</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.
Involuntary Sales. The Fund reserves the right, on sixty days' notice,
to sell the shares of any shareholder whose shares, due to sales by
the shareholder, have a value below $1,000. 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.
Money Market Fund Automatic Sale Procedures. If you maintain a
brokerage account with Dean Witter Reynolds or another authorized
dealer of Fund shares, you may elect to have your Fund shares
automatically sold from your account to satisfy amounts you owe as a
result of purchasing securities or other transactions in your
brokerage account.
12
<PAGE>
If you elect to participate by notifying Dean Witter Reynolds or
another authorized dealer of Fund shares, your brokerage account will
be scanned each business day prior to the close of business (4:00 p.m.
Eastern time). After any cash balances in the account are applied, a
sufficient number of Fund shares may be sold to satisfy any amounts
you are obligated to pay to Dean Witter Reynolds or another authorized
dealer of Fund shares. Sales will be effected on the business day
before the date you are obligated to make payment, and Dean Witter
Reynolds or another authorized dealer of Fund shares will receive the
sale proceeds on the following day.
EasyInvest(SM)-Automatic Redemption. You may invest in shares of
certain other Morgan Stanley Dean Witter Funds by subscribing to
EasyInvest(SM), an automatic purchase plan that provides for the
automatic investment of any amount from $100 to $5,000 in shares of
the specified fund. Under EasyInvest(SM), you may direct that a
sufficient number of shares of the Fund be automatically sold and the
proceeds transferred to Morgan Stanley Dean Witter Trust FSB, on a
semi-monthly, monthly or quarterly basis, for investment in shares of
the specified fund. Sales of your Fund shares will be made on the
business day preceding the investment date and Morgan Stanley Dean
Witter Trust FSB will receive the proceeds for investment on the day
following the sale date.
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 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 may realize 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 Investment
Manager does not anticipate that there will be
significant capital gain distributions.
[sidebar open]
TARGETED DIVIDENDS(SM)
You may select to have your Fund distributions automatically invested in
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 payable on each day
the New York Stock Exchange is open for business, of
all of its daily net income to shareholders of record
as of the close of business the preceding business day.
Capital gains, if any, are distributed periodically.
Distributions are reinvested automatically in additional shares of the
Fund (rounded to the last 1|M/100 of a share) and automatically
credited to your account unless you request in writing that
distributions be paid in cash. If you elect the cash option, the Fund
will
13
<PAGE>
reinvest the additional shares and credit your account during the
month, then redeem the credited amount no later than the last business
day of the month, and mail a check to you no later than seven business
days after the end of the 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.
Your income dividend distributions are normally exempt from federal
income tax- 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.
The 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 the Fund makes any capital gain distributions, those distributions
will normally be subject to federal and state income tax when they are
paid, whether you take them in cash or reinvest them in Fund shares.
Any short-term capital gain distributions are taxable to you as
ordinary income. 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.
Every January, you will be sent a statement (IRS Form 1099-DIV)
showing the distributions paid to you in the previous year. The
statement provides information on your dividends and capital gains for
tax purposes.
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>
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 throughout each
year. 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 this Prospectus.
<TABLE>
<CAPTION>
For the year ended December 31, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selected Per Share Data:
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
================================================================================================================================
Net investment income 0.025 0.028 0.029 0.028 0.032
Less dividends from net investment income 0.025) (0.028) (0.029) (0.028) (0.032)
---------- ---------- ---------- ---------- ---------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===============================================================================================================================
Total Return 2.53% 2.80% 2.98% 2.83% 3.22%
================================================================================================================================
Ratios to Average Net Assets:
- --------------------------------------------------------------------------------------------------------------------------------
Expenses 0.73% (1) 0.72%(1) 0.72%(1) 0.71% 0.72%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.49% 2.75% 2.93% 2.76% 3.16%
- --------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $480,121 $498,072 $517,438 $521,879 $521,652
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not reflect the effect of expense offset of 0.01%.
See Notes to Financial Statements
15
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN CURRENT DEMAND
THOUSANDS RATE+ DATE* VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (66.0%)
ARIZONA
$ 3,000 Maricopa County, Arizona Public Service Co Palo Verde 1994 Ser C .............. 4.80 % 01/03/00 $ 3,000,000
6,300 Tempe, Excise Tax Ser 1998 .................................................... 4.90 01/03/00 6,300,000
CALIFORNIA
8,000 California Public Capital Improvements Financing Authority, Pooled
Ser 1988 C .................................................................... 3.70 03/15/00 8,000,000
7,500 California Statewide Communities Development Authority, Sutter Health
Ser 1995 COPs (AMBAC) ......................................................... 4.20 01/03/00 7,500,000
5,000 California Pollution Control Financing Authority, Pacific Gas & Electric Co
Ser 1996 D .................................................................... 4.40 01/03/00 5,000,000
CONNECTICUT
2,500 Connecticut Health & Educational Facilities Authority, Yale University
Ser T-2 ...................................................................... 5.10 01/07/00 2,500,000
7,000 Connecticut Special Assessment, Unemployment Compensation 1993
Ser C (FGIC) ................................................................. 3.38 07/01/00 7,000,000
DISTRICT OF COLUMBIA
4,800 District of Columbia, The American University Ser 1985 ........................ 5.50 01/07/00 4,800,000
FLORIDA
9,800 Dade County, Water & Sewer Ser 1994 (FGIC) .................................... 4.75 01/07/00 9,800,000
17,100 Dade County Industrial Development Authority, Dolphins Stadium
Ser 1985 A ................................................................... 5.35 01/07/00 17,100,000
4,700 Jacksonville Pollution Control Financing Authority, Florida Power & Light
Co Ser 1995 ................................................................... 4.00 01/03/00 4,700,000
GEORGIA
2,900 Burke County Development Authority, Georgia Power Co 5th Ser 1994 ............. 4.75 01/03/00 2,900,000
3,200 Hapeville Development Authority, Hapeville Hotel Ltd Ser 1985 ................. 5.00 01/03/00 3,200,000
IDAHO
1,725 Idaho Health Facilities Authority, St Luke's Regional Medical Center
Ser 1995 ...................................................................... 4.70 01/03/00 1,725,000
ILLINOIS
5,000 Chicago, Tender Notes Ser 1999 ................................................ 2.95 01/27/00 5,000,000
10,000 Illinois Educational Facilities Authority, Northwestern University Ser 1988 ... 5.40 01/07/00 10,000,000
Illinois Health Facilities Authority,
7,485 Central Dupage Hospital Assn Ser 1990 ........................................ 4.75 01/03/00 7,485,000
2,250 Resurrection Health Care Ser 1999A (FSA) ..................................... 5.00 01/03/00 2,250,000
10,000 Oak Forest, Homewood South Suburban Mayors & Managers Assn Ser 1989............ 5.35 01/07/00 10,000,000
KENTUCKY
8,450 Mason County, East Kentucky Power Co-op Inc Ser 1984 (NRU-CFC Gtd) ............ 5.55 01/07/00 8,450,000
LOUISIANA
5,200 East Baton Rouge Parish, Exxon Corp Ser 1993 .................................. 4.80 01/03/00 5,200,000
4,900 New Orleans Aviation Board, Ser 1993 B (MBIA) ................................. 5.40 01/07/00 4,900,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN CURRENT DEMAND
THOUSANDS RATE+ DATE* VALUE
- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
MARYLAND
$ 4,700 Washington Suburban Sanitary District, 1998 Ser BANs ........................ 5.35 % 01/07/00 $ 4,700,000
MASSACHUSETTS
5,000 Massachusetts, Refg 1998 Ser A .............................................. 5.50 01/07/00 5,000,000
Massachusetts Health & Educational Facilities Authority,
4,600 Amherst College Ser F ...................................................... 5.10 01/07/00 4,600,000
2,325 Capital Asset Issue Ser D (MBIA) ........................................... 4.90 01/03/00 2,325,000
3,730 Harvard University Ser 1985 I .............................................. 5.40 01/07/00 3,730,000
4,900 Massachusetts Water Resources Authority, Multi-Modal Sub 1999 Ser B ......... 5.50 01/07/00 4,900,000
MICHIGAN
1,300 Delta County Economic Development Corp, Mead-Escanaba Paper Co
Ser 1985 E ................................................................. 4.80 01/03/00 1,300,000
MINNESOTA
5,000 University of Minnesota Regents, Ser 1999A .................................. 5.50 01/07/00 5,000,000
MISSOURI
1,300 Missouri Health & Educational Facilities Authority, Cox Health Systems
Ser 1997 (MBIA) ............................................................ 4.70 01/03/00 1,300,000
NEW HAMPSHIRE
5,000 New Hampshire Higher Educational & Health Facilities Authority, St Paul's
School Ser 1998 ............................................................ 5.40 01/07/00 5,000,000
NEW JERSEY
4,000 Gloucester County, Mobil Oil Refining Corp Ser 1993 A ....................... 5.10 01/07/00 4,000,000
2,600 New Jersey Educational Facilities Authority, College of New Jersey
Ser 1999 A (AMBAC) ......................................................... 5.35 01/07/00 2,600,000
NEW YORK
500 New York City Cultural Resources Trust, Solomon R Guggenheim
Foundation Ser 1990 B ...................................................... 4.75 01/03/00 500,000
NORTH CAROLINA
2,200 Asheville, Ser 1993 A COPs .................................................. 5.55 01/07/00 2,200,000
5,000 North Carolina Medical Care Commission, Duke University Hospital
Ser 1985 B ................................................................. 4.95 01/07/00 5,000,000
OHIO
1,100 Ohio Air Quality Development Authority, Mead Co 1986 Ser A .................. 4.70 01/03/00 1,100,000
4,400 Columbus, Unlimited Tax Ser 1995-1 .......................................... 5.30 01/07/00 4,400,000
10,000 Cuyahoga County, Cleveland Clinic Health System Obligated Group
Ser 1998A .................................................................. 5.65 01/07/00 10,000,000
OKLAHOMA
16,255 Oklahoma Water Resources Board,
State Loan Program Ser 1994A, Ser 1995 & Ser 1999 .......................... 3.60 03/01/00 16,255,000
OREGON
5,000 Oregon, Veterans' Ser 73 E .................................................. 5.65 01/07/00 5,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN CURRENT DEMAND
THOUSANDS RATE+ DATE* VALUE
- ----------- ------- ---------- ---------------
<S> <C> <C> <C> <C>
PENNSYLVANIA
$ 4,500 Delaware County Industrial Development Authority, United Parcel Service
of America Ser 1985 ........................................................ 4.70 % 01/03/00 $ 4,500,000
3,100 York General Authority, Pooled Ser 1996 ..................................... 5.40 01/07/00 3,100,000
PUERTO RICO
2,300 Puerto Rico Highway & Transportation Authority, 1998 Ser A (AMBAC) .......... 5.00 01/07/00 2,300,000
SOUTH CAROLINA
7,350 York County, North Carolina Electric Membership Corporation, Ser 1984 N-5
(NRU-CFC Gtd) .............................................................. 3.60 03/15/00 7,350,000
TENNESSEE
2,700 Chattanooga-Hamilton County Hospital Authority, Erlanger Medical Center
Ser 1987 ................................................................... 4.80 01/03/00 2,700,000
15,000 Clarksville Public Building Authority, Pooled Financing Ser 1995 ............ 5.40 01/07/00 15,000,000
TEXAS
15,500 Harris County Health Facilities Development Corporation, St Luke's
Episcopal Hospital Ser 1997 A .............................................. 4.80 01/03/00 15,500,000
4,700 Lower Neches Valley Authority, Chevron USA Inc Ser 1987 ..................... 3.45 02/15/00 4,700,000
4,700 North Central Texas Health Facilities Development Corporation,
Presbyterian Medical Center Ser 1985 C & Ser 1985 D (MBIA) ................. 4.80 01/03/00 4,700,000
UTAH
10,000 Intermountain Power Agency, 1985 Ser F (AMBAC) .............................. 3.625 03/15/00 10,000,000
VIRGINIA
2,000 Roanoke Industrial Development Authority, Roanoke Memorial Hospitals
Ser 1995 A ................................................................. 4.80 01/03/00 2,000,000
WASHINGTON
8,500 Washington, Ser 1996 A ...................................................... 5.40 01/07/00 8,500,000
2,300 Washington Health Care Facilities Authority, Sisters of Providence
Ser 1985 D ................................................................. 4.70 01/03/00 2,300,000
WEST VIRGINIA
5,000 Pleasants County Commission, American Cyanamid Co Ser 1985 .................. 5.65 01/07/00 5,000,000
WYOMING
3,400 Lincoln County, Exxon Corp Ser 1984 B & Ser 1984 C .......................... 4.70 01/03/00 3,400,000
------------
TOTAL SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (Amortized Cost $316,770,000)................. 316,770,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999, continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- ----------- ------ ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
TAX-EXEMPT COMMERCIAL PAPER (21.1%)
FLORIDA
$ 5,000 Sunshine State Governmental Financing Commission, Ser B .......... 3.85 % 02/10/00 3.85 % $ 5,000,000
LOUISIANA
4,000 Louisiana, Ser 1991-A ............................................ 3.90 02/10/00 3.90 4,000,000
Louisiana Public Facilities Authority,
5,000 Christus Health Ser 1999 B (AMBAC) .............................. 3.80 02/03/00 3.80 5,000,000
5,000 Christus Health Ser 1999 B (AMBAC) .............................. 3.80 02/09/00 3.80 5,000,000
Plaquemines Port Harbor & Terminal District,
5,500 Electric-Coal Transfer Co Ser 1985 D ............................ 3.60 01/20/00 3.60 5,500,000
10,000 Electric-Coal Transfer Co Ser 1985 D ............................ 3.70 02/09/00 3.70 10,000,000
MARYLAND
Baltimore County,
7,100 Metro District Ser 1995 BANs .................................... 3.85 01/13/00 3.85 7,100,000
10,100 Metro District Ser 1995 BANs .................................... 3.85 02/08/00 3.85 10,100,000
NEVADA
Las Vegas Valley Water District,
10,000 Water Ser 1999A ................................................. 3.55 01/27/00 3.55 10,000,000
10,000 Water Ser 1999A ................................................. 3.70 03/07/00 3.70 10,000,000
NEW HAMPSHIRE
New Hampshire State Business Finance Authority,
5,000 New England Power Co Ser 1993 B ................................. 3.85 01/19/00 3.85 5,000,000
7,000 New England Power Co Ser 1993 B ................................. 3.80 02/16/00 3.80 7,000,000
OHIO
7,600 Ohio Air Quality Development Authority, Cleveland Electric
Illuminating Co 1988 Ser B (FGIC) ............................... 3.80 02/08/00 3.80 7,600,000
TEXAS
10,000 Texas Public Finance Authority, Ser 1993 A ....................... 3.85 02/17/00 3.85 10,000,000
------------
TOTAL TAX-EXEMPT COMMERCIAL PAPER (Amortized Cost $101,300,000)..................................... 101,300,000
------------
SHORT-TERM MUNICIPAL NOTES (12.4%)
ARIZONA
5,000 Arizona School District, Tax Anticipation Note Financing
Ser 1999A COPs, dtd 08/19/99 .................................... 4.05 07/31/00 3.58 5,013,166
IDAHO
5,000 Idaho, Ser 1999 TANs, dtd 07/01/99 ............................... 4.25 06/30/00 3.40 5,020,307
INDIANA
5,900 Indianapolis Local Improvement Bond Bank, Ser 1999 B Notes,
dtd 06/17/99 .................................................... 4.00 01/10/00 3.25 5,901,070
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999, continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- ----------- ------------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
IOWA
Iowa School Corporations,
$ 3,300 Warrant Certificates 1998-1999 Ser B (FSA), dtd 01/28/99 ......... 3.50 % 01/28/00 2.97 % $ 3,301,255
7,000 Warrant Certificates 1999-2000 Ser A (FSA), dtd 06/24/99 ......... 4.00 06/23/00 3.23 7,024,795
KENTUCKY
10,000 Kentucky Asset/Liability Commission, 1999 Ser A TRANs,
dtd 07/01/99 ..................................................... 4.25 06/28/00 3.375 10,041,372
MASSACHUSETTS
5,000 Massachusetts Bay Transportation Authority, 1999 Ser A Notes,
dtd 02/26/99 ..................................................... 3.50 02/25/00 3.45 4,999,943
NEW MEXICO
5,000 New Mexico, Ser 1999-2000 Ser A TRANs, dtd 07/01/99 ............... 4.00 06/30/00 3.23 5,018,422
TEXAS
10,000 Harris County, Ser 1999 TANs, dtd 08/17/99 ........................ 4.00 02/29/00 3.48 10,008,248
3,500 Texas, Ser 1999A TRANs, dtd 09/01/99 .............................. 4.50 08/31/00 3.70 3,517,965
-----------
TOTAL SHORT-TERM MUNICIPAL NOTES (Amortized Cost $59,846,543).... 59,846,543
-----------
TOTAL INVESTMENTS (Amortized Cost $477,916,543) (a) ............. 99.5% 477,916,543
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .................. 0.5 2,204,139
----- ------------
NET ASSETS ...................................................... 100.0% $480,120,682
===== ============
</TABLE>
- ---------------
BANs Bond Anticipation Notes.
COPs Certificates of Participation.
NRU-CFC National Rural Utilities - Cooperative Finance Corporation.
TANs Tax Anticipation Notes.
TRANs Tax and Revenue Anticipation Notes.
+ Rate shown is the rate in effect at December 31, 1999.
* Date on which the principal amount can be recovered through demand.
(a) Cost is the same for federal income tax purposes.
Bond Insurance:
- --------------
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $477,916,543) ........................... $477,916,543
Cash ...................................................... 1,457,942
Receivable for:
Interest ............................................... 3,413,099
Shares of beneficial interest sold ..................... 305
Prepaid expenses and other assets ......................... 43,932
-------------
TOTAL ASSETS ........................................... 482,831,821
-------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased .............. 2,354,671
Investment management fee .............................. 214,374
Plan of distribution fee ............................... 42,969
Accrued expenses .......................................... 99,125
-------------
TOTAL LIABILITIES ...................................... 2,711,139
-------------
NET ASSETS ................................................ $480,120,682
=============
COMPOSITION OF NET ASSETS:
Paid-in-capital ........................................... $480,120,478
Accumulated undistributed net investment income ........... 204
-------------
NET ASSETS ............................................. $480,120,682
=============
NET ASSET VALUE PER SHARE,
480,120,404 shares outstanding
(unlimited shares authorized of $.01 par value) ......... $1.00
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME .......................... $16,479,410
-----------
EXPENSES
Investment management fee ................ 2,551,350
Plan of distribution fee ................. 488,628
Transfer agent fees and expenses ......... 369,466
Registration fees ........................ 126,436
Professional fees ........................ 79,276
Shareholder reports and notices .......... 63,026
Custodian fees ........................... 25,162
Trustees' fees and expenses .............. 18,217
Other .................................... 7,789
-----------
TOTAL EXPENSES ........................ 3,729,350
Less: expense offset ..................... (25,085)
-----------
NET EXPENSES .......................... 3,704,265
-----------
NET INVESTMENT INCOME ................. 12,775,145
NET REALIZED GAIN ..................... 429
-----------
NET INCREASE ............................. $12,775,574
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 12,775,145 $ 14,720,592
Net realized gain .................................... 429 2,153
------------- -------------
NET INCREASE ...................................... 12,775,574 14,722,745
------------- -------------
Dividends from net investment income ................. (12,775,516) (14,720,472)
Net decrease from transactions in shares of beneficial
interest ........................................... (17,951,504) (19,368,358)
------------- -------------
NET DECREASE ...................................... (17,951,446) (19,366,085)
NET ASSETS:
Beginning of period .................................. 498,072,128 517,438,213
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$204 and $575, respectively) ...................... $ 480,120,682 $ 498,072,128
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Tax-Free Daily Income Trust (the "Fund) is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The Fund's investment
objective is to provide a high level of daily income which is exempt from
federal income tax, consistent with stability of principal and liquidity. The
Fund was incorporated in Maryland on March 24, 1980, commenced operations on
February 20, 1981 and reorganized as a Massachusetts business trust on April 30,
1987.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued at amortized
cost, which approximates market value.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
The Fund amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to shareholders as of the close of each business day.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of the daily net assets not exceeding $500
million; 0.425% to the portion of the daily net assets exceeding $500 million
but not exceeding $750 million; 0.375% to the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of the
daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.325% to
the
24
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1999, continued
portion of the daily net assets exceeding $1.5 billion but not exceeding $2
billion; 0.30% to the portion of the daily net assets exceeding $2 billion but
not exceeding $2.5 billion; 0.275% to the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3 billion; and 0.25% to the portion of
the daily net assets exceeding $3 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Morgan Stanley Dean Witter Distributors Inc. (the "Distributor"), an affiliate
of the Investment Manager, is the distributor of the Fund's shares and, in
accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under
the Act, finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses that
the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor and other
broker-dealers under the Plan: (1) compensation to, and expenses of, Morgan
Stanley Dean Witter Financial Advisors and other selected broker-dealers; (2)
sales incentives and bonuses to sales representatives and to marketing personnel
in connection with promoting sales of the Fund's shares; (3) expenses incurred
in connection with promoting sales of the Fund's shares; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio, newspaper,
magazine and other media advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the Fund's
shares. The amount of each monthly reimbursement payment may in no event exceed
an amount equal to a payment at the annual rate of 0.15% of the Fund's average
daily net assets. For the year ended December 31, 1999, the distribution fee was
accrued at the annual rate of 0.10%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended December 31, 1999 aggregated $1,053,006,170 and
$1,073,559,590, respectively.
25
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1999, continued
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $9,250.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended December 31, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,887. At December 31, 1999, the Fund had an accrued pension liability of
$52,582 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest, at $1.00 per share, were as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
Shares sold ........................................ 1,069,436,080 1,102,902,492
Shares issued in reinvestment of dividends ......... 12,775,516 14,720,472
------------- -------------
1,082,211,596 1,117,622,964
Shares repurchased ................................. (1,100,163,100) (1,136,991,322)
-------------- --------------
Net decrease in shares outstanding ................. (17,951,504) (19,368,358)
============== ==============
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year ended December 31, 1999, the Fund utilized all of its capital
loss carryover of approximately $400.
26
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Tax-Free
Daily Income Trust (the "Fund") at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
February 7, 2000
1999 FEDERAL TAX NOTICE (unaudited)
For the year ended December 31, 1999, all of the Fund's dividends from net
investment income were exempt interest dividends, excludable from gross
income for Federal income tax purposes.
27
<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
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 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 which 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>
[2][1][0][-][ ][ ][ ][ ][ ][ ][ ][ ][ ]
for office use only
Morgan Stanley Dean Witter
Tax-Free Daily
Income Trust
Application
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
Send to: Morgan Stanley Dean Witter Trust FSB (the "Transfer Agent"), P.O. Box
1040, Jersey City, NJ 07303
- --------------------------------------------------------------------------------
INSTRUCTIONS For assistance in completing this application, telephone Morgan
Stanley Dean Witter Trust FSB at (800) 869-NEWS (Toll-Free).
- --------------------------------------------------------------------------------
TO REGISTER
SHARES 1. ------------------------------------------------------
(please print)
First Name Last Name
- -As joint tenants,
use line 1 & 2 2. ------------------------------------------------------
First Name Last Name
(Joint tenants with rights of survivorship unless otherwise
specified)
---------------
Social Security Number
- -As custodian
for a minor, 3. ------------------------------------------------------
use lines 1 & 3
Minor's Name
Under the --------------- Uniform Gifts to Minors Act
State of Residence of Minor
------------------------------
Minor's Social Security Number
- -In the name of a
corporation, 4. ------------------------------------------------------
trust,
partnership Name of Corporation, Trust (including trustee name(s))
or other or Other Organization
institutional
investors,
use line 4
------------------------------------------------------
--------------------------------
Tax Identification Number
If Trust, Date of Trust Instrument:
-----------------
- --------------------------------------------------------------------------------
ADDRESS
-------------------------------------------------------------------
-------------------------------------------------------------------
City State Zip Code
- --------------------------------------------------------------------------------
TO PURCHASE
SHARES:
Minimum Initial [ ] CHECK (enclosed) $ --------- (Make Payable to Morgan
Investment: Stanley Dean Witter Tax-Free Daily Income Trust)
$5,000
[ ] WIRE* On ----------- MF* ----------------
(Date) (Control number, this transaction)
----------------------------------------------------------
Name of Bank Branch
----------------------------------------------------------
Address
----------------------------------------------------------
Telephone Number
* For an initial investment made by wiring funds, obtain a control
number by calling: (800) 869-NEWS (Toll Free)
Your bank should wire to:
Bank of New York for credit to account of Morgan Stanley Dean
Witter Trust FSB
Account Number: 8900188413
Re: Morgan Stanley Dean Witter Tax-Free Daily Income Trust
Account Of: ----------------------------------
(Investor's Account as Registered at the Transfer Agent)
Control or Account Number: -------------------------
(Assigned by Telephone)
- --------------------------------------------------------------------------------
OPTIONAL SERVICES
- --------------------------------------------------------------------------------
NOTE: If you are a current shareholder of Morgan Stanley Dean Witter
Tax-Free Daily Income Trust, please indicate your fund account number here.
2 1 0
----------------------
- --------------------------------------------------------------------------------
DIVIDENDS All dividends will be reinvested daily in additional shares, unless
the following option is selected:
[ ] Pay income dividends by check at the end of each month.
- --------------------------------------------------------------------------------
WRITE YOUR [ ] Send an initial supply of checks.
OWN FOR JOINT ACCOUNTS:
CHECK [ ] Check this box if all owners are required to sign checks.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PAYMENT TO [ ] Morgan Stanley Dean Witter Trust FSB is hereby authorized
PREDESIGNATED to honor telephonic or other instructions, without
BANK ACCOUNT signature guarantee, from any person for the redemption of
any or all shares of Morgan Stanley Dean Witter Tax-Free
Bank Account must Daily Income Trust held in my (our) account provided that
be in same name as proceeds are transmitted only to the following bank
shares are account. (Absent its own negligence, neither Morgan Stanley
registered Dean Witter Tax-Free Daily Income Trust nor Morgan Stanley
Dean Witter Trust FSB (the "Transfer Agent") shall be
liable for any redemption caused by unauthorized
instruction(s)):
-------------------------------------------- -------------
Name & Bank Account Number Bank's Routing
Transmit Code
(Ask Your Bank)
Minimum Amount:
$1,000 --------------------------------------------
Name of Bank
-----------------------------------------------
( )
-----------------------------------------------
Telephone Number of Bank
- --------------------------------------------------------------------------------
SIGNATURE AUTHORIZATION
- --------------------------------------------------------------------------------
FOR ALL ACCOUNTS NOTE: RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY
MODIFICATION OF THE INFORMATION BELOW WILL REQUIRE AN AMENDMENT
TO THIS FORM. THIS DOCUMENT IS IN FULL FORCE AND EFFECT UNTIL
ANOTHER DULY EXECUTED FORM IS RECEIVED BY THE TRANSFER AGENT.
The "Transfer Agent" is hereby authorized to act as agent for the
registered owner of shares of Morgan Stanley Dean Witter Tax-Free
Daily Income Trust (the "Fund") in effecting redemptions of shares
and is authorized to recognize the signature(s) below in payment
of funds resulting from such redemptions on behalf of the
registered owners of such shares. The Transfer Agent shall be
liable only for its own negligence and not for default or
negligence of its correspondents, or for losses in transit. The
Fund shall not be liable for any default or negligence of the
Transfer Agent.
I (we) certify to my (our) legal capacity, or the capacity of the
investor named above, to invest in and redeem shares of, and I
(we) acknowledge receipt of a current prospectus of Morgan Stanley
Dean Witter Tax-Free Daily Income Trust and (we) further certify
my (our) authority to sign and act for and on behalf of
the investor.
Under penalties of perjury, I certify (1) that the number shown on
this form is my correct taxpayer identification number and (2)
that I am not subject to backup withholding either because I have
not been notified that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or the
Internal Revenue Service has notified me that I am no longer
subject to backup withholding. (Note: You must cross out item (2)
above if you have been notified by IRS that you are currently
subject to backup withholding because of underreporting interest
or dividends on your tax return.)
For Individual, Joint and Custodial Accounts for Minors, Check
Applicable Box:
[ ] I am a United States Citizen. [ ] I am not a United
States Citizen.
SIGNATURE(S) (IF JOINT TENANTS, ALL MUST SIGN)
Name(s) must be signed
exactly the same as shown on
lines 1 to 4 on the reverse
side of this application
-----------------------------------------------------------------
-----------------------------------------------------------------
Signed this _______________ day of __________________ , 20__.
FOR CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER ORGANIZATIONS
The following named persons are currently
officers/trustees/general partners/other authorized signatories of
the Registered Owner, and any _____ * of them ("Authorized
Person(s)") is/are currently authorized under the applicable
governing document to act with full power to sell, assign or
transfer securities of the Fund for the Registered Owner and to
execute and deliver any instrument necessary to effectuate the
authority hereby conferred:
In addition, complete
Section A or B below.
Name/Title Signature
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
Signed this ________________ day of __________________ , 20___.
The Transfer Agent may, without inquiry, act only upon the
instruction of ANY PERSON(S) purporting to be (an) Authorized
Person(s) as named in the Certification Form last received by the
Transfer Agent. The Transfer Agent and the Fund shall not be
liable for any claims, expenses (including legal fees) or losses
resulting from the Transfer Agent having acted upon any
instruction reasonably believed genuine.
-----------------------------------------------------------------
* INSERT A NUMBER. UNLESS OTHERWISE INDICATED, THE TRANSFER AGENT
MAY HONOR INSTRUCTIONS OF ANY ONE OF THE PERSONS NAMED ABOVE.
- --------------------------------------------------------------------------------
SECTION [A] NOTE: EITHER A SIGNATURE GUARANTEE OR CORPORATE SEAL IS REQUIRED.
CORPORATIONS I, ______________________ , Secretary of the Registered Owner, do
AND hereby certify that at a meeting on ------ at which a quorum was
INCORPORATED present throughout, the Board of Directors of the corporation/the
ASSOCIATIONS officers of the association duly adopted a resolution, which is in
ONLY. full force and effect and in accordance with the Registered
Owner's charter and by-laws, which resolution did the following:
SIGN ABOVE (1) empowered the above-named Authorized Person(s) to effect
AND COMPLETE securities transactions for the Registered Owner on the terms
THIS described above; (2) authorized the Secretary to certify, from
SECTION time to time, the names and titles of the officers of the
Registered Owner and to notify the Transfer Agent when changes in
office occur; and (3) authorized the Secretary to certify that
such a resolution has been duly adopted and will remain in full
force and effect until the Transfer Agent receives a duly executed
amendment to the Certification Form.
SIGNATURE Witness my hand on behalf of the corporation/association this
GUARANTEE** _______ day of ________________ , 20____ .
(or Corporate
Seal)
-------------------------------------
Secretary**
The undersigned officer (other than the Secretary) hereby
certifies that the foregoing instrument has been signed by the
Secretary of the corporation/association.
-------------------------------------
Certifying Officer of the
Corporation or Incorporated
Association**
- --------------------------------------------------------------------------------
SECTION [B] NOTE: A SIGNATURE GUARANTEE IS REQUIRED.
ALL OTHER
INSTITUTIONAL
INVESTORS
----------------------------------------------
Certifying
SIGNATURE Trustee(s)/General Partner(s)Other(s)**
GUARANTEE**
SIGN ABOVE AND
COMPLETE THIS
SECTION ----------------------------------------------
Certifying
Trustee(s)/General Partner(s)/Other(s)**
-----------------------------------------------------------------
**SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
- --------------------------------------------------------------------------------
DEALER Above signature(s) guaranteed. Prospectus has been delivered by
(if any) undersigned to above-named applicant(s).
Completion
by dealer
only
------------------------- -------------------------
Firm Name Office Number-Account Number at
Dealer-F/A Number
------------------------- -------------------------
Address Financial Advisor's Last Name
------------------------- -------------------------
City, State, Zip Code Branch Office
* 2000 Morgan Stanley Dean
Witter Distributors Inc.
<PAGE>
PROSPECTUS - FEBRUARY 28, 2000
Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders (the current annual report is
included in this Prospectus). 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 at (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 SYMBOL: DSTXX
- -----------------------------------------------------------------------
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-3031)
Morgan Stanley Dean Witter
TAX-FREE DAILY INCOME TRUST
[GRAPHIC OMITTED]
A MONEY MARKET FUND THAT SEEKS TO PROVIDE AS HIGH A LEVEL OF DAILY INCOME
EXEMPT FROM FEDERAL INCOME TAX AS IS
CONSISTENT WITH STABILITY OF PRINCIPAL AND LIQUIDITY
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MORGAN STANLEY DEAN WITTER
TAX-FREE DAILY INCOME TRUST
FEBRUARY 28, 2000
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated February 28, 2000) for the Morgan Stanley Dean Witter
Tax-Free Daily Income Trust may be obtained without charge from the Fund at its
address or telephone number listed below or from Dean Witter Reynolds at any of
its branch offices.
Morgan Stanley Dean Witter Tax-Free Daily Income Trust
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
I. Fund History ................................................... 4
II. Description of the Fund and Its Investments and Risks .......... 4
A. Classification ............................................ 4
B. Investment Strategies and Risks ........................... 4
C. Fund Policies/Investment Restrictions ..................... 7
III. Management of the Fund ......................................... 9
A. Board of Trustees ......................................... 9
B. Management Information .................................... 9
C. Compensation .............................................. 13
IV. Control Persons and Principal Holders of Securities ............ 15
V. Investment Management and Other Services ....................... 15
A. Investment Manager ........................................ 15
B. Principal Underwriter ..................................... 16
C. Services Provided by the Investment Manager ............... 16
D. Rule 12b-1 Plan ........................................... 17
E. Other Service Providers ................................... 19
VI. Brokerage Allocation and Other Practices ....................... 20
A. Brokerage Transactions .................................... 20
B. Commissions ............................................... 20
C. Brokerage Selection ....................................... 20
D. Directed Brokerage ........................................ 21
E. Regular Broker-Dealers .................................... 21
VII. Capital Stock and Other Securities ............................. 21
VIII. Purchase, Redemption and Pricing of Shares ..................... 22
A. Purchase/Redemption of Shares ............................. 22
B. Offering Price ............................................ 23
IX. Taxation of the Fund and Shareholders .......................... 25
X. Underwriters ................................................... 27
XI. Calculation of Performance Data ................................ 27
XII. Financial Statements ........................................... 27
</TABLE>
2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
The terms defined in this glossary are frequently used in this Statement
of Additional Information (other terms used occasionally are defined in the
text of the document).
"Custodian" -- The Bank of New York is the Custodian of the Fund's assets.
"Dean Witter Reynolds" -- Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"Distributor" -- Morgan Stanley Dean Witter Distributors Inc., a
wholly-owned broker-dealer subsidiary of MSDW.
"Financial Advisors" -- Morgan Stanley Dean Witter authorized financial
services representatives.
"Fund" -- Morgan Stanley Dean Witter Tax-Free Daily Income Trust, a
registered no-load, open-end investment company.
"Investment Manager" -- Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW.
"Independent Trustees" -- Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.
"Morgan Stanley & Co." -- Morgan Stanley & Co. Incorporated, a
wholly-owned broker-dealer subsidiary of MSDW.
"Morgan Stanley Dean Witter Funds" -- Registered investment companies (i)
for which the Investment Manager serves as the investment advisor and (ii) that
hold themselves out to investors as related companies for investment and
investor services.
"MSDW" -- Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.
"MSDW Services Company" -- Morgan Stanley Dean Witter Services Company
Inc., a wholly-owned fund services subsidiary of the Investment Manager.
"Transfer Agent" -- Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.
"Trustees" -- The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
- --------------------------------------------------------------------------------
The Fund was incorporated in the state of Maryland on March 24, 1980 under
the name InterCapital Reserve Cash Management Inc. Effective October 13, 1980,
the Fund's name was changed to lnterCapital Tax-Free Daily Income Fund Inc. On
March 21, 1983, the Fund's name was changed to Dean Witter/Sears Tax-Free Daily
Income Fund Inc. On April 30, 1987, the Fund reorganized as a Massachusetts
business trust with the name Dean Witter/Sears Tax-Free Daily Income Trust. On
February 19, 1993, the Fund's name was changed to Dean Witter Tax-Free Daily
Income Trust. Effective June 22, 1998, the Fund's name was changed to Morgan
Stanley Dean Witter Tax-Free Daily Income Trust.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end, diversified management investment company whose
investment objective is to provide as high a level of daily income exempt from
federal income tax as is consistent with stability of principal and liquidity.
B. INVESTMENT STRATEGIES AND RISKS
The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies" and "Principal Risks."
LEASE OBLIGATIONS. Included within the revenue bonds category in which the
Fund may invest are participations in lease obligations or installment purchase
contracts (collectively called "lease obligations") of municipalities. State
and local governments issue lease obligations to acquire equipment and
facilities.
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 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 such
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 such legislative actions do not occur, the holders of the lease
obligation may experience difficulty in exercising their rights, including
disposition of the property.
TAXABLE SECURITIES. The Fund may invest up to 20% of its total assets in
taxable money market instruments. Investments in taxable money market
instruments would generally be made under any one of the following
circumstances: (a) pending investment proceeds of sale of Fund shares or of
portfolio securities; (b) pending settlement of purchases of portfolio
securities; and (c) to maintain liquidity for the purpose of meeting
anticipated redemptions.
The types of taxable money market instruments in which the Fund may invest
are limited to the following short-term fixed-income securities (maturing in
one year or less from the time of purchase): (i) obligations of the United
States Government, its agencies, instrumentalities or authorities; (ii)
commercial paper rated P-1 by Moody's Investors Services, Inc. ("Moody's") or
A-1 by Standard & Poor's Corporation ("S&P"); (iii) certificates of deposit of
domestic banks with assets of $1 billion or more; and (iv) repurchase
agreements with respect to portfolio securities.
VARIABLE RATE AND FLOATING RATE OBLIGATIONS. The Fund may invest in
Municipal Bonds and Municipal Notes ("Municipal Obligations") of the type
called variable rate and floating rate obligations. The interest rate payable
on a variable rate obligation is adjusted either at predesignated periodic
intervals and, on a floating rate obligation, whenever there is a change in the
market rate of interest on
4
<PAGE>
which the interest rate payable is based. Other features may include the right
whereby the Fund may demand prepayment of the principal amount of the
obligation prior to its stated maturity (a "demand feature") and the right of
the issuer to prepay the principal amount prior to maturity. The principal
benefit of a variable rate obligation is that the interest rate adjustment
minimizes changes in the market value of the obligation. As a result, the
purchase of variable rate and floating rate obligations should enhance the
ability of the Fund to maintain a stable net asset value per share and to sell
obligations prior to maturity at a price that is approximately the full
principal amount of the obligations. The principal benefit to the Fund of
purchasing obligations with a demand feature is that liquidity, and the ability
of the Fund to obtain repayment of the full principal amount of an obligation
prior to maturity, is enhanced. The payment of principal and interest by
issuers of certain obligations purchased by the Fund may be guaranteed by
letters of credit or other credit facilities offered by banks or other
financial institutions. Such guarantees will be considered in determining
whether an obligation meets the Fund's investment quality requirements.
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL BONDS. The Fund may invest
more than 25% of its total assets in industrial development and pollution
control bonds (two kinds of tax-exempt municipal bonds) whether or not the
users of the facilities financed by such bonds are in the same industry. In
cases where such users are in the same industry, there may be additional risk
to the Fund in the event of an economic downturn in such industry, which may
result generally in a lowered need for such facilities and a lowered ability of
such users to pay for the use of such facilities.
PUT OPTIONS. The Fund may purchase securities together with the right to
resell them to the seller at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell is
commonly known as a "put," and the aggregate price which the Fund pays for
securities with puts may be higher than the price which otherwise would be paid
for the securities. The primary purpose of this practice is to permit the Fund
to be fully invested in securities, the interest on which is exempt from
Federal income tax, while preserving the necessary flexibility and liquidity to
purchase securities on a when-issued basis, to meet unusually large redemptions
and to purchase at a later date securities other than those subject to the put.
The Fund's policy is, generally, to exercise the puts on their expiration date,
when the exercise price is higher than the current market price for the related
securities. Puts may be exercised prior to the expiration date in order to fund
obligations to purchase other securities or to meet redemption requests. These
obligations may arise during periods in which proceeds from sales of Fund
shares and from recent sales of portfolio securities are insufficient to meet
such obligations or when the funds available are otherwise allocated for
investment. In addition, puts may be exercised prior to their expiration date
in the event the Investment Manager revises its evaluation of the
creditworthiness of the issuer of the underlying security. In determining
whether to exercise puts prior to their expiration date and in selecting which
puts to exercise in such circumstances, the Investment Manager considers, among
other things, the amount of cash available to the Fund, the expiration dates of
the available puts, any future commitments for securities purchases, the yield,
quality and maturity dates of the underlying securities, alternative investment
opportunities and the desirability of retaining the underlying securities in
the Fund's portfolio.
The Fund values securities which are subject to puts at their amortized
cost and values the put, apart from the security, at zero. Thus, the cost of
the put will be carried on the Fund's books as an unrealized loss from the date
of acquisition and will be reflected in realized gain or loss when the put is
exercised or expires. Since the value of the put is dependent on the ability of
the put writer to meet its obligation to repurchase, the Fund's policy is to
enter into put transactions only with municipal securities dealers who are
approved by the Fund's Trustees. Each dealer will be approved on its own merits
and it is the Fund's general policy to enter into put transactions only with
those dealers which are determined to present minimal credit risks. In
connection with such determination, the Board of Trustees will review, among
other things, the ratings, if available, of equity and debt securities of such
municipal securities dealers, their reputations in the municipal securities
markets, the net worth of such dealers and their efficiency in consummating
transactions. Bank dealers normally will be members of the Federal Reserve
System, and other dealers will be members of the National Association of
Securities Dealers, Inc. or members of a national securities exchange. The
Trustees have directed the Investment Manager not to
5
<PAGE>
enter into put transactions with, and to exercise outstanding puts of, any
municipal securities dealer which, in the judgment of the Investment Manager,
ceases at any time to present a minimal credit risk. In the event that a dealer
should default on its obligation to repurchase an underlying security, the Fund
is unable to predict whether all or any portion of any loss sustained could be
subsequently recovered from such dealer. During the fiscal year ended December
31, 1999, the Fund did not purchase any put options.
In Revenue Ruling 82-144, the Internal Revenue Service stated that, under
certain circumstances, a purchaser of tax-exempt obligations which are subject
to puts will be considered the owner of the obligations for Federal income tax
purposes.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a
bank, savings and loan association or broker-dealer. The agreement provides
that the Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The Fund will accrue interest from the institution until the
time when the repurchase is to occur. Although this date is deemed by the Fund
to be the maturity date of a repurchase agreement, the maturities of securities
subject to repurchase agreements are not subject to any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well capitalized and well established financial institutions,
whose financial condition will be continuously monitored. In addition, the
value of the collateral underlying the repurchase agreement will always be at
least equal to the resale price which consists of the acquisition price paid to
the seller of the securities plus the accrued resale premium which is defined
as the amount specified in the repurchase agreement or the daily amortization
of the difference between the acquisition price and the resale price specified
in the repurchase agreement. Such collateral will consist entirely of
securities that are direct obligations of, or that are fully guaranteed as to
principal and interest by, the United States or any agency thereof, and/or
certificates of deposit, bankers' acceptances which are eligible for acceptance
by a Federal Reserve Bank, and, if the seller is a bank, mortgage related
securities (as such term is defined in section 3(a)(41) of the Securities
Exchange Act of 1934 that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by the Requisite NRSROs (as
defined under Rule 2a-7 of the Investment Company Act of 1940). Additionally,
Upon an Event of Insolvency (as defined under Rule 2a-7) with respect to the
seller, the collateral must qualify the repurchase agreement for preferential
treatment under a provision of applicable insolvency law providing an exclusion
from any automatic stay of creditors' rights against the seller. In the event
of a default or bankruptcy by a selling financial institution, the Fund will
seek to liquidate such collateral. However, the exercising of the Fund's right
to liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss.
It is the current policy of the Fund not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with any
other illiquid assets held by the Fund, amount to more than 10% of its total
assets. The Fund's investments in repurchase agreements may at times be
substantial when, in the view of the Fund's investment manager, liquidity or
other considerations warrant.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. From time to time the Fund
may purchase tax-exempt securities on a when-issued or delayed delivery basis.
When these transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery with the intention of acquiring the securities,
the Fund may sell the securities before the settlement date, if it is deemed
advisable. The securities so purchased or sold are subject to market
fluctuation and no interest or dividends accrue to the purchaser prior to the
settlement date.
6
<PAGE>
At the time the Fund makes the commitment to purchase or sell securities
on a when-issued, delayed delivery, it will record the transaction and
thereafter reflect the value, each day, of such security purchased, or if a
sale, the proceeds to be received, in determining its net asset value. At the
time of delivery of the securities, their value may be more or less than the
purchase or sale price. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued, delayed delivery may
increase the volatility of its net asset value. The Fund will also establish a
segregated account on the Fund's books in which it will continually maintain
cash or cash equivalents or other liquid portfolio securities equal in value to
commitments to purchase securities on a when-issued or delayed delivery basis.
During the fiscal year ended December 31, 1999, the Fund's investment in
when-issued and delayed delivery securities did not exceed 5% of the Fund's net
assets.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today were designed in such a
way that they may not be able to recognize the year 2000, but revert to 1900 or
some other date, due to the manner in which dates were encoded and calculated.
That failure could have a negative impact on the handling of securities trades,
pricing and account services.
Improperly functioning trading systems may result in settlement problems
and liquidity issues. Corporate and governmental data processing errors could
result in production problems for individual issuers and overall economic
uncertainties. Operations ran smoothly from the last week in December through
the first few weeks of January, but the year 2000 issue may yet have an adverse
impact on financial market participants and other entities, including the
issuers whose securities are contained in the Fund's portfolio.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act
of 1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the
Fund. The Investment Company Act defines a majority as the lesser of (a) 67% or
more of the shares present at a meeting of shareholders, if the holders of 50%
of the outstanding shares of the Fund are present or represented by proxy; or
(b) more than 50% of the outstanding shares of the Fund. For purposes of the
following restrictions: (i) all percentage limitations apply immediately after
a purchase or initial investment; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
In addition, for purposes of the following restrictions: (a) an "issuer"
of a security is the entity whose assets and revenues are committed to the
payment of interest and principal on that particular security, provided that
the guarantee of a security will be considered a separate security and provided
further that a guarantee of a security shall not be deemed a security issued by
the guarantor if the value of all securities guaranteed by the guarantor and
owned by the Fund does not exceed 10% of the value of the total assets of the
Fund; (b) a "taxable security" is any security the interest on which is subject
to federal income tax; and (c) all percentage limitations apply immediately
after a purchase or initial investment, and any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund will:
1. Seek to provide as high a level of daily income exempt from federal
income tax as is consistent with stability of principal and liquidity.
The Fund may not:
1. Invest in common stock.
2. Write, purchase or sell puts, calls, or combinations thereof, except
that it may acquire rights to resell municipal obligations at an agreed
upon price and at or within an agreed upon time.
7
<PAGE>
3. Invest more than 5% of the value of its total assets in the securities
of any one issuer (other than obligations issued, or guaranteed by, the
United States Government, its agencies or instrumentalities).
4. Purchase more than 10% of all outstanding taxable debt securities of
any one issuer (other than debt securities issued, or guaranteed as to
principal and interest by, the United States Government, its agencies or
instrumentalities).
5. Invest more than 5% of the value of its total assets in taxable
securities of issuers having a record, together with predecessors, of
less than three years of continuous operation. This restriction shall not
apply to any obligation of the Unites States Government, its agencies or
instrumentalities.
6. Invest 25% or more of the value of its total assets in taxable
securities of issuers in any one industry (industrial development and
pollution control bonds are grouped into industries based upon the
business in which the issuers of such obligations are engaged). This
restriction does not apply to obligations issued or guaranteed by the
United States Government, its agencies or instrumentalities or to cash
equivalents.
7. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or trustee of the Fund or of the Investment Manager owns more
than 1/2 of 1% of the outstanding securities of the issuer, and the
officers and trustees who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of the issuer.
8. Purchase or sell real estate or interests therein, although the Fund
may purchase securities secured by real estate or interests therein.
9. Purchase or sell commodities or commodity futures contracts.
10. Borrow money, except that the Fund may borrow from a bank for temporary
or emergency purposes in amounts not exceeding 5% (taken at the lower of
cost or current value) of the value of its total assets (not including
the amount borrowed).
11. Pledge its assets or assign or otherwise encumber them except to secure
permitted borrowings. To meet the requirements of regulations in certain
states, the Fund, as a matter of operating policy but not as a
fundamental policy, will limit any pledge of its assets to 10% of its net
assets so long as shares of the Fund are being sold in those states.
12. Issue senior securities as defined in the Investment Company Act except
insofar as the Fund may be deemed to have issued a senior security by
reason of: (a) entering into any repurchase agreement; (b) purchasing any
securities on a when-issued or delayed delivery basis; or (c) borrowing
money.
13. Make loans of money or securities, except: (a) by the purchase of debt
obligations; and (b) by investment in repurchase agreements.
14. Make short sales of securities.
15. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities.
16. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act in disposing of a
portfolio security.
17. Invest for the purpose of exercising control or management of any
other issuer.
18. Purchase oil, gas or other mineral leases, rights or royalty contracts,
or exploration or development programs.
19. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
8
<PAGE>
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided
to the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's
own interest or the interest of another person or organization. A Trustee
satisfies his or her duty of care by acting in good faith with the care of an
ordinarily prudent person and in a manner the Trustee reasonably believes to be
in the best interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any
of its affiliated persons and do not own any stock or other securities issued
by the Investment Manager's parent company, MSDW. These are the
"non-interested" or "independent" Trustees. The other two Trustees (the
"management Trustees") are affiliated with the Investment Manager.
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the Morgan Stanley Dean Witter Funds (there were
93 such Funds as of the calendar year ended December 31, 1999), are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- --------------------------------------------------
<S> <C>
Michael Bozic (59) ........................ Vice Chairman of Kmart Corporation (since
Trustee December 1998); Director or Trustee of the Morgan
c/o Kmart Corporation Stanley Dean Witter Funds; formerly Chairman
3100 West Big Beaver Road and Chief Executive Officer of Levitz Furniture
Troy, Michigan Corporation (November 1995-November 1998) and
President and Chief Executive Officer of Hills
Department Stores (May 1991-July 1995); formerly
variously Chairman, Chief Executive Officer,
President and Chief Operating Officer (1987-1991)
of the Sears Merchandise Group of Sears, Roebuck
and Co.; Director of Weirton Steel Corporation.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------------- ----------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (66) ................. Chairman, Director or Trustee, and Chief Executive
Chairman of the Board, Chief Executive Officer Officer of the Morgan Stanley Dean Witter Funds;
and Trustee formerly Chairman, Chief Executive Officer and
Two World Trade Center Director of the Investment Manager, the Distributor
New York, New York and MSDW Services Company; Executive Vice
President and Director of Dean Witter Reynolds;
Chairman and Director of the Transfer Agent;
formerly Director and/or officer of various MSDW
subsidiaries (until June 1998).
Edwin J. Garn (67) ........................... Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds; formerly United States Senator
c/o Huntsman Corporation (R-Utah) (1974-1992) and Chairman, Senate
500 Huntsman Way Banking Committee (1980-1986); formerly Mayor
Salt Lake City, Utah of Salt Lake City, Utah (1971-1974); formerly
Astronaut, Space Shuttle Discovery (April 12-19,
1985); Vice Chairman, Huntsman Corporation
(chemical company); Director of Franklin Covey
(time management systems), BMW Bank of North
America, Inc. (industrial loan corporation); United
Space Alliance (joint venture between Lockheed
Martin and the Boeing Company) and Nuskin Asia
Pacific (multilevel marketing); member of the board
of various civic and charitable organizations.
Wayne E. Hedien (66) ......................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Director of The PMI Group,
c/o Mayer, Brown & Platt Inc. (private mortgage insurance); Trustee and
Counsel to the Independent Trustees Vice Chairman of The Field Museum of Natural
1675 Broadway History; formerly associated with the Allstate
New York, New York Companies (1966-1994), most recently as
Chairman of The Allstate Corporation (March 1993-
December 1994) and Chairman and Chief
Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July 1989-December
1994); director of various other business and
charitable organizations.
Dr. Manuel H. Johnson (51) ................... Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of
c/o Johnson Smick International, Inc. the Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Chairman of the Audit
Washington, D.C. Committee and Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of Greenwich
Capital Markets, Inc. (broker-dealer) and NVR, Inc.
(home construction); Chairman and Trustee of the
Financial Accounting Foundation (oversight
organization of the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System (1986-
1990) and Assistant Secretary of the U.S. Treasury.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ----------------------------------------------------
<S> <C>
Michael E. Nugent (63) .................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan
237 Park Avenue Stanley Dean Witter Funds; formerly Vice
New York, New York President, Bankers Trust Company and BT Capital
Corporation (1984-1988); director of various
business organizations.
Philip J. Purcell* (56) ................... Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds
1585 Broadway and Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of American
Airlines, Inc. and its parent company, AMR
Corporation; Director and/or officer of various
MSDW subsidiaries.
John L. Schroeder (69) .................... Retired; Chairman of the Derivatives Committee
Trustee and Director or Trustee of the Morgan Stanley
c/o Mayer, Brown & Platt Dean Witter Funds; Director of Citizens Utilities
Counsel to the Independent Trustees Company (telecommunications, gas, electric and
1675 Broadway water utilities company); formerly Executive Vice
New York, New York President and Chief Investment Officer of the
Home Insurance Company (August 1991-
September 1995).
Mitchell M. Merin (46) .................... President and Chief Operating Officer of Asset
President Management of MSDW (since December 1998);
Two World Trade Center President and Director (since April 1997) and Chief
New York, New York Executive Officer (since June 1998) of the
Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and
Director of the Distributor (since June 1998);
Chairman and Chief Executive Officer (since June
1998) and Director (since January 1998) of the
Transfer Agent; Director of various MSDW
subsidiaries; President of the Morgan Stanley Dean
Witter Funds (since May 1999); Trustee of various
Van Kampen investment companies (since
December 1999); previously Chief Strategic Officer
of the Investment Manager and MSDW Services
Company and Executive Vice President of the
Distributor (April 1997-June 1998), Vice President
of the Morgan Stanley Dean Witter Funds (May
1997-April 1999), and Executive Vice President of
Dean Witter, Discover & Co.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ----------------------------------------------------
<S> <C>
Barry Fink (45) ........................... Executive Vice President (since December 1999)
Vice President, and Secretary and General Counsel (since
Secretary and General Counsel February 1997) and Director (since July 1998) of
Two World Trade Center the Investment Manager and MSDW Services
New York, New York Company; Executive Vice President (since
December 1999) and Assistant Secretary and
Assistant General Counsel (since February 1997)
of the Distributor; Assistant Secretary of Dean
Witter Reynolds (since August 1996); Vice
President, Secretary and General Counsel of the
Morgan Stanley Dean Witter Funds (since February
1997); previously Senior Vice President (March
1997-December 1999), First Vice President (June
1993-February 1997), Vice President and Assistant
Secretary and Assistant General Counsel of the
Investment Manager and MSDW Services
Company, Senior Vice President of the Distributor
(March 1997-December 1999) and Assistant
Secretary of the Morgan Stanley Dean Witter
Funds.
Katherine H. Stromberg (51) ............... Senior Vice President of the Investment Manager;
Vice President Vice President of various Morgan Stanley Dean
Two World Trade Center Witter Funds.
New York, New York
Thomas F. Caloia (53) ..................... First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW
Two World Trade Center Services Company; Treasurer of the Morgan
New York, New York Stanley Dean Witter Funds.
</TABLE>
- ----------
* Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, Robert S. Giambrone, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer
Agent, Peter M. Avelar, Senior Vice President and Director of the High Yield
Group of the Investment Manager, Jonathan R. Page, Senior Vice President and
Director of the Money Market Group of the Investment Manager, James F.
Willison, Senior Vice President and Director of the Tax-Exempt Fixed Income
Group of the Investment Manager, Joseph R. Arcieri, Senior Vice President of
the Investment Manager, and Gerard J. Lian, Vice President of the Investment
Manager, are Vice Presidents of the Fund.
In addition, Marilyn K. Cranney, Todd Lebo, Lou Anne D. McInnis, Carsten
Otto and Ruth Rossi, First Vice Presidents and Assistant General Counsels of
the Investment Manager and MSDW Services Company, and Natasha Kassian,
Assistant Vice President and Assistant General Counsel with the Investment
Manager and MSDW Services Company are Assistant Secretaries of the Fund.
INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the independent
directors/trustees. The Morgan Stanley Dean Witter Funds seek as independent
directors/trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' boards, such individuals may reject other
attractive assignments because the Funds make substantial demands
12
<PAGE>
on their time. All of the independent directors/trustees serve as members of
the Audit Committee. In addition, three of the directors/trustees, including
two independent directors/trustees, serve as members of the Derivatives
Committee and the Insurance Committee.
The independent directors/trustees are charged with recommending to the
full board approval of management, advisory and administration contracts, Rule
12b-1 plans and distribution and underwriting agreements; continually reviewing
Fund performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage
and allocations, as well as other matters that arise from time to time. The
independent directors/trustees are required to select and nominate individuals
to fill any independent director/trustee vacancy on the board of any Fund that
has a Rule 12b-1 plan of distribution. Most of the Morgan Stanley Dean Witter
Funds have a Rule 12b-1 plan.
The Audit Committee is charged with recommending to the full board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
board.
The board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.
Finally, the board of each Fund has formed an Insurance Committee to
review and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS/TRUSTEES
FOR ALL MORGAN STANLEY DEAN WITTER FUNDS. The independent directors/trustees
and the Funds' management believe that having the same independent
directors/trustees for each of the Morgan Stanley Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as independent directors/trustees for each of the Funds or
even of sub-groups of Funds. They believe that having the same individuals
serve as independent directors/trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility
of separate groups of independent directors/trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same independent
directors/trustees serve on all Fund boards enhances the ability of each Fund
to obtain, at modest cost to each separate Fund, the services of independent
directors/trustees, of the caliber, experience and business acumen of the
individuals who serve as independent directors/trustees of the Morgan Stanley
Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties.
It also provides that all third persons shall look solely to the Fund property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750
and the Chairmen of the Committee of the Derivatives and Insurance Committees
additional
13
<PAGE>
annual fees of $500). If a Board meeting and a meeting of the Independent
Trustees or a Committee meeting, or a meeting of the Independent Trustees
and/or more than one Committee meeting, take place on a single day, the
Trustees are paid a single meeting fee by the Fund. The Fund also reimburses
such Trustees for travel and other out-of-pocket expenses incurred by them in
connection with attending such meetings. Trustees and officers of the Fund who
are or have been employed by the Investment Manager or an affiliated company
receive no compensation or expense reimbursment from the Fund for their
services as Trustee.
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended December 31, 1999.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------- --------------
<S> <C>
Michael Bozic ................. $1,550
Edwin J. Garn ................. 1,600
Wayne E. Hedien ............... 1,600
Dr. Manuel H. Johnson ......... 2,100
Michael E. Nugent ............. 1,933
John L. Schroeder ............. 1,933
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1999 for services
to the 93 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1999.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES TO
93 MORGAN
NAME OF STANLEY DEAN
INDEPENDENT TRUSTEE WITTER FUNDS
- ------------------------------- ----------------
<S> <C>
Michael Bozic ................. $134,600
Edwin J. Garn ................. 138,700
Wayne E. Hedien ............... 138,700
Dr. Manuel H. Johnson ......... 208,638
Michael E. Nugent ............. 193,324
John L. Schroeder ............. 193,324
</TABLE>
As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds, including the Fund, have adopted a retirement
program under which an independent director/ trustee who retires after serving
for at least five years (or such lesser period as may be determined by the
Board) as an independent director/trustee of any Morgan Stanley Dean Witter
Fund that has adopted the retirement program (each such Fund referred to as an
"Adopting Fund" and each such independent director/trustee referred to as an
"Eligible Trustee") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual
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retirement benefit (the "Regular Benefit") equal to 30.22% of his or her
Eligible Compensation plus 0.5036667% of such Eligible Compensation for each
full month of service as an independent director/trustee of any Adopting Fund
in excess of five years up to a maximum of 60.44% after ten years of service.
The foregoing percentages may be changed by the Board.(1) "Eligible
Compensation" is one-fifth of the total compensation earned by such Eligible
Trustee for service to the Adopting Fund in the five year period prior to the
date of the Eligible Trustee's retirement. Benefits under the retirement
program are accrued as expenses on the books of the Adopting Funds. Such
benefits are not secured or funded by the Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the year ended December 31, 1999
and by the 55 Morgan Stanley Dean Witter Funds (including the Fund) for the
year ended December 31, 1999, and the estimated retirement benefits for the
Independent Trustees, to commence upon their retirement, from the Fund as of
December 31, 1999 and from the 55 Morgan Stanley Dean Witter Funds as of
December 31, 1999.
RETIREMENT BENEFITS FROM THE FUND AND ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
------------------------------
ESTIMATED ANNUAL
RETIREMENT BENEFITS BENEFITS
ESTIMATED ACCRUED AS EXPENSES UPON RETIREMENT(2)
CREDITED YEARS ESTIMATED ------------------- --------------------
OF SERVICE AT PERCENTAGE BY ALL FROM ALL
NAME OF RETIREMENT OF ELIGIBLE BY THE ADOPTING FROM THE ADOPTING
INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- -------------------------- ---------------- ------------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic ............ 10 60.44% $378 $20,933 $ 907 $50,588
Edwin J. Garn ............ 10 60.44 557 31,737 909 50,675
Wayne E. Hedien .......... 9 51.37 711 39,566 771 43,000
Dr. Manuel H. Johnson 10 60.44 229 13,129 1,360 75,520
Michael E. Nugent ........ 10 60.44 395 23,175 1,209 67,209
John L. Schroeder ........ 8 50.37 768 41,558 955 52,994
</TABLE>
- ----------
(1) An Eligible Trustee may elect alternative payments of his or her
retirement benefits based upon the combined life expectancy of the
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. In addition, the Eligible Trustee may elect that
the Surviving spouse's periodic payment of benefits will be equal to a
lower percentage of the periodic amount when both spouses were alive. The
amount estimated to be payable under this method, through the remainder
of the later of the lives of the Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit.
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
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As of February 4, 2000, no shareholder was known to own beneficially or of
record as much as 5% of the outstanding shares of the Fund.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1% of the Fund's shares of
beneficial interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
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A. INVESTMENT MANAGER
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New
York, NY 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
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<PAGE>
Pursuant to an Investment Management Agreement (the "Management
Agreement") with the Investment Manager, the Fund has retained the Investment
Manager to provide administrative services and manage the investment of the
Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Fund pays the Investment Manager monthly compensation
calculated daily by applying the following annual rates to the net assets of
the Fund, determined as of the close of business on every business day: 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 $1.5 billion; 0.325% of the
portion of the daily net assets exceeding $1.5 billion but not exceeding $2
billion; 0.30% of the portion of the daily net assets exceeding $2 billion but
not exceeding $2.5 billion; 0.275% of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3 billion; and 0.25% of the portion
of the daily net assets exceeding $3 billion. For the fiscal years ended
December 31, 1997, 1998 and 1999, the Investment Manager accrued total
compensation under the Management Agreement in the amounts of $2,695,933,
$2,647,549 and $2,551,350, respectively.
The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.
B. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. The Distributor also pays certain expenses in
connection with the distribution of the Fund's shares, including the costs of
preparing, printing and distributing advertising or promotional materials, and
the costs of printing and distributing prospectuses and supplements thereto
used in connection with the offering and sale of the Fund's shares. The Fund
bears the costs of initial typesetting, printing and distribution of
prospectuses and supplements thereto to shareholders. The Fund also bears the
costs of registering the Fund and its shares under federal and state securities
laws and pays filing fees in accordance with state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER
The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.
Under the terms of the Management Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, the office space,
facilities, equipment, clerical help, bookkeeping and certain legal services as
the Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be filed
with federal and state securities
16
<PAGE>
commissions (except insofar as the participation or assistance of independent
accountants and attorneys is, in the opinion of the Investment Manager,
necessary or desirable). In addition, the Investment Manager pays the salaries
of all personnel, including officers of the Fund, who are employees of the
Investment Manager. The Investment Manager also bears the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses include, but are not limited to: expenses of the Plan of Distribution
pursuant to Rule 12b-1; charges and expenses of any registrar, custodian, stock
transfer and dividend disbursing agent; brokerage commissions; taxes; engraving
and printing share certificates; registration costs of the Fund and its shares
under federal and state securities laws; the cost and expense of printing,
including typesetting, and distributing prospectuses of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Trustees' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Trustees or
members of any advisory board or committee who are not employees of the
Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to any dividend, withdrawal or redemption options; charges
and expenses of any outside service used for pricing of the Fund's shares; fees
and expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Investment Manager (not including
compensation or expenses of attorneys who are employees of the Investment
Manager); fees and expenses of the Fund's independent accountants; membership
dues of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees, including a majority of the Independent Trustees.
D. RULE 12B-1 PLAN
In accordance with a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act between the Fund and the Distributor, the Distributor
provides certain services in connection with the promotion of sales of Fund
shares (the "Plan").
The Plan provides that the Distributor bears the expense of all
promotional and distribution related activities on behalf of the Fund, except
for expenses that the Trustees determine to reimburse, as described below. The
following activities and services may be provided by the Distributor under the
Plan: (1) compensation to and expenses of Dean Witter Reynolds' and other
selected Broker-Dealers' Financial Advisors and other employees, including
overhead and telephone expenses; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales
of the Fund's shares; (3) expenses incurred in connection with promoting sales
of the Fund's shares; (4) preparing and distributing sales literature; and (5)
providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements.
Dean Witter Reynolds' Financial Advisors are paid an annual residual
commission, currently a residual of up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record. The
residual is a charge which reflects residual commissions paid by Dean Witter
Reynolds to its Financial Advisors and Dean Witter Reynolds' expenses
associated with the servicing of
17
<PAGE>
shareholders' accounts, including the expenses of operating Dean Witter
Reynolds' branch offices in connection with the servicing of shareholders'
accounts, which expenses include lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies and other
expenses relating to branch office serving of shareholder accounts.
The Investment Manager will compensate Financial Advisors at an annual
rate of 0.025% of the value of shares of the Fund acquired by exchange from an
MSDW Open-end Fund provided that the shares exchanged would otherwise have been
eligible for the payment of a retention fee. Such eligible shares must have
been purchased after January 1, 2000 and held for at least one year. Shares
owned in variable annuities, closed-end fund shares and shares held in 401(k)
plans where the Transfer Agent or Dean Witter Reynolds' Retirement Plan
Services is either recordkeeper or trustee are not eligible for a retention
fee.
The retention fees are paid by the Investment Manager from its own assets,
which may include profits from investment management fees payable under the
Management Agreement, as well as from borrowed funds.
The Fund is authorized to reimburse specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares. Reimbursement is
made through payments at the end of each month. The amount of each monthly
payment may in no event exceed an amount equal to a payment at the annual rate
of 0.15 of 1% of the Fund's average daily net assets during the month. No
interest or other financing charges will be incurred for which reimbursement
payments under the Plan will be made. In addition, no interest charges, if any,
incurred on any distribution expense incurred by the Distributor or other
selected dealers pursuant to the Plan, will be reimbursable under the Plan. In
the case of all expenses other than expenses representing a residual to
Financial Advisors, such amounts shall be determined at the beginning of each
calendar quarter by the Trustees, including a majority of the Independent 12b-1
Trustees. Expenses representing a residual to Financial Advisors may be
reimbursed without prior determination. In the event that the Distributor
proposes that monies shall be reimbursed for other than such expenses, then in
making quarterly determinations of the amounts that may be expended by the
Fund, the Investment Manager provides and the Trustees review a quarterly
budget of projected incremental distribution expenses to be incurred on behalf
of the Fund, together with a report explaining the purposes and anticipated
benefits of incurring such expenses. The Trustees determine which particular
expenses, and the portions thereof, that may be borne by the Fund, and in
making such a determination shall consider the scope of the Distributor's
commitment to promoting the distribution of the Fund's shares.
The Fund reimbursed $488,628 to the Distributor pursuant to the Plan which
amounted to 0.10 of 1% of the Fund's average daily net assets for the year
ended December 31, 1999. Based upon the total amounts spent by the Distributor
during the period, it is estimated that the amount paid by the Fund to the
Distributor for distribution was spent in approximately the following ways: (i)
advertising -- $0; (ii) printing and mailing Prospectuses to other than current
shareholders -- $0; (iii) compensation to underwriters -- $0; (iv) compensation
to dealers -- $0; (v) compensation to sales personnel -- $0; and (vi) other,
which includes payments to Dean Witter Reynolds for expenses substantially all
of which relate to compensation of sales personnel and associated overhead
expenses -- $488,628. No payments under the Plan were made for interest,
carrying or other financing charges.
Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each calendar
quarter, a written report regarding the incremental distribution expenses
incurred on behalf of the Fund during such calendar quarter, which report
includes (1) an itemization of the types of expenses and the purposes
therefore; (2) the amounts of such expenses; and (3) a description of the
benefits derived by the Fund. In the Trustees' quarterly review of the Plan
they consider its continued appropriateness and the level of compensation
provided therein.
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<PAGE>
No interested person of the Fund nor any Independent Trustee has any
direct financial interest in the operation of the Plan except to the extent
that the Distributor, the Investment Manager, Dean Witter Reynolds, MSDW
Services Company or certain of their employees may be deemed to have such an
interest as a result of benefits derived from the successful operation of the
Plan or as a result of receiving a portion of the amounts expended thereunder
by the Fund.
On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Fund had obtained, was obtaining and would be likely to
obtain under the Plan, including that; (a) the Plan is essential in order to
implement the Fund's method and to enable the Fund to continue or grow and
avoid a pattern of net redemptions which, in turn, are essential for effective
investment management; and (b) without the reimbursement of distribution and
account maintenance expenses of Dean Witter Reynolds' branch offices made
possible by the 12b-1 fees, Dean Witter Reynolds could not establish and
maintain an effective system for distribution, servicing of Fund shareholders
and maintenance of shareholder accounts; and (3) what services had been
provided and were continuing to be provided under the Plan to the Fund and its
shareholders. Based upon their review, the Trustees, including each of the
Independent Trustees, determined that continuation of the Plan would be in the
best interest of the Fund and would have a reasonable likelihood of continuing
to benefit the Fund and its shareholders. In the Trustees' quarterly review of
the Plan, they will consider its continued appropriateness and the level of
compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
Fund, and all material amendments to the Plan must also be approved by the
Trustees in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Investment Company Act) on not more than thirty days'
written notice to any other party to the Plan. So long as the Plan is in
effect, the election and nomination of Independent Trustees shall be committed
to the discretion of the Independent Trustees.
E. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent. The Transfer
Agent is the transfer agent for the Fund's shares and the Dividend Disbursing
Agent for payment of dividends and distributions on Fund shares and Agent for
shareholders under various investment plans. The principal business address of
the Transfer Agent is Harborside Financial Center, Plaza Two, Jersey City, NJ
07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Bank of New York, 100 Church Street, New York, NY 10007 is the
Custodian for the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, NY
10036, serves as the independent accountants of the Fund. The independent
accountants are responsible for auditing the annual financial statements of the
Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining share-
19
<PAGE>
holder accounts, disbursing cash dividends and reinvesting dividends,
processing account registration changes, handling purchase and redemption
transactions, mailing prospectuses and reports, mailing and tabulating proxies,
processing share certificate transactions, and maintaining shareholder records
and lists. For these services, the Transfer Agent receives a per shareholder
account fee from the Fund and is reimbursed for its out-of-pocket expenses in
connection with such services.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
is responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. The Fund expects that the primary
market for the securities in which it intends to invest will generally be the
over-the-counter market. Securities are generally traded in the
over-the-counter market on a "net" basis with dealers acting as principal for
their own accounts without a stated commission, although the price of the
security usually includes a profit to the dealer. The Fund also expects that
securities will be purchased at times in underwritten offerings where the price
includes a fixed amount of compensation, generally referred to as the
underwriter's concession or discount. On occasion the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid.
During the fiscal years ended December 31, 1997, 1998 and 1999, the Fund
paid no such brokerage commissions or concessions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal
transactions in certain money market instruments with Dean Witter Reynolds. The
Fund will limit its transactions with Dean Witter Reynolds to U.S. Government
and Government Agency Securities, Bank Money Instruments (i.e. Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper (not including
Tax-Exempt Municipal Paper). The transactions will be effected with Dean Witter
Reynolds only when the price available from Dean Witter Reynolds is better than
that available from other dealers.
During the fiscal years ended December 31, 1997, 1998 and 1999, the Fund
did not effect any principal transactions with Dean Witter Reynolds.
Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds,
Morgan Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on an exchange during a comparable period of time. This standard would
allow the affiliated broker or dealer to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Trustees, including the
Independent Trustees, have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to an affiliated
broker or dealer are consistent with the foregoing standard. The Fund does not
reduce the management fee it pays to the Investment Manager by any amount of
the brokerage commissions it may pay to an affiliated broker or dealer.
During the fiscal years ended December 31, 1997, 1998 and 1999, the Fund
paid no brokerage commissions to an affiliated broker or dealer.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions.
20
<PAGE>
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment Manager
believes provide the most favorable prices and are capable of providing
efficient executions. If the Investment Manager believes the prices and
executions are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and dealers
who also furnish research and other services to the Fund or the Investment
Manager. The services may include, but are not limited to, any one or more of
the following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investment;
wire services; and appraisals or evaluations of portfolio securities.
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of research
or services otherwise performed by the Investment Manager and thereby reduce
its expenses, it is of indeterminable value and the Fund does not reduce the
management fee it pays to the Investment Manager by any amount that may be
attributable to the value of such services.
Subject to the principle of obtaining best price and execution, the
Investment Manager may consider a broker-dealer's sales of shares of the Fund
as a factor in selecting from among those broker-dealers qualified to provide
comparable prices and execution on the Fund's portfolio transactions. The Fund
does not, however, require a broker-dealer to sell shares of the Fund in order
for it to be considered to execute portfolio transactions, and will not enter
into any arrangement whereby a specific amount or percentage of the Fund's
transactions will be directed to a broker which sells shares of the Fund to
customers. The Trustees review, periodically, the allocation of brokerage
orders to monitor the operation of these policies.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain
initial and secondary public offerings, the Investment Manager utilizes a pro
rata allocation process based on the size of the Morgan Stanley Dean Witter
Funds involved and the number of shares available from the public offering.
D. DIRECTED BROKERAGE
During the fiscal year ended December 31, 1999, the Fund did not pay any
brokerage commissions to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the fiscal year ended December 31, 1999, the Fund did not purchase
securities issued by brokers or dealers that were among the ten brokers or the
ten dealers which executed transactions for or with the Fund in the largest
dollar amounts during the year. At December 31, 1999, the Fund did not own any
securities issued by any of such issuers.
VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. All shares of beneficial interest of
the Fund are of $0.01 par value and are equal as to earnings, assets and voting
privileges.
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<PAGE>
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios) and additional Classes
of shares within any series. The Trustees have not presently authorized any
such additional series or Classes of shares other than as set forth in the
Prospectus.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by the actions
of the Trustees. In addition, under certain circumstances, the shareholders may
call a meeting to remove the Trustees and the Fund is required to provide
assistance in communicating with shareholders about such a meeting. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect
any Trustees.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
All of the Trustees have been elected by the shareholders of the Fund,
most recently at a Special Meeting of Shareholders held on May 21, 1997. The
Trustees themselves have the power to alter the number and the terms of office
of the Trustees (as provided for in the Declaration of Trust), and they may at
any time lengthen or shorten their own terms or make their terms of unlimited
duration and appoint their own successors, provided that always at least a
majority of the Trustees has been elected by the shareholders of the Fund.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------
A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any
other Morgan Stanley Dean Witter Fund and the general administration of the
exchange privilege. No commission or discounts will be paid to DWR or any
authorized broker-dealer for any transaction pursuant to the exchange
privilege.
REDEMPTIONS. A check drawn by a shareholder against his or her account in
the Fund constitutes a request or redemption of a number of shares sufficient
to provide proceeds equal to the amount of the check. Payment of the proceeds
will normally be made on the next business day after receipt by the
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Transfer Agent of the check in proper form. If a check is presented for payment
to the Transfer Agent by a shareholder or payee in person, the Transfer Agent
will make payment by means of a check drawn on the Fund's account or, in the
case of a shareholder payee, to the shareholder's predesignated bank account,
but will not make payment in cash.
B. OFFERING PRICE
The Fund's shares are offered at net asset value per share. Net asset
value is based on the amortized cost of the Fund's portfolio securities.
The Fund utilizes the amortized cost method in valuing its portfolio
securities for purposes of determining the net asset value of its shares. The
Fund utilizes the amortized cost method in valuing its portfolio securities
even though the portfolio securities may increase or decrease in market value,
generally in connection with changes in interest rates. The amortized cost
method of valuation involves valuing a security at its cost at the time of
purchase adjusted by a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the
investment. During such periods, the yield to investors in the Fund may differ
somewhat from that obtained in a similar company which uses market-to-market
values for all of its portfolio securities. For example, if the use of
amortized cost resulted in a lower (higher) aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher (lower) yield than would result from investment in such a
similar company and existing investors would receive less (more) investment
income. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share of $1.00.
The use of the amortized cost method to value the portfolio securities of
the Fund and the maintenance of the per share net asset value of $1.00 is
permitted pursuant to Rule 2a-7 of the Act (the "Rule") and is conditioned on
its compliance with various conditions contained in the Rule including: (a) the
Trustees are obligated, as a particular responsibility within the overall duty
of care owed to the Fund's shareholders, to establish procedures reasonably
designed, taking into account current market conditions and the Fund's
investment objectives, to stabilize the net asset value per share as computed
for the purpose of distribution and redemption at $1.00 per share; (b) the
procedures include (i) calculation, at such intervals as the Trustees determine
are appropriate and as are reasonable in light of current market conditions, of
the deviation, if any, between net asset value per share using amortized cost
to value portfolio securities and net asset value per share based upon
available market quotations with respect to such portfolio securities; (ii)
periodic review by the Trustees of the amount of deviation as well as methods
used to calculate it; and (iii) maintenance of written records of the
procedures, and the Trustees' considerations made pursuant to them and any
actions taken upon such consideration; (c) the Trustees should consider what
steps should be taken, if any, in the event of a difference of more than 1/2 of
1% between the two methods of valuation; and (d) the Trustees should take such
action as they deem appropriate (such as shortening the average portfolio
maturity, realizing gains or losses, withholding dividends or, as provided by
the Declaration of Trust, reducing the number of outstanding shares of the
Fund) to eliminate or reduce to the extent reasonably practicable material
dilution or other unfair results to investors or existing shareholders which
might arise from differences between the two methods of valuation.
Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio security is deemed to be the period remaining
(calculated from the trade date or such other date on which the Fund's interest
in the instrument is subject to market action) until the date on which in
accordance with the terms of the security the principal amount must
unconditionally be paid, or in the case of a security called for redemption,
the date on which the redemption payment must be made.
A variable rate security that is subject to a demand feature is deemed to
have a maturity equal to the period remaining until the principal amount can be
recovered through demand. A floating rate security
23
<PAGE>
that is subject to a demand feature is deemed to have a maturity equal to the
period remaining until the principal amount can be recovered through demand.
An "NRSRO" is a nationally recognized statistical rating organization. The
term "Requisite NRSROs" means (i) any two NRSROs that have issued a rating with
respect to a security or class of debt obligations of an issuer, or (ii) if
only one NRSRO has issued a rating with respect to such security or issuer at
the time a fund purchases or rolls over the security, that NRSRO.
An Eligible Security is generally defined in the Rule to mean (i) a rated
security with a remaining maturity of 397 calendar days or less that has
received a rating from the Requisite NRSROs in one of the two highest
short-term rating categories (within which there may be sub-categories or
gradations indicating relative standing); or (ii) An Unrated Security that is
of comparable quality to a security meeting the requirements of (1) above, as
determined by the Trustees; (iii) In addition, in the case of a security that
is subject to a Demand Feature or Guarantee: (A) The Guarantee has received a
rating from an NRSRO or the Guarantee is issued by a guarantor that has
received a rating from an NRSRO with respect to a class of debt obligations (or
any debt obligation within that class) that is comparable in priority and
security to the Guarantee; unless: (1) the Guarantee is issued by a person that
directly or indirectly, controls, is controlled by or is under a common control
with the issuer of the security subject to the Guarantee (other than a sponsor
or a Special Purpose Entity with respect to an Asset Backed Security; (2) the
security subject to the Guarantee is a repurchase agreement that is
Collateralized Fully, or (3) the Guarantee itself is a Government Security and
(B) the issuer of the Demand Feature, or another institution, has undertaken
promptly to notify the holder of the security in the event the Demand Feature
or Guarantee is substituted with another Demand Feature or Guarantee (if such
substitution is permissible under the terms of the Demand Feature or
Guarantee). The Fund will limit its investments to securities that meet the
requirements for Eligible Securities.
As permitted by the Rule, the Trustees have delegated to the Fund's
Investment Manager the authority to determine which securities present minimal
credit risks and which unrated securities are comparable in quality to rated
securities.
Also, as required by the Rule, the Fund will limit its investments in
securities, other than Government securities, so that, at the time of purchase:
(a) except as further limited in (b) below with regard to certain securities,
with respect to 75% of its total assets no more than 5% of its total assets
will be invested in the securities of any one issuer; and (b) with respect to
Eligible Securities that have received a rating in less than the highest
category by any one of the NRSROs whose ratings are used to qualify the
security as an Eligible Security, or that have been determined to be of
comparable quality: (i) no more than 5% in the aggregate of the Fund's total
assets in all such securities, and (ii) no more than the greater of 1% of total
assets, or $1 million, in the securities on any one issuer.
The presence of a line of credit or other credit facility offered by a
bank or other financial institution which guarantees the payment obligation of
the issuer, in the event of a default in the payment of principal or interest
of an obligation, may be taken into account in determining whether an
investment is an Eligible Security, provided that the guarantee itself is an
Eligible Security.
The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Trustees determine present minimal
credit risks and which are Eligible Securities. The Rule also requires the Fund
to maintain a dollar-weighted average portfolio maturity (not more than 90
days) appropriate to its objective of maintaining a stable net asset value of
$1.00 per share and precludes the purchase of any instrument with a remaining
maturity of more than 397 days. Should the disposition of a portfolio security
result in a dollar-weighted average portfolio maturity of more than 90 days,
the Fund will invest its available cash in such a manner as to reduce such
maturity to 90 days or less a soon as is reasonably practicable.
If the Trustees determine that it is no longer in the best interests of
the Fund and its shareholders to maintain a stable price of $1 per share or if
the Trustees believe that maintaining such price no longer reflects a
market-based net asset value per share, the Trustees have the right to change
from an amortized cost basis of valuation to valuation based on market
quotations. The Fund will notify shareholders of the Fund of any such change.
24
<PAGE>
IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund generally will make three basic types of distributions: tax
exempt dividends, ordinary dividends and long-term capital gain distributions.
These types of distributions are reported differently on a shareholder's income
tax return and they are also subject to different rates of tax. The tax
treatment of the investment activities of the Fund will affect the amount and
timing and character of the distributions made by the Fund. Shareholders are
urged to consult their own tax professionals regarding specific questions as to
federal, state or local taxes.
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any ordinary income or capital gains in any year for reinvestment. In
such event, the Fund will pay federal income tax (and possibly excise tax) on
such retained gains.
Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more
than one year. Gains or losses on the sale of securities with a tax holding
period of one year or less will be short-term gains or losses.
In computing net investment income, the Fund will amortize any premiums
and original issue discounts on securities owned, if applicable. Capital gains
or losses realized upon sale or maturity of such securities will be based on
their amortized cost.
All or a portion of any of the Fund's gain from tax-exempt obligations
purchased at a market discount may be treated as ordinary income rather than
capital gain.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be affected. In that event, the
Fund would re-evaluate its investment objective and policies.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. The Fund intends to qualify to
pay "exempt-interest dividends" to its shareholders by maintaining, as of the
close of each of its taxable years, at least 50% of the value of its assets in
tax-exempt securities. An exempt-interest dividend is that part of the dividend
distributions made by the Fund which consists of interest received by the Fund
on tax-exempt securities upon which the shareholder incurs no federal income
taxes. Exempt-interest dividends are included, however, in determining what
portion, if any, of a person's Social Security benefits are subject to federal
income tax.
The Fund intends to invest a portion of its assets in certain "private
activity bonds." As a result, a portion of the exempt-interest dividends paid
by the Fund will be an item of tax preference to shareholders subject to the
alternative minimum tax. Certain corporations which are subject to the
alternative minimum tax may also have to include exempt-interest dividends in
calculating their alternative minimum taxable income in situations where the
"adjusted current earnings" of the corporation exceeds its alternative minimum
taxable income.
Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of net
short-term capital gains. Such dividends and distributions are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Distributions of
long-term capital gains, if any, are taxable as long-term capital gains,
regardless of how long the shareholder has held the
25
<PAGE>
Fund shares and regardless of whether the distribution is received in
additional shares or in cash. Since the Fund's income is expected to be derived
entirely from interest rather than dividends, it is anticipated that no portion
of such dividend distributions will be eligible for the federal dividends
received deduction available to corporations.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of any taxable interest income and short term
capital gains.
After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the percentage of any distributions which
constitute an item of tax preference for purposes of the alternative minimum
tax.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from the Fund will have
the effect of reducing the net asset value of the shareholder's stock in the
Fund by the exact amount of the dividend or capital gains distribution.
Furthermore, capital gains distributions and some portion of the dividends may
be subject to federal income taxes. If the net asset value of the shares should
be reduced below a shareholder's cost as a result of the payment of dividends
or the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains
or losses and those held for more than one year generally result in long-term
gain or loss. Under current law, the maximum tax on long-term capital gains is
20%. Any loss realized by shareholders upon a sale or redemption of shares
within six months of the date of their purchase will be treated as a long-term
capital loss to the extent of any distributions of net long-term capital gains
with respect to such shares during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured
by the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the
tax basis of their shares. Under certain circumstances a shareholder may
compute and use an average cost basis in determining the gain or loss on the
sale or redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund is not deductible. Furthermore, entities or persons who are
"substantial users" (or related persons) of facilities financed by industrial
development bonds should consult their tax advisers before purchasing shares of
the Fund. "Substantial user" is defined generally by Income Tax Regulation
1.103-11(b) as including a "non-exempt person" who regularly uses in a trade or
business a part of a facility financed from the proceeds of industrial
development bonds.
26
<PAGE>
X. UNDERWRITERS
- --------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain
obligations under the Distribution Agreement concerning the distribution of the
shares. These obligations and the compensation the Distributor receives are
described above in the sections titled "Principal Underwriter" and "Rule 12b-1
Plans."
XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------
The Fund's current yield for the seven days ending December 31, 1999 was
3.60%. The effective annual yield on December 31, 1999, was 3.66% assuming
daily compounding.
The Fund's annualized current yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential
investors, is computed by determining, for a stated seven-day period, the net
change, exclusive of capital changes and including the value of additional
shares purchased with dividends and any dividends declared therefrom (which
reflect deductions of all expenses of the Fund such as management fees), in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return,
and then multiplying the base period return by (365/7).
The Fund's annualized effective yield, as may be quoted from time to time
in advertisements and other communications to shareholders and potential
investors, is computed by determining (for the same stated seven-day period as
for the current yield), the net change, exclusive of capital changes and
including the value of additional shares purchased with dividends and any
dividends declared therefrom (which reflect deductions of all expenses of the
Fund such as management fees), in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period, and
dividing the difference by the value of the account at the beginning of the
base period to obtain the base period return, and then compounding the base
period return by adding 1, raising the sum to a power equal to 365 divided by
7, and subtracting 1 from the result.
The yields quoted in any advertisement or other communication should not
be considered a representation of the yields of the Fund in the future since
the yield is not fixed. Actual yields will depend not only on the type, quality
and maturities of the investments held by the Fund and changes in interest
rates on such investments, but also on changes in the Fund's expenses during
the period.
Yield information may be useful in reviewing the performance of the Fund
and for providing a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments which typically pay a fixed
yield for a stated period of time, the Fund's yield fluctuates.
Based upon a Federal personal income tax bracket of 39.6%, the Fund's
tax-equivalent yield for the seven days ending December 31, 1999, was 5.96%.
Tax-equivalent yield is computed by dividing that portion of the current
yield (calculated as described above) which is tax-exempt by 1 minus a stated
tax rate and adding the quotient to that portion, if any, of the yield of the
Fund that is not tax-exempt. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund
by adding the sum of all distributions on 10,000, 50,000 or 100,000 shares of
the Fund since inception to $10,000, $50,000 and $100,000, as the case may be.
Investments of $10,000, $50,000 and $100,000 in the Fund at inception would
have grown to $21,553, $107,765 and $215,530, respectively, at December 31,
1999.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
December 31, 1999 included in the Prospectus and incorporated by reference in
this Statement of Additional Information have been so included and incorporated
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
* * * * *
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from
the SEC.
27
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
PART C OTHER INFORMATION
Item 23. Exhibits
1(a). Declaration of Trust of the Registrant, dated April 6, 1987, is
incorporated by reference to Exhibit 1(a) of Post-Effective
Amendment No. 20 to the Registration Statement on Form N-1A, filed
on February 26, 1996.
1(b). Amendment to the Declaration of Trust of the Registrant, dated
February 19, 1993, is incorporated by reference to Exhibit 1(b) of
Post-Effective Amendment No. 20 to the Registration Statement on
Form N-1A, filed on February 26, 1996.
1(c). Amendment to the Declaration of Trust of the Registrant, dated
June 22, 1998, is incorporated by reference to Exhibit 1 of
Post-Effective Amendment No. 23 to the Registration Statement on
Form N-1A, filed on February 10, 1999.
2. Amended and Restated By-Laws of the Registrant, dated January 28,
1999, is incorporated by reference to Exhibit 2 of Post-Effective
Amendment No. 23 to the Registration Statement on Form N-1A, filed
on February 10, 1999.
3. Not Applicable.
4. Amended Investment Management Agreement between the Registrant and
Morgan Stanley Dean Witter Trust FSB, dated April 30, 1998, is
incorporated by reference to Exhibit 5 of Post-Effective Amendment
No. 23 to the Registration Statement on Form N-1A, filed on
February 10, 1999.
5 (a). Distribution Agreement, dated May 31, 1997, is incorporated by
reference to Exhibit 6 of Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A, filed on February 27, 1998.
5 (b). Selected Dealers Agreement between Morgan Stanley Dean Witter
Distributors Inc. and the Registrant, is incorporated by reference
to Exhibit 6(b) of Post-Effective Amendment No. 18 to the
Registration Statement on Form N-1A, filed on February 18, 1994.
6. Second Amended and Restated Retirement Plan for Non-Interested
Directors or Trustees, dated May 8, 1997, is incorporated by
reference to Exhibit 6 of Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A, filed on April 9, 1999.
7 (a). Custody Agreement between The Bank of New York and the Registrant
is incorporated by reference to Exhibit 8 of Post-Effective
Amendment No. 20 to the Registration Statement on Form N-1A, filed
on February 26, 1996.
7 (b). Amendment to the Custody Agreement between The Bank of New York
and the Registrant is incorporated by reference to Exhibit 8 of
Post-Effective Amendment No. 21 to the Registration Statement on
Form N-1A, filed on February 24, 1997.
1
<PAGE>
8 (a). Amended and Restated Transfer Agency and Service Agreement is
incorporated by reference to Exhibit 8 of Post-Effective Amendment
No. 23 to the Registration Statement on Form N-1A, filed on
February 10, 1999.
8 (b). Amended Services Agreement, dated June 22, 1998, is incorporated
by reference to Exhibit 9 of Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A, filed on February 10,
1999.
9. Opinion of Sheldon Curtis, Esq., dated April 29, 1987, is
incorporated by reference to Exhibit 10 of Post-Effective
Amendment No. 11 to the Registration Statement on Form N-1A, filed
on April 29, 1987, and is filed herein.
10. Consent of Independent Accountants, filed herein.
11. Not Applicable.
12. Not Applicable.
13. Amended and Restated Plan of Distribution pursuant to Rule 12b-1,
dated July 23, 1997, is incorporated by reference to Exhibit 15 of
Post-Effective Amendment No. 22 to the Registration Statement on
Form N-1A, filed on February 27, 1998.
14. Not Applicable.
Other Powers of Attorney are incorporated by reference to Exhibit
(Other) of Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A, filed on February 23, 1995, and in the
case of Wayne E. Hedien, is incorporated by reference to Exhibit
(Other) of Post-Effective Amendment No. 22 to the Registration
Statement on Form N-1A, filed on February 27, 1998.
Item 24. Persons Controlled by or Under Common Control with the Fund.
None
Item 25. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
2
<PAGE>
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 26. Business and Other Connections of Investment Advisor
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment advisor. The following information is given regarding officers
of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW Advisors is
a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
Closed-End Investment Companies
- -------------------------------
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
3
<PAGE>
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities
Open-end Investment Companies
- -----------------------------
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Institutional Money Trust
(4) Active Assets Money Trust
(5) Active Assets Premier Money Trust
(6) Active Assets Tax-Free Trust
(7) Morgan Stanley Dean Witter 21st Century Trend Fund
(8) Morgan Stanley Dean Witter Aggressive Equity Fund
(9) Morgan Stanley Dean Witter American Opportunities Fund
(10) Morgan Stanley Dean Witter Balanced Growth Fund
(11) Morgan Stanley Dean Witter Balanced Income Fund
(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, ?Best Ideas Portfolio?
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
4
<PAGE>
(32) Morgan Stanley Dean Witter Information Fund
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(42) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(43) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(44) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Real Estate Fund
(51) Morgan Stanley Dean Witter S&P 500 Index Fund
(52) Morgan Stanley Dean Witter S&P 500 Select Fund
(53) Morgan Stanley Dean Witter Select Dimensions Investment Series
(54) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(55) Morgan Stanley Dean Witter Short-Term Bond Fund
(56) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(57) Morgan Stanley Dean Witter Small Cap Growth Fund
(58) Morgan Stanley Dean Witter Special Value Fund
(59) Morgan Stanley Dean Witter Strategist Fund
(60) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(61) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(62) Morgan Stanley Dean Witter Total Market Index Fund
(63) Morgan Stanley Dean Witter Total Return Trust
(64) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(65) Morgan Stanley Dean Witter U.S. Government Securities Trust
(66) Morgan Stanley Dean Witter Utilities Fund
(67) Morgan Stanley Dean Witter Value-Added Market Series
(68) Morgan Stanley Dean Witter Value Fund
(69) Morgan Stanley Dean Witter Variable Investment Series
(70) Morgan Stanley Dean Witter World Wide Income Trust
5
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and
Director Director of Morgan Stanley Dean Witter Distributors
Inc. ("MSDW Distributors") and Morgan Stanley Dean
Witter Trust FSB ("MSDW Trust"); President, Chief
Executive Officer and Director of Morgan Stanley
Dean Witter Services Company Inc. ("MSDW
Services"); President of the Morgan Stanley Dean
Witter Funds; Executive Vice President and Director
of Dean Witter Reynolds Inc. ("DWR"); Director of
various MSDW subsidiaries; Trustee of various Van
Kampen investment companies.
Barry Fink Assistant Secretary of DWR; Executive Vice
Executive Vice President, President, Secretary, General Counsel and Director
Secretary, General of MSDW Services; Executive Vice President,
and Counsel and Director Assistant Secretary Assistant General Counsel of
MSDW Distributors; Vice President, Secretary and
General Counsel of the Morgan Stanley Dean Witter
Funds.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter
Executive Vice President Funds; Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison President MSDW Trust; Executive Vice President,
Executive Vice President, Chief Administrative Officer and Director of MSDW
Chief Administrative Services; Vice President of the Morgan Stanley Dean
Officer and Director Witter Funds.
Edward C. Oelsner, III
Executive Vice President
Joseph R. Arcieri Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Peter M. Avelar Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the High
Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Douglas Brown
Senior Vice President
6
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Rosalie Clough
Senior Vice President
and Director of Marketing
Richard Felegy
Senior Vice President
Sheila A. Finnerty Vice President of Morgan Stanley Dean Witter Prime
Senior Vice President Income Trust.
Edward F. Gaylor Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW
Trust; Vice President of the Morgan Stanley Dean
Witter Funds.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean
Senior Vice President, Witter Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative
Officer - Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Kevin Hurley Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Jenny Beth Jones Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of Sector
Rotation
7
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Jonathan R. Page Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Money Market Group
Ira N. Ross Vice President of various Morgan Stanley Dean
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Growth Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
James Solloway
Senior Vice President
Katherine H. Stromberg Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Growth and Income Group
Elizabeth A. Vetell
Senior Vice President
and Director of
Shareholder Communication
James F. Willison Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Tax-Exempt Fixed
Income Group
Raymond A. Basile
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial
Treasurer and Accounting Officer of the Morgan Stanley Dean
Witter Funds.
8
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Thomas Chronert
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
and First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of MSDW Distributors and the Morgan
Stanley Dean Witter Funds.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
Michael Interrante First Vice President and Controller of MSDW
First Vice President Services; Assistant Treasurer of MSDW Distributors;
and Controller First Vice President and Treasurer of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Douglas J. Ketterer
First Vice President
Todd Lebo First Vice President and Assistant Secretary of
First Vice President MSDW and Services; Assistant Secretary of MSDW
and Assistant Secretary Distributors the Morgan Stanley Dean Witter Funds.
Lou Anne D. McInnis First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors and the Morgan Stanley Dean Witter
Funds.
Carsten Otto First Vice President and Assistant Secretary of
First Vice President MSDW Services; Assistant Secretary of MSDW
Distributors and and Assistant Secretary the Morgan
Stanley Dean Witter Funds.
Carl F. Sadler
First Vice President
Ruth Rossi First Vice President and Assistant Secretary of
First Vice President MSDW and Services; Assistant Secretary of MSDW
and Assistant Secretary Distributors the Morgan Stanley Dean Witter Funds.
9
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
James P. Wallin
First Vice President
Robert Abreu
Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz Vice President of Morgan Stanley Dean Witter Global
Vice President Utilities Fund.
Armon Bar-Tur Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Maurice Bendrihem
Vice President and
Assistant Controller
Thomas A. Bergeron
Vice President
Philip Bernstein
Vice President
Dale Boettcher
Vice President
Michelina Calandrella
Vice President
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Liam Carroll
Vice President
10
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Philip Casparius
Vice President
Annette Celenza
Vice President
Aaron Clark
Vice President
William Connerly
Vice President
Michael J. Davey
Vice President
David Dineen Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Glen H. Frey Vice President of Morgan Stanley Dean Witter
Vice President Information Fund.
Jeffrey D. Geffen
Vice President
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity-Burke
Vice President
Peter Gewirtz
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Trey Hancock
Vice President
11
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Laury A. Haskamp
Vice President
Matthew T. Haynes Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Peter Hermann Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
David T. Hoffman
Vice President
Thomas G. Hudson II
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Carol Espejo-Kane
Vice President
Nancy Karole-Kennedy
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Gerard J. Lian Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Cameron J. Livingstone
Vice President
Nancy Login
Vice President
Sharon Loguercio
Vice President
Steven MacNamara
Vice President
12
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Catherine Maniscalco Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter R. McDowell
Vice President
Albert McGarity
Vice President
Teresa McRoberts Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Mark Mitchell
Vice President
Julie Morrone Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Hilary A. O'Neill
Vice President
Anne Pickrell
Vice President
Mori Paulson
Vice President
Frances Roman
Vice President
Dawn Rorke
Vice President
John Roscoe Vice President of Morgan Stanley Dean Witter
Vice President Real Estate Fund.
Hugh Rose
Vice President
13
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Robert Rossetti Vice President of Morgan Stanley Dean Witter
Vice President Competitive Edge Fund.
Sally Sancimino
Vice President
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.
Alison M. Sharkey
Vice President
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Ronald B. Silvestri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Robert Stearns
Vice President
Naomi Stein
Vice President
William Stevens
Vice President
Michael Strayhorn
Vice President
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Robert Vanden Assem
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
14
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
John Wong
Vice President
The principal address of MSDW Advisors, MSDW Services, MSDW Distributors,
DWR, and the Morgan Stanley Dean Witter Funds is Two World Trade Center, New
York, New York 10048. The principal address of MSDW is 1585 Broadway, New York,
New York 10036. The principal address of MSDW Trust is 2 Harborside Financial
Center, Jersey City, New Jersey 07311.
Item 27. Principal Underwriters
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Institutional Money Trust
(4) Active Assets Money Trust
(5) Active Assets Premier Money Trust
(6) Active Assets Tax-Free Trust
(7) Morgan Stanley Dean Witter 21st Century Trend Fund
(8) Morgan Stanley Dean Witter Aggressive Equity Fund
(9) Morgan Stanley Dean Witter American Opportunities Fund
(10) Morgan Stanley Dean Witter Balanced Growth Fund
(11) Morgan Stanley Dean Witter Balanced Income Fund
(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, ?Best Ideas Portfolio?
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
(32) Morgan Stanley Dean Witter Information Fund
15
<PAGE>
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(42) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(43) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(44) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Prime Income Trust
(51) Morgan Stanley Dean Witter Real Estate Fund
(52) Morgan Stanley Dean Witter S&P 500 Index Fund
(53) Morgan Stanley Dean Witter S&P 500 Select Fund
(54) Morgan Stanley Dean Witter Short-Term Bond Fund
(55) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(56) Morgan Stanley Dean Witter Small Cap Growth Fund
(57) Morgan Stanley Dean Witter Special Value Fund
(58) Morgan Stanley Dean Witter Strategist Fund
(59) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(60) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(61) Morgan Stanley Dean Witter Total Market Index Fund
(62) Morgan Stanley Dean Witter Total Return Trust
(63) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(64) Morgan Stanley Dean Witter U.S. Government Securities Trust
(65) Morgan Stanley Dean Witter Utilities Fund
(66) Morgan Stanley Dean Witter Value-Added Market Series
(67) Morgan Stanley Dean Witter Value Fund
(68) Morgan Stanley Dean Witter Variable Investment Series
(69) Morgan Stanley Dean Witter World Wide Income Trust
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than Mr.
Purcell, who is a Trustee of the Registrant, none of the following persons has
any position or office with the Registrant.
Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
Michael T. Gregg Vice President and Assistant Secretary.
James F. Higgins Director
Philip J. Purcell Director
16
<PAGE>
Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 29. Management Services
Registrant is not a party to any such management-related service contract.
Item 30. Undertakings
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
17
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 28th day of February, 2000.
MORGAN STANLEY DEAN WITTER
TAX-FREE DAILY INCOME TRUST
By: /s/ Barry Fink
--------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 25 has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
(1) Principal Executive Officer Chairman, Chief Executive
Officer and Trustee
By: /s/ Charles A. Fiumefreddo 02/28/00
---------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By: /s/ Thomas F. Caloia 02/28/00
---------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By: /s/ Barry Fink 02/28/00
---------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder
By: /s/David M. Butowsky 02/28/00
---------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-FREE DAILY INCOME TRUST
EXHIBIT INDEX
9. Opinion of Sheldon Curtis, Esq., Dated April 29, 1987.
10. Consent of Independent Accountants.
<PAGE>
DEAN WITTER/SEARS TAX-FREE DAILY INCOME TRUST
April 29, 1987
Dean Witter Tax-Exempt Securities Trust
One World Trade Center
New York, New York 10048
Dear Sirs:
With respect to Post-Effective Amendment No. 11 to the Registration
Statement on Form N-1A (File No. 2-67087) (the "Registration Statement") filed
with the Securities and Exchange Commission by Dean Witter/Sears Tax-Free Daily
Income Trust, a Massachusetts business trust (the "Trust"), as successor to Dean
Witter/Sears Tax-Free Daily Income Fund, Inc., for the purpose of registering
under the Securities Act of 1933, as amended, an indefinite number of shares of
beneficial interest of $0.01 par value of the Trust (the "Shares"), I, as your
counsel, have examined such Trust records, certificates and other documents and
reviewed such questions of law as I have considered necessary or appropriate for
the purposes of this opinion, and on the basis of such examination and review, I
advise you that, in my opinion, proper trust proceedings have been taken by the
Trust so that the Shares have been validly authorized; and when the shares have
been issued and sold in accordance with the terms of the Prospectus and
Statement of Additional Information contained in the aforesaid Post-Effective
Amendment, the Shares will be validly issued, fully paid and non-assessable.
As to matters of Massachusetts law contained in the forgoing opinion, I
have relied upon the opinion of Gaston Snow & Ely Bartlett, dated the date
hereof.
I hereby consent to the filing of this opinion as an exhibit to the
aforesaid Post-Effective Amendment and to the reference to me under the caption
"Legal Counsel" in the Statement of Additional Information forming a part of the
aforesaid Post-Effective Amendment. In giving this consent, I do not thereby
admit that I am within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Sheldon Curtis
Sheldon Curtis
General Counsel
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form N-1A of our
report dated February 7, 2000, relating to the financial statements and
financial highlights of Morgan Stanley Dean Witter Tax-Free Daily Income Trust,
which appears in such Registration Statement. We also consent to the references
to us under the headings "Custodian and Independent Accountants", "Experts", and
"Financial Highlights" in such Registration Statement.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
February 25, 2000
