<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1999
REGISTRATION NOS. 2-86966
811-3870
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 17 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 19 /X/
-------------------
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
(FORMERLY NAMED DEAN WITTER U.S. GOVERNMENT SECURITIES 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:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
----------------
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)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
_X_ on April 30, 1999 pursuant to paragraph (a) of rule 485.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- --------------------------------------- ---------------------------------------
<S> <C>
PART A PROSPECTUS
1. .................................. Cover Page; Back Cover
2. .................................. Investment Objective; Principal
Investment Strategies, Principal Risks,
Past Performance
3. .................................. Fees and Expenses
4. .................................. Investment Objective; Additional
Investment Strategy Information;
Additional Risk Information
5. .................................. Not Applicable
6. .................................. Fund Management
7. .................................. Pricing Fund Shares; How to Buy Shares;
How to Exchange Shares; How to Sell
Shares; Distributions; Tax
Consequences
8. .................................. Share Class Arrangements
9. .................................. Financial Highlights
PART B STATEMENT OF ADDITIONAL INFORMATION
</TABLE>
Information required to be included in Part B is set forth under the
appropriate caption in Part B of this Registration Statement.
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS - MAY 1, 1999
Morgan Stanley Dean Witter
U.S. GOVERNMENT SECURITIES TRUST
[COVER PHOTO]
A MUTUAL FUND THAT SEEKS
A HIGH LEVEL OF CURRENT INCOME
CONSISTENT WITH SAFETY OF PRINCIPAL
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this PROSPECTUS. Any representation
to the contrary is a criminal offense.
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
The Fund Investment Objective........................................ 1
Principal Investment Strategies............................. 1
Principal Risks............................................. 2
Past Performance............................................ 4
Fees and Expenses........................................... 5
Fund Management............................................. 6
Shareholder Information Pricing Fund Shares......................................... 7
How to Buy Shares........................................... 7
How to Exchange Shares...................................... 9
How to Sell Shares.......................................... 11
Distributions............................................... 13
Tax Consequences............................................ 13
Share Class Arrangements.................................... 14
Financial Highlights ............................................................ 21
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>
FUND CATEGORY
---------------------------
/ / Growth
/ / Growth and Income
/X/ INCOME
/ / Money Market
<PAGE>
(Sidebar)
INCOME
An investment objective having the goal of selecting securities to pay out
income rather than rise in value.
(End Sidebar)
THE FUND
ICON INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter U.S. Government Securities Trust
(the "Fund") is a mutual fund that seeks a high level of
current income consistent with safety of principal. There is
no guarantee that the Fund will achieve this objective.
ICON PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund will invest all of its assets in U.S. Government
securities. In making investment decisions, the Fund's
"Investment Manager," Morgan Stanley Dean Witter Advisors
Inc., considers economic developments, interest rate trends
and other factors. The Fund is not limited as to the
maturities of the U.S. Government securities in which it may
invest.
The U.S. Government securities (including zero coupon
securities) that the Fund may purchase include:
- U.S. Treasury bills, notes and bonds, all of which are
direct obligations of the U.S. Government.
- Securities (including mortgage-backed securities) issued
by agencies and instrumentalities of the U.S. Government
which are backed by the full faith and credit of the
United States. Among the agencies and instrumentalities
issuing these obligations are the Government National
Mortgage Association, the Federal Housing Administration,
and REFCO.
One type of mortgage-backed security, in which the Fund may
invest, is a mortgage pass-through security. These
securities represent a participation interest in a pool of
residential mortgage loans originated by U.S. Governmental
or private lenders such as banks. They differ from
conventional debt securities, which provide for periodic
payment of interest in fixed amounts and principal payments
at maturity or on specified call dates. Mortgage
pass-through securities provide for monthly payments that
are a "pass-through" of the monthly interest and principal
payments made by the individual borrowers on the pooled
mortgage loans. Mortgage pass-through securities may be
collateralized by mortgages with fixed rates of interest or
adjustable rates.
Fixed-income securities are debt securities such as bonds or
notes. The issuer of the debt security borrows money from
the investor who buys the security. Most debt securities pay
either fixed or adjustable rates of interest at regular
intervals until they mature, at which point investors get
their principal back.
1
<PAGE>
In pursuing the Fund's investment objective, the Investment
Manager has considerable leeway in deciding which
investments it buys, holds or sells on a day-to-day basis --
and which trading strategies it uses. For example, the
Investment Manager in its discretion may determine to use
some permitted trading strategies while not using others.
ICON PRINCIPAL RISKS
- --------------------------------------------------------------------------------
The Fund's share price will fluctuate with changes in the
market value of the Fund's portfolio securities. The Fund's
yield also will vary based on the yield of the Fund's
portfolio securities. Neither the value nor the yield of the
U.S. Government securities that the Fund invests in (or the
value or yield of the Fund's shares) is guaranteed by the
U.S. Government. When you sell Fund shares, they may be
worth less than what you paid for them and, accordingly, you
can lose money investing in this Fund.
FIXED-INCOME SECURITIES. Principal risks of investing in the
Fund are associated with its U.S. Government securities,
which are fixed-income securities. All fixed-income
securities are subject to two types of risk: credit risk and
interest rate risk. Credit risk refers to the possibility
that the issuer of a security will be unable to make
interest payments and/or repay the principal on its debt.
Interest rate risk refers to fluctuations in the value of a
fixed-income security resulting from changes in the general
level of interest rates. When the general level of interest
rates goes up, the prices of most fixed-income securities go
down. When the general level of interest rates goes down,
the prices of most fixed-income securities go up. (Zero
coupon securities are typically subject to greater price
fluctuations than comparable securities that pay interest.)
As merely illustrative of the relationship between
fixed-income securities and interest rates, the following
table shows how interest rates affect bond prices.
<TABLE>
<CAPTION>
PRICE PER $1,000 OF A BOND IF
INTEREST RATES:
------------------------------
INCREASE DECREASE
HOW INTEREST RATES AFFECT BOND PRICES -------------- --------------
- ------------------------------------------------------
BOND MATURITY COUPON 1% 2% 1% 2%
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------
1 year N/A $1,000 $1,000 $1,000 $1,000
- ----------------------------------------------------------------------
5 years 4.25% $967 $934 $1,038 $1,076
- ----------------------------------------------------------------------
10 years 4.75% $930 $867 $1,074 $1,155
- ----------------------------------------------------------------------
30 years 5.25% $865 $756 $1,166 $1,376
- ----------------------------------------------------------------------
</TABLE>
Coupons reflect yields on Treasury securities as of December
31, 1998. The table is not representative of price changes
for mortgage-backed securities principally because of
prepayment risk. In addition, the table is an illustration
and does not represent expected yields or share price
changes of any Morgan Stanley Dean Witter mutual fund.
2
<PAGE>
While the credit risk associated with U.S. Government
securities is minimal, the interest rate risk can be
substantial. The Fund is not limited as to the maturities of
the securities in which it may invest. Thus, a rise in the
general level of interest rates may cause the price of the
Fund's portfolio securities to fall substantially.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities in
which the Fund may invest have different risk
characteristics than traditional debt securities. Although
generally the value of fixed-income securities increases
during periods of falling interest rates and decreases
during periods of rising rates, this is not always the case
with mortgage-backed securities. This is due to the fact
that principal on underlying mortgages may be prepaid at any
time as well as other factors. Generally, prepayments will
increase during a period of falling interest rates and
decrease during a period of rising interest rates. The rate
of prepayments also may be influenced by economic and other
factors. Prepayment risk includes the possibility that, as
interest rates fall, securities with stated interest rates
may have the principal prepaid earlier than expected,
requiring the Fund to invest the proceeds at generally lower
interest rates.
Investments in mortgage-backed securities are made based
upon, among other things, expectations regarding the rate of
prepayments on underlying mortgage pools. Rates of
prepayment, faster or slower than expected by the Investment
Manager, could reduce the Fund's yield, increase the
volatility of the Fund and/or cause a decline in net asset
value. Certain mortgage-backed securities may be more
volatile and less liquid than other traditional types of
debt securities.
ZERO COUPON SECURITIES. A portion of the U.S. Government
securities purchased by the Fund may be zero coupon
securities with maturity dates in each case no later than
ten years from the settlement date for the purchase of such
security. Such securities are purchased at a discount from
their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such
securities is, implicitly, automatically compounded and paid
out at maturity. While such compounding at a constant rate
eliminates the risk of receiving lower yields upon
reinvestment of interest if prevailing interest rates
decline, the owner of a zero coupon security will be unable
to participate in higher yields upon reinvestment of
interest received on interest-paying securities if
prevailing interest rates rise.
A zero coupon security pays no interest to its holder during
its life. Therefore, to the extent the Fund invests in zero
coupon securities, it will not receive current cash
available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater
price fluctuations during periods of changing prevailing
interest rates than are comparable securities which pay
interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon
security accrue a portion of the discount at which the
security was purchased as income each year even though the
Fund receives no interest payments in cash on the security
during the year.
OTHER RISKS. The performance of the Fund also will depend on
whether or not the Investment Manager is successful in
pursuing the Fund's investment strategy.
Shares of the Fund are not bank deposits and are not
guaranteed or insured by any bank, governmental entity, or
the FDIC.
YEAR 2000. The Fund could be adversely affected if the
computer systems necessary for the efficient operation of
the Investment Manager, the Fund's other service
3
<PAGE>
providers and the markets and individual and governmental
issuers in which the Fund invests do not properly process
and calculate date-related information from and after
January 1, 2000. While year 2000-related computer problems
could have a negative effect on the Fund, the Investment
Manager and affiliates are working hard to avoid any
problems and to obtain assurances from their service
providers that they are taking similar steps.
(Sidebar)
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's Class B shares has varied
from year to year over a 10-year period.
AVERAGE ANNUAL
TOTAL RETURNS
This table compares the Fund's average annual returns with those of a broad
measure of market performance over time. The Fund's returns include the maximum
applicable sales charge for each Class and assume you sold your shares at the
end of each period.
(End Sidebar)
ICON 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
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED
GRAPHIC
<TABLE>
<S> <C>
1989 11.10%
'90 8.49%
'91 11.43%
'92 5.76%
'93 7.13%
'94 -3.61%
'95 16.74%
'96 3.16%
'97 8.56%
'98 7.27%
</TABLE>
The bar chart reflects the performance of Class B shares;
the performance of the other Classes will differ because the
Classes have different ongoing fees. The performance
information in the bar chart does not reflect the deduction
of sales charges; if these amounts were reflected, returns
would be less than shown.
During the periods shown in the bar chart, the highest
return for a calendar quarter was 5.48% (quarter ended June
30, 1995) and the lowest return for a calendar quarter was
-3.23% (quarter ended March 31, 1994). Year-to-date total
return as of March 31, 1999 was %.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED THE 1998 CALENDAR YEAR)
- -------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
Class A 3.13% -- --
- -------------------------------------------------------------------------------
Class B(1) 2.27% 5.92% 7.49%
- -------------------------------------------------------------------------------
Class C 6.14% -- --
- -------------------------------------------------------------------------------
Class D 7.72% -- --
- -------------------------------------------------------------------------------
Lehman Brothers General U.S.
Government Index(2) 9.85% 7.18% 9.17%
- -------------------------------------------------------------------------------
Lipper General U.S. Government
Funds Index(3) 7.85% 6.01% 7.92%
- -------------------------------------------------------------------------------
</TABLE>
1 Prior to July 28, 1997, the Fund only issued Class B shares.
2 The Lehman Brothers General U.S. Government Index is a broad-based measure
of all U.S. Government and U.S. Treasury securities. The Index does not
include any expenses or fees. The Index is unmanaged and should not be
considered an investment.
3 The Lipper General U.S. Government Funds Index is an equally-weighted
performance index of the largest-qualifying funds in the Lipper General
U.S. Government Funds objective. The Index, which is adjusted for capital
gains distributions and income dividends, is unmanaged and should not be
considered an investment.
4
<PAGE>
(Sidebar)
SHAREHOLDER FEES
These fees are paid directly from your investment.
ANNUAL FUND
OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended December 31, 1998.
(End Sidebar)
ICON FEES AND EXPENSES
- --------------------------------------------------------------------------------
The Fund offers four Classes of shares: Classes A, B, C and
D. Each Class has a different combination of fees, expenses
and other features. The table below briefly describes the
fees and expenses that you may pay if you buy and hold
shares of the Fund. The Fund does not charge account or
exchange fees. See the "Share Class Arrangements" section
for further fee and expense information.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
SHAREHOLDER FEES
- ---------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) 4.25%(1) None None None
- ---------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage based
on the lesser of the offering price or net asset value at
redemption) None(2) 5.00%(3) 1.00%(4) None
- ---------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------------------------------------------------
Management Fee 0.43% 0.43% 0.43% 0.43%
- ---------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.24% 0.75% 0.75% None
- ---------------------------------------------------------------------------------------------------
Other expenses 0.09% 0.09% 0.09% 0.09%
- ---------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 0.76% 1.27% 1.27% 0.52%
- ---------------------------------------------------------------------------------------------------
</TABLE>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the time of
purchase are subject to a contingent deferred sales charge ("CDSC") of
1.00% that will be imposed on sales made within one year after purchase,
except for certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.
4 Only applicable to sales made within one year after purchase.
EXAMPLE
This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other
mutual funds.
The example assumes that you invest $10,000 in the Fund,
your investment has a 5% return each year, and the Fund's
operating expenses remain the same. Although your actual
costs may be higher or lower, the tables below show your
costs at the end of each period based on these assumptions
depending upon whether or not you sell your shares at the
end of each period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
----------------------------------------- -----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------- -----------------------------------------
CLASS A $499 $658 $829 $1,327 $499 $658 $829 $1,327
- ---------------------------------------------------------- -----------------------------------------
CLASS B $629 $703 $897 $1,534 $129 $403 $697 $1,534
- ---------------------------------------------------------- -----------------------------------------
CLASS C $229 $403 $697 $1,534 $129 $403 $697 $1,534
- ---------------------------------------------------------- -----------------------------------------
CLASS D $ 53 $167 $291 $ 653 $ 53 $167 $291 $ 653
- ---------------------------------------------------------- -----------------------------------------
</TABLE>
5
<PAGE>
(Sidebar)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc., its
wholly-owned subsidiary, has more than $ billion in assets under management or
administration as of March 31, 1999.
(End Sidebar)
ICON FUND MANAGEMENT
- --------------------------------------------------------------------------------
The Fund has retained the Investment Manager -- Morgan
Stanley Dean Witter Advisors Inc. -- to provide
administrative services, manage its business affairs and
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, New York 10048.
The Fund's portfolio is managed within the Investment
Manager's Taxable Fixed-Income Group. Rajesh K. Gupta, a
Senior Vice President of the Investment Manager, has been
the primary portfolio manager of the Fund and a portfolio
manager with the Investment Manager for over five years.
The Fund pays the Investment Manager a monthly management
fee as full compensation for the services and facilities
furnished to the Fund, and for Fund expenses assumed by the
Investment Manager. The fee is based on the Fund's average
daily net assets. For the fiscal year ended December 31,
1998, the Fund accrued total compensation to the Investment
Manager amounting to 0.43% of the Fund's average daily net
assets.
6
<PAGE>
(Sidebar)
CONTACTING A FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (800)
THE-DEAN for the telephone number of the Morgan Stanley Dean Witter office
nearest you.
You may also access our office locator on our Internet site at:
www.deanwitter.com/funds.
(End Sidebar)
SHAREHOLDER INFORMATION
PRICING FUND SHARES
- --------------------------------------------------------------------------------
The price of Fund shares (excluding sales charges), called
"net asset value," is based on the value of the Fund's
portfolio securities. While the assets of each Class are
invested in a single portfolio of securities, the net asset
value of each Class will differ because the Classes have
different ongoing distribution fees.
The net asset value per share of the Fund is determined once
daily at 4:00 p.m. Eastern time on each day that the New
York Stock Exchange is open (or, on days when the New York
Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York
Stock Exchange is closed.
The value of the Fund's portfolio securities is based on the
securities' market price when available. When a market price
is not readily available, including circumstances under
which the Investment Manager determines that a security's
market price is not accurate, a portfolio security is valued
at its fair value, as determined under procedures
established by the Fund's Board of Trustees. In these cases,
the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price.
An exception to the Fund's general policy of using market
prices concerns its short-term debt portfolio securities.
Debt securities with remaining maturities of sixty days or
less at the time of purchase are valued at amortized cost.
However, if the cost does not reflect the securities' market
value, these securities will be valued at their fair value.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may open a new account to buy Fund shares or buy
additional Fund shares for an existing account by contacting
your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative. Your Financial Advisor
will assist you, step-by-step, with the procedures to invest
in the Fund. You may also purchase shares directly by
calling the Fund's transfer agent and requesting an
application.
Because every investor has different immediate financial
needs and long-term investment goals, the Fund offers
investors four Classes of shares: Classes A, B, C and D.
Class D shares are only offered to a limited group of
investors. Each Class of shares offers a distinct structure
of sales charges, distribution and service fees, and other
features that are designed to address a variety of needs.
Your Financial Advisor or other authorized financial
representative can help you decide which Class may be most
appropriate for you. When purchasing Fund shares, you must
specify which Class of shares you wish to purchase.
When you buy Fund shares, the shares are purchased at the
next share price calculated (less any applicable front-end
sales charge for Class A shares) after we receive your
investment order in proper form. We reserve the right to
reject any order for the purchase of Fund shares.
7
<PAGE>
(Sidebar)
EASYINVEST-SM-
A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
(End Sidebar)
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
- ------------------------------------------------------------------------------------------------
MINIMUM INVESTMENT
----------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Regular Accounts $ 1,000 $ 100
- ------------------------------------------------------------------------------------------------
Individual Retirement Accounts: Regular IRAs $ 1,000 $ 100
Education IRAs $500 $ 100
- ------------------------------------------------------------------------------------------------
EASYINVEST-SM- (automatically from your checking
or savings account or Money Market
Fund) $100* $ 100*
- ------------------------------------------------------------------------------------------------
</TABLE>
* Provided your schedule of investments totals $1,000 in twelve months.
There is no minimum investment amount if you purchase Fund
shares through: (1) the Investment Manager's mutual fund
asset allocation plan, (2) a program, approved by the Fund's
distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, or (3)
employer-sponsored employee benefit plan accounts.
INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER
INVESTORS/CLASS D SHARES. To be eligible to purchase Class D
shares, you must qualify under one of the investor
categories specified in the "Share Class Arrangements"
section of this PROSPECTUS.
THREE DAY SETTLEMENT. Fund shares are sold through the
Fund's distributor. Morgan Stanley Dean Witter Distributors
Inc., on a normal three business day basis; that is, your
payment for Fund shares is due on the third business day
(settlement day) after you place a purchase order.
SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In
addition to buying additional Fund shares for an existing
account by contacting your Morgan Stanley Dean Witter
Financial Advisor, you may send a check directly to the
Fund. To buy additional shares in this manner:
- Write a "letter of instruction" to the Fund specifying the
name(s) on the account, the account number, the social
security or tax identification number, the Class of shares
you wish to purchase and the investment amount (which
would include any applicable front-end sales charge). The
letter must be signed by the account owner(s).
- Make out a check for the total amount payable to: Morgan
Stanley Dean Witter U.S. Government Securities Trust.
- Mail the letter and check to Morgan Stanley Dean Witter
Trust FSB at P.O. Box 1040, Jersey City, NJ 07303.
8
<PAGE>
HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of any
Class of the Fund for the same Class of any other
continuously offered Multi-Class Fund, or for shares of a
No-Load Fund, Money Market Fund or Short-Term U.S. Treasury
Trust, without the imposition of an exchange fee. See the
inside back cover of this PROSPECTUS for each Morgan Stanley
Dean Witter Fund's designation as a Multi-Class Fund, No-
Load Fund or Money Market Fund. If a Morgan Stanley Dean
Witter Fund is not listed, consult the inside back cover of
that Fund's PROSPECTUS for its designation. For purposes of
exchanges, shares of FSC Funds (subject to a front-end sales
charge) are treated as Class A shares of a Multi-Class Fund.
Exchanges may be made after shares of the Fund acquired by
purchase have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or
dividend reinvestment. The current PROSPECTUS for each fund
describes its investment objective(s), policies and and
investment minimums, should be read before investment.
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. Certain services normally available to
shareholders of Money Market Funds, including the check
writing privilege, are not available for Money Market Fund
shares you acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan
Stanley Dean Witter Trust FSB, we will employ reasonable
procedures to confirm that exchange instructions
communicated over the telephone are genuine. These
procedures may include requiring various forms of personal
identification such as name, mailing address, social
security or other tax identification number. Telephone
instructions also may be recorded.
Telephone instructions will be accepted if received by the
Fund's transfer agent between 9:00 a.m. and 4:00 p.m.
Eastern time, on any day the New York Stock
9
<PAGE>
Exchange is open for business. During periods of drastic
economic or market changes, it is possible that the
telephone exchange procedures may be difficult to implement,
although this has not been the case with the Fund in the
past.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a
margin account, contact your Morgan Stanley Dean Witter
Financial Advisor or other authorized financial
representative regarding restrictions on the exchange of
such shares.
TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of
the Fund for shares of another Morgan Stanley Dean Witter
Fund there are important tax considerations. For tax
purposes, the exchange out of the Fund is considered a sale
of Fund shares - and the exchange into the other Fund is
considered a purchase. As a result, you may realize a
capital gain or loss.
You should review the "Tax Consequences" section and consult
your own tax professional about the tax consequences of an
exchange.
FREQUENT EXCHANGES. A pattern of frequent exchanges may
result in the Fund limiting or prohibiting, at its
discretion, additional purchases and/or exchanges. The Fund
will notify you in advance of limiting your exchange
privileges.
CDSC CALCULATIONS ON EXCHANGES. See the "Share Class
Arrangements" section of this PROSPECTUS for a further
discussion of how applicable contingent deferred sales
charges (CDSCs) are calculated for shares of one Morgan
Stanley Dean Witter Fund that are exchanged for shares of
another.
FOR FURTHER INFORMATION REGARDING EXCHANGE PRIVILEGES, YOU
SHOULD CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL
ADVISOR OR CALL (800) 869-NEWS.
10
<PAGE>
(Sidebar)
SYSTEMATIC
WITHDRAWAL PLAN
This plan
allows you to withdraw money automatically from your Fund account at regular
intervals. Contact your Morgan Stanley Dean Witter Financial Advisor for more
details.
(End Sidebar)
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell some or all of your Fund shares at any time. If
you sell Class A, Class B or Class C shares, your net sale
proceeds are reduced by the amount of any applicable CDSC.
Your shares will be sold at the next price calculated after
we receive your order to sell as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
- --------------------------------------------------------------------------------
Contact your To sell your shares, simply call your Morgan Stanley Dean
Financial Advisor Witter Financial Advisor or other authorized financial
representative.
------------------------------------------------------------
ICON Payment will be sent to the address to which the account is
registered or deposited in your brokerage account.
- --------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of
instruction" that includes:
ICON - your account number;
- the dollar amount or the number of shares you wish to
sell;
- the Class of shares you wish to sell; and
- the signature of each owner as it appears on the account.
------------------------------------------------------------
If you are requesting payment to anyone other than the
registeredowner(s) or that payment be sent to any address
other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature
guarantee. You can obtain a signature guarantee from an
eligible guarantor acceptable to Morgan Stanley Dean Witter
Trust FSB. (You should contact Morgan Stanley Dean Witter
Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.)
A notary public CANNOT provide a signature guarantee.
Additional documentation may be required for shares held by
a corporation, partnership, trustee or executor.
------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at
P.O. Box 983, Jersey City, NJ 07303. If you hold share
certificates, you must return the certificates, along with
the letter and any required additional documentation.
------------------------------------------------------------
A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
instructions.
- --------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter
Withdrawal Plan Family of Funds has a total market value of at least
$10,000, you may elect to withdraw amounts of $25 or more,
or in any whole percentage of a Fund's balance (provided the
amount is at least $25), on a monthly, quarterly,
semi-annual or annual basis, from any Fund with a balance of
at least $1,000. Each time you add a Fund to the plan, you
must meet the plan requirements.
------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC
may be waived under certain circumstances. See the Class B
waiver categories listed in the "Share Class Arrangements"
section of this PROSPECTUS.
------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your
Morgan Stanley Dean Witter Financial Advisor or call (800)
869-NEWS. You may terminate or suspend your plan at any
time. Please remember that withdrawals from the plan are
sales of shares, not Fund "distributions," and ultimately
may exhaust your account balance. The Fund may terminate or
revise the plan at any time.
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
PAYMENT FOR SOLD SHARES. After we receive your complete
instructions to sell as described below, 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, payment
of the sale proceeds may be delayed for the minimum time
needed to verify that the check has been honored (not more
than fifteen days from the time we receive the check).
TAX CONSIDERATIONS. Normally, your sale of Fund shares is
subject to federal and state income tax. You should review
the "Tax Consequences" section of this PROSPECTUS and
consult your own tax professional about the tax consequences
of a sale.
REINSTATEMENT PRIVILEGE. If you sell Fund shares and have
not previously exercised the reinstatement privilege, you
may, within 35 days after the date of sale, invest any
portion of the proceeds in the same Class of Fund shares at
their net asset value and receive a pro rata credit for any
CDSC paid in connection with the sale.
INVOLUNTARY SALES. The Fund reserves the right, on sixty
days' notice, to sell the shares of any shareholder (other
than shares held in an IRA or 403(b) Custodial Account)
whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through
EASYINVEST-SM-, if after 12 months the shareholder has
invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner,
we will notify you and allow you sixty days to make an
additional investment in an amount that will increase the
value of your account to at least the required amount before
the sale is processed. No CDSC will be imposed on any
involuntary sale.
MARGIN ACCOUNTS. Certain restrictions may apply to Fund
shares pledged in margin accounts with Dean Witter Reynolds
or another authorized broker-dealer of Fund shares. If you
hold Fund shares in this manner, please contact your Morgan
Stanley Dean Witter Financial Advisor or other authorized
financial representative for more details.
12
<PAGE>
(Sidebar)
TARGETED DIVIDENDS-SM-
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of another Morgan Stanley Dean Witter Fund
that you own. Contact your Morgan Stanley Dean Witter Financial Advisor for
further information about this service.
(End Sidebar)
DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund passes substantially all of its earnings from
income and capital gains along to its investors as
"distributions." The Fund earns interest from fixed-income
investments. These amounts are passed along to Fund
shareholders as "income dividend distributions." The Fund
realizes capital gains whenever it sells securities for a
higher price than it paid for them. These amounts may be
passed along as "capital gain distributions."
The Fund declares income dividends separately for each
Class. Distributions paid on Class A and Class D shares
usually will be higher than for Class B and Class C because
distribution fees that Class B and Class C pay are higher.
Normally, income dividends are declared on each day the New
York Stock Exchange is open for business, and distributed
monthly and capital gains are distributed annually in
December. The Fund, however, may retain and reinvest any
long-term capital gains. The Fund may at times make payments
from sources other than income or capital gains that
represent a return of a portion of your investment.
Distributions are reinvested automatically in additional
shares of the same Class and automatically credited to your
account, unless you request in writing that all
distributions be paid in cash. If you elect the cash option,
processing of your dividend checks begins immediately
following the monthly payment date, and the Fund will mail a
monthly dividend check to you normally during the first
seven days of the following month. No interest will accrue
on uncashed checks. If you wish to change how your
distributions are paid, your request should be received by
the Fund's transfer agent, Morgan Stanley Dean Witter Trust
FSB, at least five business days prior to the record date of
the distributions.
TAX CONSEQUENCES
- --------------------------------------------------------------------------------
As with any investment, you should consider how your Fund
investment will be taxed. The tax information in this
PROSPECTUS is provided as general information. You should
consult your own tax professional about the tax consequences
of an investment in the Fund.
Unless your investment in the Fund is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need
to be aware of the possible tax consequences when:
- The Fund makes distributions; and
- You sell Fund shares, including an exchange to another
Morgan Stanley Dean Witter Fund.
TAXES ON DISTRIBUTIONS. Your distributions are normally
subject to federal and state income tax when they are paid,
whether you take them in cash or reinvest them in Fund
shares. A distribution also may be subject to local income
tax. Any income dividend distributions and any short-term
capital gain distributions are
13
<PAGE>
taxable to you as ordinary income. Any long-term capital
gain distributions are taxable as long-term capital gains,
no matter how long you have owned shares in the Fund.
Every January, you will be sent a statement (IRS Form
1099-DIV) showing the taxable distributions paid to you in
the previous year. The statement provides full information
on your dividends and capital gains for tax purposes.
TAXES ON SALES. Your sale of Fund shares normally is subject
to federal and state income tax and may result in a taxable
gain or loss to you. A sale also may be subject to local
income tax. Your exchange of Fund shares for shares of
another Morgan Stanley Dean Witter Fund is treated for tax
purposes like a sale of your original shares and a purchase
of your new shares. Thus, the exchange may, like a sale,
result in a taxable gain or loss to you and will give you a
new tax basis for your new shares.
When you open your Fund account, you should provide your
social security or tax identification number on your
investment application. By providing this information, you
will avoid being subject to a federal backup withholding tax
of 31% on taxable distributions and redemption proceeds. Any
withheld amount would be sent to the IRS as an advance tax
payment.
SHARE CLASS ARRANGEMENTS
- --------------------------------------------------------------------------------
The Fund offers several Classes of shares having different
distribution arrangements designed to provide you with
different purchase options according to your investment
needs. Your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative can help you
decide which Class may be appropriate for you.
The general public is offered three Classes: Class A shares,
Class B shares and Class C shares, which differ principally
in terms of sales charges and ongoing expenses. A fourth
Class, Class D shares, is offered only to a limited category
of investors. Shares that you acquire through reinvested
distributions will not be subject to any front-end sales
charge or CDSC - contingent deferred sales charge. Sales
personnel may receive different compensation for selling
each Class of shares. The sales charges applicable to each
Class provide for the distribution financing of shares of
that Class.
The chart below compares the sales charge and annual 12b-1
fee applicable to each Class:
<TABLE>
<CAPTION>
CLASS SALES CHARGE ANNUAL 12B-1 FEE
<S> <C> <C>
- ------------------------------------------------------------------
A Maximum 4.25% initial sales charge
reduced for purchase of $25,000 or more;
shares sold without an initial sales
charge are generally subject to a 1.0%
CDSC during the first year 0.25%
- ------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year
decreasing to 0% after six years 0.75%
- ------------------------------------------------------------------
C 1.0% CDSC during the first year 0.75%
- ------------------------------------------------------------------
D None None
- ------------------------------------------------------------------
</TABLE>
14
<PAGE>
(Sidebar)
FRONT-END SALES
CHARGE OR FSC
An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges - the COMBINED PURCHASE PRIVILEGE, RIGHT OF ACCUMULATION
and LETTER OF INTENT.
(End Sidebar)
CLASS A SHARES Class A shares are sold at net asset value
plus an initial sales charge of up to 4.25%. The initial
sales charge is reduced for purchases of $25,000 or more
according to the schedule below. Investments of $1 million
or more are not subject to an initial sales charge, but are
generally subject to a contingent deferred sales charge, or
CDSC, of 1.0% on sales made within one year after the last
day of the month of purchase. The CDSC will be assessed in
the same manner and with the same CDSC waivers as with Class
B shares. Class A shares are also subject to a distribution
(12b-1) fee of up to 0.25% of the average daily net assets
of the Class.
The offering price of Class A shares includes a sales charge
(expressed as a percentage of the offering price) on a
single transaction as shown in the following table:
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
----------------------------------------------
PERCENTAGE OF PUBLIC APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION OFFERING PRICE OF AMOUNT INVESTED
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Less than $25,000 4.25% 4.44%
- ----------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.00% 4.17%
- ----------------------------------------------------------------------------------------
$50,000 but less than $100,000 3.50% 3.63%
- ----------------------------------------------------------------------------------------
$100,000 but less than $250,000 2.75% 2.83%
- ----------------------------------------------------------------------------------------
$250,000 but less than $1 million 1.75% 1.78%
- ----------------------------------------------------------------------------------------
$1 million and over 0 0
- ----------------------------------------------------------------------------------------
</TABLE>
The reduced sales charge schedule is applicable to purchases
of Class A shares in a single transaction by:
- A single account (including an individual, trust or
fiduciary account).
- Family member accounts (limited to husband, wife and
children under the age
of 21).
- Pension, profit sharing or other employee benefit plans of
companies and their affiliates.
- Tax-exempt organizations.
- Groups organized for a purpose other than to buy mutual
fund shares.
COMBINED PURCHASE PRIVILEGE. You also will have the benefit
of reduced sales charges by combining purchases of Class A
shares of the Fund in a single transaction with purchases of
Class A shares of other Multi-Class Funds and shares of FSC
Funds.
RIGHT OF ACCUMULATION. You also may benefit from a reduction
of sales charges if the cumulative net asset value of Class
A shares of the Fund purchased in a single transaction,
together with shares of other Funds you currently own which
were previously purchased at a price including a front-end
sales charge (including shares acquired through reinvestment
of distributions), amounts to $25,000 or more. Also, if you
have a cumulative net asset value of all your Class A and
Class D shares equal to at least $5 million (or $25 million
for certain employee benefit plans), you are eligible to
purchase Class D shares of any Fund subject to the Fund's
minimum initial investment requirement.
15
<PAGE>
You must notify your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative (or
Morgan Stanley Dean Witter Trust FSB if you purchase
directly through the Fund), at the time a purchase order is
placed, that the purchase qualifies for the reduced charge
under the Right of Accumulation. Similar notification must
be made in writing when an order is placed by mail. The
reduced sales charge will not be granted if: (i)
notification is not furnished at the time of the order; or
(ii) a review of the records of Dean Witter Reynolds or
other authorized dealer of Fund shares or the Fund's
transfer agent does not confirm your represented holdings.
LETTER OF INTENT. The schedule of reduced sales charges for
larger purchases also will be available to you if you enter
into a written "letter of intent." A letter of intent
provides for the purchase of Class A shares of the Fund or
other Multi-Class Funds or shares of FSC Funds within a
thirteen-month period. The initial purchase under a letter
of intent must be at least 5% of the stated investment goal.
To determine the applicable sales charge reduction, you may
also include: (1) the cost of shares of other Morgan Stanley
Dean Witter Funds which were previously purchased at a price
including a front-end sales charge during the 90-day period
prior to the distributor receiving the letter of intent, and
(2) the cost of shares of other Funds you currently own
acquired in exchange for shares of Funds purchased during
that period at a price including a front-end sales charge.
You can obtain a letter of intent by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized
financial representative, or by calling (800) 869-NEWS. If
you do not achieve the stated investment goal within the
thirteen-month period, you are required to pay the
difference between the sales charges otherwise applicable
and sales charges actually paid.
OTHER FRONT-END SALES CHARGE WAIVERS. In addition to
investments of $1 million or more, your purchase of Class A
shares is not subject to a front-end sales charge (or a CDSC
upon sale) if your account qualifies under one of the
following categories:
- A trust for which Morgan Stanley Dean Witter Trust FSB
provides discretionary trustee services.
- Persons participating in a fee-based investment program
(subject to all of its terms and conditions, including
mandatory sale or transfer restrictions on termination)
approved by the Fund's distributor pursuant to which they
pay an asset-based fee for investment advisory,
administrative and/or brokerage services.
- Employer-sponsored employee benefit plans, whether or not
qualified under the Internal Revenue Code, for which
Morgan Stanley Dean Witter Trust FSB serves as trustee or
Dean Witter Reynolds' Retirement Plan Services serves as
recordkeeper under a written Recordkeeping Services
Agreement ("MSDW Eligible Plans") which have at least 200
eligible employees.
- A MSDW Eligible Plan whose Class B shares have converted
to Class A shares, regardless of the plan's asset size or
number of eligible employees.
16
<PAGE>
- A client of a Morgan Stanley Dean Witter Financial Advisor
who joined us from another investment firm within six
months prior to the date of purchase of Fund shares, and
you used the proceeds from the sale of shares of a
proprietary mutual fund of that Financial Advisor's
previous firm that imposed either a front-end or deferred
sales charge to purchase Class A shares, provided that:
(1) you sold the shares not more than 60 days prior to the
purchase of Fund shares, and (2) the sale proceeds were
maintained in the interim in cash or a money market fund.
- Current or retired Directors/Trustees of the Morgan
Stanley Dean Witter Funds, such persons' spouses and
children under the age of 21, and trust accounts for which
any of such persons is a beneficiary.
- Current or retired directors, officers and employees of
Morgan Stanley Dean Witter & Co. and any of its
subsidiaries, such persons' spouses and children under the
age of 21, and trust accounts for which any of such
persons is a beneficiary.
(Sidebar)
CONTINGENT DEFERRED SALES CHARGE OR CDSC
A fee you pay when you sell shares of certain Morgan Stanley Dean Witter Funds
purchased without an initial sales charge. This fee declines the longer you hold
your shares as set forth in the table.
(End Sidebar)
CLASS B SHARES Class B shares are offered at net asset
value with no initial sales charge but are subject to a
contingent deferred sales charge, or CDSC, as set forth in
the table below. For the purpose of calculating the CDSC,
shares are deemed to have been purchased on the last day of
the month during which they were purchased.
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PAYMENT MADE CDSC AS A PERCENTAGE OF AMOUNT REDEEMED
<S> <C>
- --------------------------------------------------------------------------------------------
First 5.0%
- --------------------------------------------------------------------------------------------
Second 4.0%
- --------------------------------------------------------------------------------------------
Third 3.0%
- --------------------------------------------------------------------------------------------
Fourth 2.0%
- --------------------------------------------------------------------------------------------
Fifth 2.0%
- --------------------------------------------------------------------------------------------
Sixth 1.0%
- --------------------------------------------------------------------------------------------
Seventh and thereafter None
- --------------------------------------------------------------------------------------------
</TABLE>
Each time you place an order to sell or exchange shares,
shares with no CDSC will be sold or exchanged first, then
shares with the lowest CDSC will be sold or exchanged next.
For any shares subject to a CDSC, the CDSC will be assessed
on an amount equal to the lesser of the current market value
or the cost of the shares being sold.
CDSC WAIVERS. A CDSC, if otherwise applicable, will be
waived in the case of:
- Sales of shares held at the time you die or become
disabled (within the definition in Section 72(m)(7) of the
Internal Revenue Code which relates to the ability to
engage in gainful employment), if the shares are: (i)
registered either in your name (not a trust) or in the
names of you and your spouse as joint tenants with right
of survivorship; or (ii) held in a qualified corporate or
self-employed retirement plan, IRA or 403(b) Custodial
Account, provided in either case that the sale is
requested within one year of your death or initial
determination of disability.
- Sales in connection with the following retirement plan
"distributions": (i) lump-sum or other distributions from
a qualified corporate or self-employed retirement plan
following retirement (or, in the case of a "key employee"
of a "top heavy" plan, following attainment of age 59
1/2); (ii) distributions from an IRA or 403(b) Custodial
Account following attainment of age 59 1/2; or (iii) a
tax-free return of an excess IRA contribution (a
distribution does not include a direct transfer of IRA,
403(b) Custodial Account or retirement plan assets to a
successor custodian or trustee).
17
<PAGE>
- Sales of shares held for you as a participant in a MSDW
Eligible Plan.
- Sales of shares in connection with the Systematic
Withdrawal Plan of up to 12% annually of the value of each
Fund from which plan sales are made. The percentage is
determined on the date you establish the Systematic
Withdrawal Plan and based on the next calculated share
price. You may have this CDSC waiver applied in amounts up
to 1% per month, 3% per quarter, 6% semi-annually or 12%
annually. Shares with no CDSC will be sold first, followed
by those with the lowest CDSC. As such, the waiver benefit
will be reduced by the amount of your shares that are not
subject to a CDSC. If you suspend your participation in
the plan, you may later resume plan payments without
requiring a new determination of the account value for the
12% CDSC waiver.
All waivers will be granted only following the Distributor
receiving confirmation of your entitlement. If you believe
you are eligible for a CDSC waiver, please contact your
Financial Advisor or call (800) 869-NEWS.
DISTRIBUTION FEE. Class B shares also are subject to an
annual 12b-1 fee of 0.75% (0.65% on amounts over $10
billion) of the lesser of: (a) the average daily aggregate
gross purchases by all shareholders of the Fund's Class B
shares since the inception of the Fund (not including
reinvestments of dividends or capital gains distributions),
less the average daily aggregate net asset value of the
Fund's Class B shares sold by all shareholders since the
Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.
CONVERSION FEATURE. After ten (10) years, Class B shares
will convert automatically to Class A shares of the Fund
with no initial sales charge. The ten year period runs from
the last day of the month in which the shares were
purchased, or in the case of Class B shares acquired through
an exchange, from the last day of the month in which the
original Class B shares were purchased; the shares will
convert to Class A shares based on their relative net asset
values in the month following the ten year period. At the
same time, an equal proportion of Class B shares acquired
through automatically reinvested distributions will convert
to Class A shares on the same basis. (Class B shares held
before May 1, 1997, however, will convert to Class A shares
in May 2007.)
In the case of Class B shares held in a MSDW Eligible Plan,
the plan is treated as a single investor and all Class B
shares will convert to Class A shares on the conversion date
of the Class B shares of a Morgan Stanley Dean Witter Fund
purchased by that plan.
Currently, the Class B share conversion is not a taxable
event; the conversion feature may be cancelled if it is
deemed a taxable event in the future by the Internal Revenue
Service.
If you exchange your Class B shares for shares of a Money
Market Fund, No-Load Fund or Short-Term U.S. Treasury Trust,
the holding period for conversion is frozen as of the last
day of the month of the exchange and resumes on the last day
of the month you exchange back into Class B shares.
18
<PAGE>
EXCHANGING SHARES SUBJECT TO A CDSC. There are special
considerations when you exchange Fund shares that are
subject to a CDSC. When determining the length of time you
held the shares and the corresponding CDSC rate, any period
(starting at the end of the month) during which you held
shares of a fund that does NOT charge a CDSC WILL NOT BE
COUNTED. Thus, in effect the "holding period" for purposes
of calculating the CDSC is frozen upon exchanging into a
fund that does not charge a CDSC.
For example, if you held Class B shares of the Fund for one
year, exchanged to Class B of another Morgan Stanley Dean
Witter Multi-Class Fund for another year, then sold your
shares, a CDSC rate of 4% would be imposed on the shares
based on a two year holding period -- one year for each
Fund. However, if you had exchanged the shares of the Fund
for a Money Market Fund (which does not charge a CDSC)
instead of the Multi-Class Fund, then sold your shares, a
CDSC rate of 5% would be imposed on the shares based on a
one year holding period. The one year in the Money Market
Fund would not be counted. Nevertheless, if shares subject
to a CDSC are exchanged for a Fund that does not charge a
CDSC, you will receive a credit when you sell the shares
equal to the distribution (12b-1) fees, if any, you paid on
those shares while in that Fund up to the amount of any
applicable CDSC.
In addition, shares that are exchanged into or from a Morgan
Stanley Dean Witter Fund subject to a higher CDSC rate will
be subject to the higher rate, even if the shares are
re-exchanged into a Fund with a lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value
with no initial sales charge but are subject to a CDSC of
1.0% on sales made within one year after the last day of the
month of purchase. The CDSC will be assessed in the same
manner and with the same CDSC waivers as with Class B
shares.
DISTRIBUTION FEE. Class C shares are subject to an annual
distribution (12b-1) fee of 0.75% of the average daily net
assets of that Class. The Class C shares' distribution fee
may cause that Class to have higher expenses and pay lower
dividends than Class A or Class D shares. Unlike Class B
shares, Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares may
be subject to distribution (12b-1) fees applicable to Class
C shares for an indefinite period.
CLASS D SHARES Class D shares are offered without any
sales charge on purchases or sales and without any
distribution (12b-1) fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5
million ($25 million for MSDW Eligible Plans) and the
following investor categories:
- Investors participating in the Investment Manager's mutual
fund asset allocation program (subject to all of its terms
and conditions, including mandatory sale or transfer
restrictions on termination) pursuant to which they pay an
asset-based fee.
19
<PAGE>
- Persons participating in a fee-based investment program
(subject to all of its terms and conditions, including
mandatory sale or transfer restrictions on termination)
approved by the Fund's distributor pursuant to which they
pay an asset-based fee for investment advisory,
administrative and/or brokerage services.
- Employee benefit plans maintained by Morgan Stanley Dean
Witter & Co. or any of its subsidiaries for the benefit of
certain employees of Morgan Stanley Dean Witter & Co. and
its subsidiaries.
- Certain unit investment trusts sponsored by Dean Witter
Reynolds.
- Certain other open-end investment companies whose shares
are distributed by the Fund's distributor.
- Investors who were shareholders of the Dean Witter
Retirement Series on September 11, 1998 for additional
purchases for their former Dean Witter Retirement Series
accounts.
MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million
($25 million for MSDW Eligible Plans) initial investment to
qualify to purchase Class D shares you may combine: (1)
purchases in a single transaction of Class D shares of the
Fund and other Morgan Stanley Dean Witter Multi-Class Funds
and/or (2) previous purchases of Class A and Class D shares
of Multi-Class Funds and shares of FSC Funds you currently
own, along with shares of Morgan Stanley Dean Witter Funds
you currently own that you acquired in exchange for those
shares.
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you
receive a cash payment representing an income dividend or
capital gain and you reinvest that amount in the applicable
Class of shares by returning the check within 30 days of the
payment date, the purchased shares would not be subject to
an initial sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has
adopted a Plan of Distribution in accordance with Rule 12b-1
under the Investment Company Act of 1940 with respect to the
distribution of Class A, Class B and Class C shares. The
Plan allows the Fund to pay distribution fees for the sale
and distribution of these shares. It also allows the Fund to
pay for services to shareholders of Class A, Class B and
Class C shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment in these Classes and
may cost you more than paying other types of sales charges.
20
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 5 fiscal years of the Fund.
Certain information reflects financial results for a single Fund share.
The total returns in the table represent the rate an investor would have
earned or lost on an investment in the Fund (assuming reinvestment of
all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose
report, along with the Fund's financial statements, is included in the
annual report, which is available upon request.
<TABLE>
<CAPTION>
CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1998 1997* 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.10 $ 8.92 $ 9.21 $ 8.41 $ 9.31
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.54 0.56 0.56 0.57 0.58
Net realized and unrealized gain (loss) 0.10 0.18 (0.29) 0.80 (0.90)
------- ------- -------- -------- -----------
Total income (loss) from investment operations 0.64 0.74 0.27 1.37 (0.32)
- ----------------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income (0.54) (0.56) (0.56) (0.57) (0.58)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.20 $ 9.10 $ 8.92 $ 9.21 $ 8.41
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 7.27% 8.56% 3.16% 16.74% (3.51)%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses 1.27%(1) 1.26% 1.25% 1.24% 1.22%
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 5.94%(1) 6.22% 6.28% 6.44% 6.57%
- ----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in millions $ 4,996 $ 5,429 $ 6,450 $ 7,955 $ 8,211
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 4% 8% 14% 26%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of the
Fund held prior to that date, other than shares held by certain employee
benefit plans established by Dean Witter Reynolds Inc. and its affiliate, SPS
Transaction Services, Inc., have been designated Class B shares. Shares held
by those employee benefit plans prior to July 28, 1997 have been designated
Class D shares.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Reflects overall Fund ratios for investment income and non-class specific
expenses.
21
<PAGE>
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
- ---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER SHARE DATA: DECEMBER 31, 1998 THROUGH DECEMBER 31, 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.09 $ 9.03
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.59 0.25
Net realized and unrealized gain 0.09 0.06
------- -------
Total income from investment
operations 0.68 0.31
- ---------------------------------------------------------------------------------------------
Less dividends from net investment
income (0.59) (0.25)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.18 $ 9.09
- ---------------------------------------------------------------------------------------------
TOTAL RETURN+ 7.70% 3.50%(1)
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------
Expenses 0.76%(3) 0.77%(2)
- ---------------------------------------------------------------------------------------------
Net investment income 6.45%(3) 6.57%(2)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $58,538 $20,841
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 4%
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES
- ---------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.17 $ 9.03
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.55 0.23
Net realized and unrealized gain 0.09 0.14
------- -------
Total income from investment
operations 0.64 0.37
- ---------------------------------------------------------------------------------------------
Less dividends from net investment
income (0.55) (0.23)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.26 $ 9.17
- ---------------------------------------------------------------------------------------------
TOTAL RETURN+ 7.14% 4.14%(1)
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------
Expenses 1.27%(3) 1.25%(2)
- ---------------------------------------------------------------------------------------------
Net investment income 5.94%(3) 5.81%(2)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $17,087 $4,385
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 4%
- ---------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
22
<PAGE>
<TABLE>
<CAPTION>
CLASS D SHARES
- ---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER SHARE DATA: DECEMBER 31, 1998 THROUGH DECEMBER 31, 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.11 $ 9.03
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.61 0.27
Net realized and unrealized gain 0.07 0.08
------- -------
Total income from investment
operations 0.68 0.35
- ---------------------------------------------------------------------------------------------
Less dividends from net investment
income (0.61) (0.27)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.18 $ 9.11
- ---------------------------------------------------------------------------------------------
TOTAL RETURN+ 7.72% 3.87%(1)
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------
Expenses 0.52%(3) 0.52%(2)
- ---------------------------------------------------------------------------------------------
Net investment income 6.69%(3) 6.91%(2)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $20,392 $11,367
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 4%
- ---------------------------------------------------------------------------------------------
</TABLE>
*The date shares were first issued. Shareholders who held shares of the Fund
prior to July 28, 1997 (the date the Fund converted to a multiple class share
structure) should refer to the Financial Highlights of Class B to obtain the
historical per share data and ratio information of their shares.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
23
<PAGE>
NOTES
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24
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds
offers investors a wide range of investment
choices. Come on in and meet the family!
- --------------------------------------------------------------------------------
GROWTH FUNDS
- --------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Equity Fund
Growth Fund
Market Leader Trust
Mid-Cap Growth Fund
Special Value Fund
Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust
Utilities Fund
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas" Portfolio
European Growth Fund
Fund of Funds - International Portfolio
Global Dividend Growth Securities
Global Utilities Fund
International SmallCap Fund
Japan Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUNDS
- --------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
<PAGE>
Strategist Fund
Value-Added Market Series/Equity Portfolio
- --------------------------------------------------------------------------------
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
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)
N.Y. Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)
<PAGE>
Unless otherwise noted, there may be Funds created after this PROSPECTUS was
published. Please consult the inside front 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
Short-Term U.S. Treasury Trust, is a Multi-Class Fund. A Multi-Class Fund is a
mutual fund offering multiple Classes of shares. The other types of Funds are:
NL - No-Load (Mutual) Fund; MM - Money Market Fund; FSC - A mutual fund sold
with a front-end sales charge and a distribution (12b-1) fee.
<PAGE>
MORGAN STANLEY DEAN WITTER
U.S. GOVERNMENT SECURITIES TRUST
(Sidebar)
TICKER SYMBOLS:
CLASS A: USGAX
- -------------------
CLASS B: USGBX
- -------------------
CLASS C: USGCX
- -------------------
CLASS D: USGDX
- -------------------
(End Sidebar)
Additional information about the Fund's investments is
available in the Fund's ANNUAL AND SEMI-ANNUAL REPORTS TO
SHAREHOLDERS. In the Fund's ANNUAL REPORT, you will find a
discussion of the market conditions and investment
strategies that significantly affected the Fund's
performance during its last fiscal year. The Fund's
STATEMENT OF ADDITIONAL INFORMATION also provides additional
information about the Fund. The STATEMENT OF ADDITIONAL
INFORMATION is incorporated herein by reference (legally is
part of this PROSPECTUS). For a free copy of any of these
documents, to request other information about the Fund, or
to make shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling
your Morgan Stanley Dean Witter Financial Advisor or by
visiting our Internet site at:
WWW.DEANWITTER.COM/FUNDS
Information about the Fund (including the STATEMENT OF
ADDITIONAL INFORMATION) can be viewed and copied at the
Securities and Exchange Commission's Public Reference Room
in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800)
SEC-0330. Reports and other information about the Fund are
available on the SEC's Internet site (www.sec.gov) and
copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section
of the SEC, Washington, DC 20549-6009.
(MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST; INVESTMENT COMPANY
ACT FILE NO. 811-3870)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MORGAN
MAY 1, 1999 STANLEY
DEAN WITTER
U.S.
GOVERNMENT
SECURITIES
TRUST
- --------------------------------------------------------------------------------
This STATEMENT OF ADDITIONAL INFORMATION is not a PROSPECTUS. The PROSPECTUS
(dated May 1, 1999) for the Morgan Stanley Dean Witter U.S. Government
Securities 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
U.S. Government Securities 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............................................. 5
III. Management of the Fund............................................................ 6
A. Board of Trustees................................................................. 6
B. Management Information............................................................ 6
C. Compensation...................................................................... 11
IV. Control Persons and Principal Holders of Securities................................ 12
V. Investment Management and Other Services............................................ 13
A. Investment Manager................................................................ 13
B. Principal Underwriter............................................................. 13
C. Services Provided by the Investment Manager and Fund Expenses Paid by Third
Parties............................................................................. 14
D. Dealer Reallowances............................................................... 15
E. Rule 12b-1 Plan................................................................... 15
F. Other Service Providers........................................................... 19
VI. Brokerage Allocation and Other Practices........................................... 19
A. Brokerage Transactions............................................................ 19
B. Commissions....................................................................... 19
C. Brokerage Selection............................................................... 20
D. Directed Brokerage................................................................ 20
E. Regular Broker-Dealers............................................................ 20
VII. Capital Stock and Other Securities................................................ 20
VIII. Purchase, Redemption and Pricing of Shares....................................... 21
A. Purchase/Redemption of Shares..................................................... 21
B. Offering Price.................................................................... 22
IX. Taxation of the Fund and Shareholders.............................................. 22
X. Underwriters........................................................................ 24
XI. Calculation of Performance Data.................................................... 24
XII. Financial Statements.............................................................. 26
</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.
"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 U.S. Government Securities Trust, a
registered open-end investment company.
"INVESTMENT MANAGER"--Morgan Stanley Dean Witter Advisors Inc., a wholly-owned
investment advisor subsidiary of MSDW.
"INDEPENDENT TRUSTEES"--Trustees who are not "interested persons" (as defined by
the Investment Company Act) of the Fund.
"MORGAN STANLEY & CO."--Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"MORGAN STANLEY DEAN WITTER FUNDS"--Registered investment companies (i) for
which the Investment Manager serves as the investment advisor and (ii) that hold
themselves out to investors as related companies for investment and investor
services.
"MSDW"--Morgan Stanley Dean Witter & Co., a preeminent global financial services
firm.
"MSDW SERVICES COMPANY"--Morgan Stanley Dean Witter Services Company Inc., a
wholly-owned fund services subsidiary of the Investment Manager.
"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 organized as a Massachusetts business trust, under a
Declaration of Trust, on September 29, 1983, with the name Dean Witter U.S.
Government Securities Trust. Effective June 22, 1998, the Fund's name was
changed to Morgan Stanley Dean Witter U.S. Government Securities 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 a high level of current income.
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."
COLLATERALIZED MORTGAGE OBLIGATIONS. The Fund may invest in "CMOs"--
collateralized mortgage obligations. CMOs are debt obligations collateralized by
mortgage loans or mortgage pass-through securities (collectively "Mortgage
Assets"). Payments of principal and interest on the Mortgage Assets and any
reinvestment income are used to make payments on the CMOs. CMOs are issued in
multiple classes. Each class has a specific fixed or floating coupon rate and a
stated maturity or final distribution date. The principal and interest on the
Mortgage Assets may be allocated among the classes in a number of different
ways. Certain classes will, as a result of the collection, have more predictable
cash flows than others. As a general matter, the more predictable the cash flow,
the lower the yield relative to other Mortgage Assets. The less predictable the
cash flow, the higher the yield and the greater the risk. The Fund may invest in
any class of CMO.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. Interest is paid or accrues on all classes of the CMOs on a monthly,
quarterly or semi-annual basis. Certain CMOs may have variable or floating
interest rates and others may be stripped (securities which provide only the
principal or interest feature of the underlying security).
Certain mortgage-backed securities in which the Fund may invest (e.g.,
certain classes of CMOs) may increase or decrease in value substantially with
changes in interest rates and/or the rates of prepayment. In addition, if the
collateral securing CMOs or any third party guarantees are insufficient to make
payments, the Fund could sustain a loss.
In addition, the purchase or retention of stripped mortgage-backed
securities, CMOs and REMICs investments will be made only in conformity with the
provisions of Section 703.5 of the National Credit Union Administration Rules
and Regulations, as such provisions became effective on December 2, 1991.
MONEY MARKET SECURITIES. In addition to the short-term fixed-income
securities in which the Fund may otherwise invest in, the Fund may invest in
various money market securities for cash management purposes, which are limited
to U.S. Government securities.
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States. Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. The
Fund may purchase securities on a when-issued or delayed delivery basis or may
purchase or sell securities on a forward commitment basis. When these
transactions are negotiated, the price is fixed at the time of the commitment,
but delivery and payment can take place between one month and 120 days after the
date
4
<PAGE>
of commitment. While the Fund will only purchase securities on a when-issued,
delayed delivery or forward commitment basis with the intention of acquiring the
securities, the Fund may sell the securities before the settlement date, if it
is deemed advisable. The securities so purchased or sold are subject to market
fluctuation and no interest or dividends accrue to the purchaser prior to the
settlement date.
At the time the Fund makes the commitment to purchase or sell securities on
a when-issued, delayed delivery or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase securities
on a when-issued, delayed delivery or forward commitment basis.
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 cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000 and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund.
The Investment Company Act defines a majority as the lesser of (a) 67% or more
of the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions: (i) all percentage limitations apply immediately after a purchase
or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.
The Fund will:
1. Seek high current income consistent with safety of principal.
The Fund may not:
1. Purchase any securities other than obligations issued or guaranteed
by the United States Government. Such obligations are backed by the full
faith and credit of the United States. There is no limit on the amount of
its assets which may be invested in the securities of any one issuer of such
obligations.
5
<PAGE>
2. Borrow money except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require
the untimely disposition of securities. Borrowing in the aggregate may not
exceed 20%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the value of the Fund's total assets (including the amount
borrowed) at the time the borrowing is made. It is the Fund's current
intention not to borrow for other than meeting redemptions requests.
Borrowings in excess of 5% will be repaid before additional investments are
made. Interest on borrowings will reduce net investment income.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount not exceeding 10% of the value of its net assets but
only to secure borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin.
5. Make loans to others except through the purchase of debt
obligations in accordance with the Fund's investment objective and policies.
6. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have a senior security by reason of (a) borrowing
money in accordance with restriction (2) described above, or (b) by
purchasing securities on a when-issued or delayed delivery basis or
purchasing or selling securities on a forward commitment basis.
7. Underwrite the securities of other issuers or purchase restricted
securities.
8. Purchase or sell real estate or interests therein, although the
Fund may purchase securities of issuers which engage in real estate
operations and securities which are secured by real estate or interests
therein.
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. Seven Trustees (77% of the total number)
have no affiliation or business connection with the Investment Manager or any of
its affiliated persons and do not own any stock or other securities issued by
the Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other two Trustees (the "management Trustees") are
affiliated with the Investment Manager. All of the Independent Trustees also
serve as Independent Trustees of "Discover Brokerage Index Series," a mutual
fund for
6
<PAGE>
which the Investment Manager is the investment advisor. Four of the seven
Independent Trustees are also Independent Trustees of certain other mutual
funds, referred to as the "TCW/DW Funds," for which MSDW Services Company is the
manager and TCW Funds Management, Inc. is the investment advisor.
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, the 11
TCW/DW Funds and Discover Brokerage Index Series, are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------------- ------------------------------------------------------------------
<S> <C>
Michael Bozic (58) ........................... Vice Chairman of Kmart Corporation (since December, 1998);
Trustee Director or Trustee of the Morgan Stanley Dean Witter Funds;
c/o Kmart Corporation Trustee of Discover Brokerage Index Series; formerly Chairman and
3100 West Big Beaver Road Chief Executive Officer of Levitz Furniture Corporation (November,
Troy, Michigan 1995-November, 1998) and President and Chief Executive Officer of
Hills Department Stores (May, 1991-July, 1995); formerly variously
Chairman, Chief Executive Officer, President and Chief Operating
Officer (1987-1991) of the Sears Merchandise Group of Sears,
Roebuck and Co.; Director of Eaglemark Financial Services, Inc.
and Weirton Steel Corporation.
Charles A. Fiumefreddo* (65) ................. Chairman, Director or Trustee, President and Chief Executive
Chairman of the Board, President, Officer of the Morgan Stanley Dean Witter Funds; Chairman, Chief
Chief Executive Officer and Trustee Executive Officer and Trustee of the TCW/DW Funds; Trustee of
Two World Trade Center Discover Brokerage Index Series; formerly Chairman, Chief
New York, New York Executive Officer and Director of the Investment Manager, the
Distributor and MSDW Services Company; Executive Vice President
and Director of Dean Witter Reynolds; Chairman and Director of the
Transfer Agent; formerly Director and/or officer of various MSDW
subsidiaries (until June, 1998).
Edwin J. Garn (66) ........................... Director or Trustee of the Morgan Stanley Dean Witter Funds;
Trustee Trustee of Discover Brokerage Index Series; formerly United States
c/o Huntsman Corporation Senator (R-Utah)(1974-1992) and Chairman, Senate Banking Committee
500 Huntsman Way (1980-1986); formerly Mayor of Salt Lake City, Utah (1971-1974);
Salt Lake City, Utah formerly Astronaut, Space Shuttle Discovery (April 12-19, 1985);
Vice Chairman, Huntsman Corporation; Director of Franklin Covey
(time management systems), John Alden Financial Corp. (health
insurance), United Space Alliance (joint venture between Lockheed
Martin and the Boeing Company) and Nuskin Asia Pacific (multilevel
marketing); member of the board of various civic and charitable
organizations.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------------- ------------------------------------------------------------------
<S> <C>
Wayne E. Hedien (65) ......................... Retired; Director or Trustee of the Morgan Stanley Dean Witter
Trustee Funds; Trustee of Discover Brokerage Index Series; Director of The
c/o Gordon Altman Butowsky PMI Group, Inc. (private mortgage insurance); Trustee and Vice
Weitzen Shalov & Wein Chairman of The Field Museum of Natural History; formerly
Counsel to the Independent Trustees associated with the Allstate Companies (1966-1994), most recently
114 West 47th Street as Chairman of The Allstate Corporation (March, 1993-December,
New York, New York 1994) and Chairman and Chief Executive Officer of its wholly-owned
subsidiary, Allstate Insurance Company (July, 1989-December,
1994); director of various other business and charitable
organizations.
Dr. Manuel H. Johnson (50) ................... Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Co-Chairman and a founder of the Group of Seven Council
c/o Johnson Smick International, Inc. (G7C), an international economic commission; Director or Trustee
1133 Connecticut Avenue, N.W. of the Morgan Stanley Dean Witter Funds; Trustee of the TCW/DW
Washington, D.C. Funds; Trustee of Discover Brokerage Index Series; Director of
NASDAQ (since June, 1995); Director of Greenwich Capital Markets,
Inc. (broker-dealer) and NVR, Inc. (home construction); Chairman
and Trustee of the Financial Accounting Foundation (oversight
organization of the Financial Accounting Standards Board);
formerly Vice Chairman of the Board of Governors of the Federal
Reserve System (1986-1990) and Assistant Secretary of the U.S.
Treasury.
Michael E. Nugent (62) ....................... General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Director or Trustee of the Morgan Stanley Dean Witter
c/o Triumph Capital, L.P. Funds; Trustee of the TCW/DW Funds; Trustee of Discover Brokerage
237 Park Avenue Index Series; formerly Vice President, Bankers Trust Company and
New York, New York BT Capital Corporation (1984-1988); director of various business
organizations.
Philip J. Purcell* (55) ...................... Chairman of the Board of Directors and Chief Executive Officer of
Trustee MSDW, Dean Witter Reynolds and Novus Credit Services Inc.;
1585 Broadway Director of the Distributor; Director or Trustee of the Morgan
New York, New York Stanley Dean Witter Funds; Trustee of Discover Brokerage Index
Series; Director and/or officer of various MSDW subsidiaries.
John L. Schroeder (68) ....................... Retired; Director or Trustee of the Morgan Stanley Dean Witter
Trustee Funds; Trustee of the TCW/DW Funds; Trustee of Discover Brokerage
c/o Gordon Altman Butowsky Index Series; Director of Citizens Utilities Company; formerly
Weitzen Shalov & Wein Executive Vice President and Chief Investment Officer of the Home
Counsel to the Independent Trustees Insurance Company (August, 1991-September, 1995).
114 West 47th Street
New York, New York
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------------- ------------------------------------------------------------------
<S> <C>
Barry Fink (44) .............................. Senior Vice President (since March, 1997) and Secretary and
Vice President, General Counsel (since February, 1997) and Director (since July,
Secretary and General Counsel 1998) of the Investment Manager and MSDW Services Company; Senior
Two World Trade Center Vice President (since March, 1997) and Assistant Secretary and
New York, New York 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 and the TCW/DW Funds (since
February, 1997); Vice President, Secretary and General Counsel of
Discover Brokerage Index Series; previously First Vice President
(June, 1993-February, 1997), Vice President and Assistant
Secretary and Assistant General Counsel of the Investment Manager
and MSDW Services Company and Assistant Secretary of the Morgan
Stanley Dean Witter Funds and the TCW/DW Funds.
Rajesh K. Gupta (38) ......................... Senior Vice President of the Investment Manager; Vice President of
Vice President various Morgan Stanley Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (52) ........................ First Vice President and Assistant Treasurer of the Investment
Treasurer Manager and MSDW Services Company; Treasurer of the Morgan Stanley
Two World Trade Center Dean Witter Funds, the TCW/DW Funds and Discover Brokerage Index
New York, New York Series.
</TABLE>
- ------------
*Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
In addition, MITCHELL M. MERIN, President and Chief Operating Officer of
Asset Management of MSDW, President, Chief Executive Officer and Director of the
Investment Manager and MSDW Services Company, Chairman and Director of the
Distributor and the Transfer Agent, Executive Vice President and Director of
Dean Witter Reynolds, and Director of various MSDW subsidiaries, 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 and PETER M. AVELAR, JONATHAN R. PAGE and
JAMES F. WILLISON, Senior Vice Presidents of the Investment Manager, are Vice
Presidents of the Fund.
In addition, FRANK BRUTTOMESSO, MARILYN K. CRANNEY, LOUANNE D. MCINNIS,
CARSTEN OTTO and RUTH ROSSI, Vice Presidents and Assistant General Counsels of
the Investment Manager and MSDW Services Company, TODD LEBO, Vice President and
Assistant General Counsel of the Investment Manager and MSDW Services Company,
are Assistant Secretaries of the Fund.
INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The Morgan
Stanley Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; these are people whose advice and counsel are in demand by others and
for whom there is often competition. To accept a position on the Funds' Boards,
such individuals may reject other attractive assignments because the Funds make
substantial demands on their time. Indeed, by serving on the Funds' Boards,
certain Trustees who would otherwise be qualified and in demand to serve on
9
<PAGE>
bank boards would be prohibited by law from doing so. All of the Independent
Trustees serve as members of the Audit Committee. Three of them also serve as
members of the Derivatives Committee. In addition, three of the Trustees,
including two Independent Trustees, serve as members of the Derivatives
Committee and the Insurance Committee.
The Independent Trustees are charged with recommending to the full Board
approval of man-agement, 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
allo-cations, as well as other matters that arise from time to time. The
Independent Trustees are re-quired to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1
plan of distribution. Most of the Morgan Stanley Dean Witter Funds have a Rule
12b-1 plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; re-viewing 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 ac-countants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
The Board of each Fund has a Derivatives Committee to approve parameters for
and monitor the activities of the Fund with respect to derivative investments,
if any, made by the Fund.
Finally, the Board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL MORGAN
STANLEY DEAN WITTER FUNDS. The Independent Trustees and the Funds' management
believe that having the same Independent Trustees for each of the Morgan Stanley
Dean Witter Funds avoids the duplication of effort that would arise from having
different groups of individuals serving as Independent Trustees for each of the
Funds or even of sub-groups of Funds. They believe that having the same
individuals serve as Independent Trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent Trustees
serve on all Fund Boards enhances the ability of each Fund to obtain, at modest
cost to each separate Fund, the services of Independent Trustees, of the
caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Morgan Stanley Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties. It
also provides that all third persons shall look solely to the Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees
10
<PAGE>
attended by the Trustee (the Fund pays the Chairman of the Audit Committee an
additional annual fee of $750). 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 expenses reimbursed from the Fund for their services
as Trustee. Effective May 1, 1999, Dr. Johnson serves as Chairman of the Audit
Committee.
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended December 31, 1998.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
FROM THE
NAME OF INDEPENDENT TRUSTEE FUND
- ------------------------------------------------------------------ ------------
<S> <C>
Michael Bozic..................................................... $ 1,450
Edwin J. Garn..................................................... 1,600
Wayne E. Hedien................................................... 1,600
Dr. Manuel H. Johnson............................................. 1,550
Michael E. Nugent................................................. 1,600
John L. Schroeder................................................. 1,600
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 85 Morgan Stanley Dean Witter Funds and, in the case of Messrs. Johnson,
Nugent and Schroeder, the 11 TCW/DW Funds that were in operation at December 31,
1998. Effective May 1, 1999, Dr. Johnson serves as Chairman of the Audit
Committee of each Morgan Stanley Dean Witter Fund and each TCW/DW Fund. With
respect to Messrs. Johnson, Nugent and Schroeder, the TCW/DW Funds are included
solely because of a limited exchange privilege between those Funds and five
Morgan Stanley Dean Witter Money Market Funds. No compensation was paid to the
Fund's Independent Trustees by Discover Brokerage Index Series for the calendar
year ended December 31, 1998.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES
FOR SERVICE TO
AS DIRECTOR OR 85 MORGAN
TRUSTEE AND FOR SERVICE AS STANLEY DEAN
COMMITTEE MEMBER TRUSTEE AND WITTER FUNDS
OF 85 MORGAN COMMITTEE MEMBER AND 11
NAME OF STANLEY DEAN OF 11 TCW/DW TCW/DW
INDEPENDENT TRUSTEE WITTER FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------
<S> <C> <C> <C>
Michael Bozic.............. $120,150 -- $120,150
Edwin J. Garn.............. 132,450 -- 132,450
Wayne E. Hedien............ 132,350 -- 132,350
Dr. Manuel H. Johnson...... 128,400 62,331 190,731
Michael E. Nugent.......... 132,450 62,131 197,581
John L. Schroeder.......... 132,450 64,731 197,181
</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 Trustee who retires after serving for at least five
years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Morgan Stanley Dean Witter Fund that has
adopted the
11
<PAGE>
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years up
to a maximum of 60.44% after ten years of service. The foregoing percentages may
be changed by the Board(1). "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are 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 fiscal year ended December 31,
1998 and by the 55 Morgan Stanley Dean Witter Funds (including the Fund) for the
year ended December 31, 1998, and the estimated retirement benefits for the
Independent Trustees, to commence upon their retirement, from the Fund as of
December 31, 1998 and from the 55 Morgan Stanley Dean Witter Funds as of
December 31, 1998.
RETIREMENT BENEFITS FROM THE FUND AND ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS RETIREMENT BENEFITS ESTIMATED ANNUAL
--------------------------------- ACCRUED AS EXPENSES BENEFITS
ESTIMATED UPON RETIREMENT2
CREDITED YEARS ESTIMATED --------------------- -------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- ----------------------------------- --------------- --------------- ------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic...................... 10 60.44% $ 396 $ 22,377 $ 997 $ 52,250
Edwin J. Garn...................... 10 60.44 599 35,225 997 52,250
Wayne E. Hedien.................... 9 51.37 740 41,979 848 44,413
Dr. Manuel H. Johnson.............. 10 60.44 240 14,047 997 52,250
Michael E. Nugent.................. 10 60.44 421 25,336 997 52,250
John L. Schroeder.................. 8 50.37 807 45,117 838 44,343
</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
- --------------------------------------------------------------------------------
The following owned 5% or more of the outstanding shares of Class of the
Fund on [To come]
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.
12
<PAGE>
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------
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,
New York 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
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 Fund's daily net assets:
-0.50% of the portion of the daily net assets of the Fund not
exceeding $1 billion;
-0.475% of the portion of the Fund's daily net assets exceeding $1
billion but not exceeding $1.5 billion;
-0.45% of the portion of the Fund's daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
-0.425% of the portion of the Fund's daily net assets exceeding $2
billion but not exceeding $2.5 billion;
-0.40% of the portion of the Fund's daily net assets exceeding
$2.5 billion but not exceeding $5 billion;
-0.375% of the portion of the Fund's daily net assets exceeding $5
billion but not exceeding $7.5 billion;
-0.35% of the portion of the Fund's daily net assets exceeding
$7.5 billion but not exceeding $10 billion;
-0.325% of the portion of the Fund's daily net assets exceeding
$10 billion but not exceeding $12.5 billion; and
-0.30% of the portion of the Fund's daily net assets exceeding
$12.5 billion.
The management fee is allocated among the Classes pro rata based on the net
assets of the Fund attributable to each Class. For the fiscal years ended
December 31, 1996, 1997 and 1998, the Investment Manager accrued total
compensation under the Management Agreement in the amounts of $29,579,546,
$24,916,951 and $22,607,800, 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. These expenses include the payment of commissions
for sales of the Fund's shares and incentive compensation to Financial Advisors.
The Distributor also pays certain expenses in connection with the distribution
of the Fund's shares, including the costs of preparing, printing and
distributing advertising or promotional materials, and the costs of printing and
distributing prospectuses and supplements thereto used in connection with the
offering and sale of the Fund's shares. The Fund bears the costs of initial
13
<PAGE>
typesetting, printing and distribution of prospectuses and supplements thereto
to shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws and pays filing fees in
accordance with state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER AND FUND EXPENSES PAID BY THIRD
PARTIES
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 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 will be allocated among the four Classes of shares pro rata based on
the net assets of the Fund attributable to each Class, except as described
below. Such expenses include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1; charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing share certificates; registration costs of the Fund
and its shares under federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing prospectuses of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Trustees' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Trustees or
members of any advisory board or committee who are not employees of the
Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to any dividend, withdrawal or redemption options; charges and
expenses of any outside service used for pricing of the Fund's shares; fees and
expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Investment Manager (not including
compensation or expenses of attorneys who are employees of the Investment
Manager); fees and expenses of the Fund's independent accountants; membership
dues of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation. The 12b-1 fees
relating to a particular Class will be allocated directly to that Class. In
addition, other expenses associated with a particular Class (except advisory or
custodial fees) may be allocated directly to that Class, provided that such
expenses are reasonably identified as specifically attributable to that Class
and the direct allocation to that Class is approved by the Trustees.
14
<PAGE>
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees.
D. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is defined
in the Securities Act.
E. RULE 12B-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act (the "Plan") pursuant to which each Class, other than
Class D, pays the Distributor compensation accrued daily and payable monthly at
the following annual rates: 0.25% and 0.75% of the average daily net assets of
Class A and Class C, respectively, and, with respect to Class B, 0.75% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund (not including reinvestment of dividends
or capital gains distributions), less the average daily aggregate net asset
value of the Fund's Class B shares redeemed since the Fund's inception upon
which a contingent deferred sales charge has been imposed or upon which such
charge has been waived, or (b) the average daily net assets of Class B.
The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the last three fiscal
years ended December 31, in approximate amounts as provided in the table below
(the Distributor did not retain any of these amounts).
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Class A............................ FSCs: (1) $ 64,425 FSCs: $159,161 FSCs: N/A(2)
CDSCs: $ 9,698 CDSCs: $ 25 CDSCs: N/A(2)
Class B............................ CDSCs: $3,058,326 CDSCs: $5,836,190 CDSCs: $8,964,262
Class C............................ CDSCs: $ 19,701 CDSCs: $ 7,040 CDSCs: N/A(2)
</TABLE>
- ------------------------
1 FSCs apply to Class A only.
2 This Class commenced operations on July 28, 1997.
The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.20% of the average daily net assets of Class B
and 0.25% of the average daily net assets of Class C are currently each
characterized as a "service fee" under the Rules of the National Association of
Securities Dealers, Inc. (of which the Distributor is a member). The "service
fee" is a payment made for personal service and/or the maintenance of
shareholder accounts. The remaining portion of the Plan fees payable by a Class,
if any, is characterized as an "asset-based sales charge" as such is defined by
the Rules of the Association.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. Class B shares of the Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended December
31, 1998, of $38,748,945. This amount is equal to 0.75% of the average daily net
assets of Class B for the fiscal year
15
<PAGE>
and was calculated pursuant to clause (b) of the compensation formula under the
Plan. For the fiscal year ended December 31, 1998, Class A and Class C shares of
the Fund accrued payments under the Plan amounting to $91,004 and $77,373,
respectively, which amounts are equal to 0.24% and 0.75% of the average daily
net assets of Class A and Class C, respectively, for the fiscal year.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.
With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for the
sale of Class A shares, currently a gross sales credit of up to 4.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.20% of the current value of
the respective accounts for which they are the Financial Advisors or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by employer-sponsored employee benefit
plans, whether or not qualified under the Internal Revenue Code, for which the
Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement ("MSDW Eligible Plans"), the Investment Manager compensates Financial
Advisors by paying them, from its own funds, a gross sales credit of 1.0% of the
amount sold.
With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 4.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.20% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 0.75% of the current
value of the respective accounts for which they are the Financial Advisors of
record.
With respect to Class D shares other than shares held by participants in the
Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds's Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the amount paid if the Class D shares are redeemed in the first year and
a chargeback of 50% of the amount paid if the Class D shares are redeemed in the
second year after purchase. The Investment Manager also compensates Dean Witter
Reynolds's Financial Advisors by paying them, from its own funds, an annual
residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund asset
allocation program).
The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds's
Fund-associated distribution-related expenses, including sales compensation, and
overhead and other branch office distribution-related expenses including (a) the
expenses of operating Dean Witter Reynolds's branch offices in connection with
the sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares and (d) other expenses relating to branch
promotion of Fund sales.
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on behalf
of the Fund and, in the case of Class B shares,
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opportunity costs, such as the gross sales credit and an assumed interest charge
thereon ("carrying charge"). In the Distributor's reporting of the distribution
expenses to the Fund, in the case of Class B shares, such assumed interest
(computed at the "broker's call rate") has been calculated on the gross credit
as it is reduced by amounts received by the Distributor under the Plan and any
contingent deferred sales charges received by the Distributor upon redemption of
shares of the Fund. No other interest charge is included as a distribution
expense in the Distributor's calculation of its distribution costs for this
purpose. The broker's call rate is the interest rate charged to securities
brokers on loans secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 0.75%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C will
be reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to Financial Advisors and other authorized financial
representatives, such amounts shall be determined at the beginning of each
calendar quarter by the Trustees, including, a majority of the Independent
Trustees. Expenses representing the service fee (for Class A) or a gross sales
credit or a residual to Financial Advisors and other authorized financial
representatives (for Class C) may be reimbursed without prior determination. In
the event that the Distributor proposes that monies shall be reimbursed for
other than such expenses, then in making quarterly determinations of the amounts
that may be reimbursed by the Fund, the Distributor will provide and the
Trustees will review a quarterly budget of projected distribution expenses to be
incurred on behalf of the Fund, together with a report explaining the purposes
and anticipated benefits of incurring such expenses. The Trustees will determine
which particular expenses, and the portions thereof, that may be borne by the
Fund, and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's Class A and
Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended December 31, 1998 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $1,185,635,388 on behalf of Class B since the inception of the Plan.
It is estimated that this amount was spent in approximately the following ways:
(i) 0.67% ($7,929,520)--advertising and promotional expenses; (ii) 0.12%
($1,434,871)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 99.21% ($1,176,270,997)--other expenses, including the
gross sales credit and the carrying charge, of which 14.81% ($174,182,270)
represents carrying charges, 34.84% ($409,854,289) represents commission credits
to Dean Witter Reynolds branch offices and other selected broker-dealers for
payments of commissions to Financial Advisors and other authorized financial
representatives, and 50.35% ($592,234,438) represents overhead and other branch
office distribution-related expenses. The amounts accrued by Class A and Class C
for distribution during the fiscal year ended December 31, 1998 were for
expenses which relate to compensation of sales personnel and associated overhead
expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $8,899,443 as of December 31, 1998 (the end of
the Fund's fiscal year), which was equal to 0.18% of the net assets of Class B
on such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses
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with respect to Class B shares or any requirement that the Plan be continued
from year to year, this excess amount does not constitute a liability of the
Fund. Although there is no legal obligation for the Fund to pay expenses
incurred in excess of payments made to the Distributor under the Plan and the
proceeds of CDSCs paid by investors upon redemption of shares, if for any reason
the Plan is terminated, the Trustees will consider at that time the manner in
which to treat such expenses. Any cumulative expenses incurred, but not yet
recovered through distribution fees or CDSCs, may or may not be recovered
through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the Fund
through payments in any subsequent year, except that expenses representing a
gross sales commission credited to Morgan Stanley Dean Witter Financial Advisors
and other authorized financial representatives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the Fund
that unreimbursed expenses representing a gross sales commission credited to
Morgan Stanley Dean Witter Financial Advisors and other authorized financial
representatives at the time of sale totaled $47,595 in the case of Class C at
December 31, 1998 (the end of the calendar year), which amount was equal to
0.28% of the net assets of Class C on such date, and that there were no such
expenses that may be reimbursed in the subsequent year in the case of Class A on
such date. No interest or other financing charges will be incurred on any Class
A or Class C distribution expenses incurred by the Distributor under the Plan or
on any unreimbursed expenses due to the Distributor pursuant to the Plan.
No interested person of the Fund nor any Independent Trustee has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, the Investment Manager, Dean Witter Reynolds, MSDW Services Company
or certain of their employees may be deemed to have such an interest as a result
of benefits derived from the successful operation of the Plan or as a result of
receiving a portion of the amounts expended thereunder by the Fund.
On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtaining and would be likely to obtain
under the Plan, including that: (a) the Plan is essential in order to give Fund
investors a choice of alternatives for payment of distribution and service
charges and to enable the Fund to continue to grow and avoid a pattern of net
redemptions which, in turn, are essential for effective investment management;
and (b) without the compensation to individual brokers and the reimbursement of
distribution and account maintenance expenses of Dean Witter Reynolds's branch
offices made possible by the 12b-1 fees, Dean Witter Reynolds could not
establish and maintain an effective system for distribution, servicing of Fund
shareholders and maintenance of shareholder accounts; and (3) what services had
been provided and were continuing to be provided under the Plan to the Fund and
its shareholders. Based upon their review, the Trustees, including each of the
Independent Trustees, determined that continuation of the Plan would be in the
best interest of the Fund and would have a reasonable likelihood of continuing
to benefit the Fund and its shareholders. In the Trustees' quarterly review of
the Plan, they will consider its continued appropriateness and the level of
compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.
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F. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans. The principal business address of the Transfer Agent is Harborside
Financial Center, Plaza Two, Jersey City, New Jersey 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with either
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, New York
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 shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these services,
the Transfer Agent receives a per shareholder account fee from the Fund.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
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A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees of the Fund, the
Investment Manager is responsible for the investment decisions and the placing
of the orders for portfolio transactions for the Fund. The Fund's portfolio
transactions will occur primarily with issuers, underwriters or major dealers in
U.S. Government securities acting as principals. Such transactions are normally
on a net basis and do not involve payment of brokerage commissions. The cost of
securities purchased from an underwriter usually includes a commission paid by
the issuer to the underwriters; transactions with dealers normally reflect the
spread between bid and asked prices. Options and futures transactions will
usually be effected through a broker and a commission will be charged.
For the fiscal years ended December 31, 1996, 1997 and 1998, the Fund did
not pay any brokerage commissions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds. The Fund will
limit its transactions with Dean Witter Reynolds to U.S. Government Securities.
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, 1996, 1997 and 1998, the Fund did
not effect any principal transactions with Dean Witter Reynolds.
Consistent with the policy described above, 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
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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, 1996, 1997 and 1998, the Fund did
not effect any securities transactions through 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.
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.
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, 1998, 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, 1998, 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, 1998, the Fund did not own any
securities issued by any of such issuers.
VII. CAPITAL STOCK AND OTHER SECURITIES
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The shareholders of the Fund are entitled to a full vote for each full share
of beneficial interest held. The Fund is authorized to issue an unlimited number
of shares of beneficial interest. All shares of beneficial interest of the Fund
are of $0.01 par value and are equal as to earnings, assets and voting
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privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses, if such
proposal is submitted separately to Class A shareholders. Also, Class A, Class B
and Class C bear expenses related to the distribution of their respective
shares.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
PROSPECTUS.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by action of the
Trustees or by the shareholders.
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
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A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's PROSPECTUS.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the Transfer
Agent to act as their agent in connection with the application of proceeds of
any redemption of Fund shares to the purchase of shares of any other Morgan
Stanley Dean Witter Fund and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transaction pursuant to the exchange privilege.
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TRANSFERS OF SHARES. In the event a shareholder requests a transfer of Fund
shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving
less than all of the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares
bear to the total shares in the account immediately prior to the transfer). The
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.
B. OFFERING PRICE
The Fund's Class B, Class C and Class D shares are offered at net asset
value per share plus any applicable FSC which is distributed among the Fund's
Distributor, Dean Witter Reynolds and other authorized dealers as described in
"Section V. Investment Management and Other Services-- E. Rule 12b-1 Plan."
The price of Fund shares, called "net asset value," is based on the value of
the Fund's portfolio securities. Net asset value per share of each Class is
calculated by dividing the value of the portion of the Fund's securities and
other assets attributable to that Class, less the liabilities attributable to
that Class, by the number of shares of that Class outstanding. The assets of
each Class of shares are invested in a single portfolio. The net asset value of
each Class, however, will differ because the Classes have different ongoing
fees.
In the calculation of the Fund's net asset value: (1) all portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest bid price prior to the time of valuation, and (2) when
market quotations are not readily available, including circumstances under which
it is determined by the Investment Manager that sale or bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Fund's Trustees (valuation of securities
for which market quotations are not readily available may also be based upon
current market prices of securities which are comparable in coupon, rating and
maturity or an appropriate matrix utilizing similar factors).
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
Listed options on debt securities are valued at the latest sale price on the
exchange on which they are listed unless no sales of such options have taken
place that day, in which case they will be valued at the mean between their
latest bid and asked prices. Unlisted options on debt securities are valued at
the mean between their latest bid and asked prices. Futures are valued at the
latest sale price on the commodities exchange on which they trade unless the
Trustees determine such price does not reflect their market value, in which case
they will be valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Trustees.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
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The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the Fund
are not generally a consideration for shareholders such as tax
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exempt entities and tax-advantaged retirement vehicles such as an IRA or 401(k)
plan. Shareholders are urged to consult their own tax professionals regarding
specific questions as to federal, state or local taxes.
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so that
the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have a tax holding period of more than one
year. Gains or losses on the sale of securities with a tax holding period of one
year or less will be short-term gains or losses.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund.
Under certain tax rules, the Fund may be required to accrue a portion of any
discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year. To
the extent that the Fund invests in such securities, it would be required to pay
out such accrued discount as an income distribution in each year in order to
avoid taxation at the Fund level. Such distributions will be made from the
available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have to
pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income or
short-term capital gains, are taxable to the shareholder as ordinary income
regardless of whether the shareholder receives such payments in additional
shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. The Taxpayer Relief Act of 1997 reduced the
maximum tax on long-term capital gains applicable to individuals from 28% to
20%.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
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Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short term capital
gains.
After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the amount of any dividends eligible for the federal
dividends received deduction for corporations.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment company
will have the effect of reducing the net asset value of the shareholder's stock
in that company by the exact amount of the dividend or capital gains
distribution. Furthermore, such dividends and capital gains distributions are
subject to federal income taxes. If the net asset value of the shares should be
reduced below a shareholder's cost as a result of the payment of dividends or
the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Any loss realized by shareholders upon a redemption of shares within
six months of the date of their purchase will be treated as a long-term capital
loss to the extent of any distributions of net long-term capital gains with
respect to such shares during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured by
the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the tax
basis of their shares. Under certain circumstances a shareholder may compute and
use an average cost basis in determining the gain or loss on the sale or
redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
X. UNDERWRITERS
- --------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plans."
XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. These figures are computed separately
for Class A, Class B, Class C and Class D shares. Yield is calculated for any
30-day period as follows: the amount of interest income for each security in the
Fund's portfolio is determined in accordance with regulatory requirements; the
total for the entire portfolio constitutes the Fund's gross income for the
period. Expenses accrued during the period are
24
<PAGE>
subtracted to arrive at "net investment income" of each Class. The resulting
amount is divided by the product of the maximum offering price per share on the
last day of the period, multiplied by the average number of shares of the
applicable Class outstanding during the period that were entitled to dividends.
This amount is added to 1 and raised to the sixth power. 1 is then subtracted
from the result and the difference is multiplied by 2 to arrive at the
annualized yield. For the 30-day period ended December 31, 1998, the yield,
calculated pursuant to the formula described above, was approximately 5.65%,
5.39%, 5.39% and 6.16% for Class A, Class B, Class C and Class D, respectively.
The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of operations, if
shorter than any of the foregoing. The ending redeemable value is reduced by any
contingent deferred sales charge ("CDSC") at the end of the one, five, ten year
or other period. For the purpose of this calculation, it is assumed that all
dividends and distributions are reinvested. The formula for computing the
average annual total return involves a percentage obtained by dividing the
ending redeemable value by the amount of the initial investment (which in the
case of Class A shares is reduced by the Class A initial sales charge), taking a
root of the quotient (where the root is equivalent to the number of years in the
period) and subtracting 1 from the result. The average annual total returns for
Class B for the one, five and ten year periods ended December 31, 1998 were
2.27%, 5.92% and 7.49%, respectively. The average annual total returns of Class
A for the fiscal year ended December 31, 1998 and for the period July 28, 1997
(inception of the Class) through December 31, 1998 were 3.13% and 4.67%,
respectively. The average annual total returns of Class C for the fiscal year
ended December 31, 1998 and for the period July 28, 1997 (inception of the
Class) through December 31, 1998 were 6.14% and 7.98%, respectively. The average
annual total returns of Class D for the fiscal year ended December 31, 1998 and
for the period July 28, 1997 (inception of the Class) through December 31, 1998
were 7.72% and 8.20%, respectively.
In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction of
the CDSC for each of Class B and Class C which, if reflected, would reduce the
performance quoted. For example, the average annual total return of the Fund may
be calculated in the manner described above, but without deduction for any
applicable sales charge. Based on this calculation, the average annual total
returns of Class B for the one, five and ten year periods ended December 31,
1998, were 7.27%, 6.24% and 7.49%, respectively. The average annual total
returns of Class A for the fiscal year ended December 31, 1998 and for the
period July 28, 1997 through December 31, 1998 were 7.70% and 7.91%,
respectively. The average annual total returns of Class C for the fiscal year
ended December 31, 1998 and for the period July 28, 1997 through December 31,
1998 were 7.14% and 7.98%, respectively. The average annual total returns of
Class D for the fiscal year ended December 31, 1998 and for the period July 28,
1997 through December 31, 1998 were 7.72% and 8.20%, respectively.
In addition, the Fund may compute its aggregate total return for each Class
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on the foregoing calculation, the
aggregate total returns for Class B for the one, five and ten year period ended
December 31, 1998, were 7.27%, 35.31% and 105.91%, respectively. The total
returns of Class A for the fiscal year ended December 31, 1998 and for the
period July 28, 1997 through December 31, 1998 were 7.70% and 11.47%,
respectively. The total returns of Class C for the fiscal year ended December
31, 1998 and for the period July 28, 1997 through December 31, 1998 were 7.14%
and 11.58%, respectively. The total returns of Class D for the fiscal year ended
December 31, 1998 and for the period July 28, 1997 through December 31, 1998
were 7.72% and 11.90%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1 to
the Fund's aggregate total return to date
25
<PAGE>
(expressed as a decimal and without taking into account the effect of any
applicable CDSC) and multiplying by $9,575, $48,250 and $97,250 in the case of
Class A (investments of $10,000, $50,000 and $100,000 adjusted for the initial
sales charge) or by $10,000, $50,000 and $100,000 in the case of each of Class
B, Class C and Class D, as the case may be. Investments of $10,000, $50,000 and
$100,000 in each Class at inception of the Class would have grown to the
following amounts at December 31, 1998:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ---------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ----------------------------------------------------------------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C>
Class A.......................................................... 07/28/97 $ 10,673 $ 53,784 $ 108,405
Class B.......................................................... 06/29/84 31,244 156,220 312,440
Class C.......................................................... 07/28/97 11,158 55,790 111,580
Class D.......................................................... 07/28/97 11,190 55,750 111,900
</TABLE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
December 31, 1998 included in this STATEMENT OF ADDITIONAL INFORMATION and
incorporated by reference in the PROSPECTUS have been so included and
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
*****
This STATEMENT OF ADDITIONAL INFORMATION and the PROSPECTUS do not contain
all of the information set forth in the REGISTRATION STATEMENT the Fund has
filed with the SEC. The complete REGISTRATION STATEMENT may be obtained from the
SEC.
26
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES (66.4%)
Government National Mortgage Assoc. I (65.5%)
$ 25,250 12/15/28............................................................................ 6.00% $ 25,029,060
50,000 *................................................................................... 6.00 49,515,625
286,158 12/15/22............................................................................ 6.50 288,930,055
1,387,277 11/15/17............................................................................ 7.00 1,418,923,770
641,620 11/15/02 - 10/15/16................................................................. 7.50 661,470,131
222,525 10/15/16 - 01/15/20................................................................. 8.00 231,147,703
223,063 07/15/06 - 01/15/20................................................................. 8.50 236,446,536
164,570 07/15/16 - 01/15/20................................................................. 9.00 175,575,138
107,705 07/15/13 - 04/15/18................................................................. 9.50 116,220,299
119,848 12/15/10 - 09/15/16................................................................. 10.00 130,821,592
349 10/15/13............................................................................ 12.50 398,484
--------------
3,334,478,393
--------------
Government National Mortgage Assoc. II (0.8%)
38,984 01/20/24............................................................................ 6.50 39,117,792
775 03/20/26............................................................................ 7.00 787,709
--------------
39,905,501
--------------
Government National Mortgage Assoc. GPM I (0.1%)
4,755 12/15/13 - 04/15/14................................................................. 12.25 5,493,884
--------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $3,262,739,029)............................................................ 3,379,877,778
--------------
U.S. GOVERNMENT OBLIGATIONS (25.1%)
U.S. Treasury Notes (9.9%)
50,000 05/31/03............................................................................ 5.50 51,625,000
75,000 08/15/07............................................................................ 6.125 81,898,500
2,300 05/31/99............................................................................ 6.25 2,314,858
60,000 02/15/07............................................................................ 6.25 65,788,200
9,300 05/15/99............................................................................ 6.375 9,357,474
4,000 07/15/99............................................................................ 6.375 4,037,480
1,050 09/30/01............................................................................ 6.375 1,096,841
104,800 05/31/99............................................................................ 6.75 105,665,648
47,300 04/15/99............................................................................ 7.00 47,609,815
133,000 02/15/99............................................................................ 8.875 133,615,790
--------------
503,009,606
--------------
U.S. Treasury Principal Strips (15.2%)
13,000 05/15/03............................................................................ 0.00 10,606,180
123,000 02/15/04**.......................................................................... 0.00 96,946,140
380,000 05/15/04............................................................................ 0.00 295,514,600
385,000 08/15/04............................................................................ 0.00 295,499,050
75,000 11/15/04............................................................................ 0.00 56,878,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$ 26,000 02/15/05............................................................................ 0.00% $ 19,424,860
--------------
774,869,330
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $1,139,814,676)............................................................ 1,277,878,936
--------------
U.S. GOVERNMENT AGENCIES (9.3%)
Resolution Funding Corp. Zero Coupon Strips
33,500 07/15/02............................................................................ 0.00 28,216,380
5,049 10/15/02............................................................................ 0.00 4,199,809
109,000 04/15/03............................................................................ 0.00 88,671,500
55,000 07/15/03............................................................................ 0.00 44,166,650
69,000 10/15/03............................................................................ 0.00 54,736,320
89,882 01/15/04............................................................................ 0.00 70,210,425
84,419 04/15/04............................................................................ 0.00 65,247,445
68,000 07/15/04............................................................................ 0.00 51,969,680
1,550 04/15/07............................................................................ 0.00 1,025,046
18,000 07/15/07............................................................................ 0.00 11,777,580
56,000 10/15/07............................................................................ 0.00 36,279,600
30,000 10/15/08............................................................................ 0.00 18,498,000
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $414,273,083).............................................................. 474,998,435
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $4,816,826,788) (a).................................................... 100.8 % 5,132,755,149
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS.......................................... (0.8) (40,551,430)
------ ---------------
NET ASSETS.............................................................................. 100.0 % $ 5,092,203,719
------ ---------------
------ ---------------
</TABLE>
- ---------------------
GPM Graduated Payment Mortgage.
* Securities purchased on a forward commitment with an approximate principal
amount and no definite maturity date; the actual principal amount and
maturity date will be determined upon settlement.
** Some of these securities are segregated in connection with securities
purchased on a forward commitment basis.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $317,533,345 and the
aggregate gross unrealized depreciation is $1,604,984, resulting in net
unrealized appreciation of $315,928,361.
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $4,816,826,788)......................................................... $ 5,132,755,149
Cash....................................................................................... 157,341
Receivable for:
Interest............................................................................... 29,778,621
Shares of beneficial interest sold..................................................... 4,578,185
Prepaid expenses and other assets.......................................................... 80,247
---------------
TOTAL ASSETS.......................................................................... 5,167,349,543
---------------
LIABILITIES:
Payable for:
Investments purchased.................................................................. 49,253,125
Dividends to shareholders.............................................................. 13,553,786
Shares of beneficial interest repurchased.............................................. 6,857,566
Plan of distribution fee............................................................... 3,210,499
Investment management fee.............................................................. 1,878,762
Accrued expenses and other payables........................................................ 392,086
---------------
TOTAL LIABILITIES..................................................................... 75,145,824
---------------
NET ASSETS............................................................................ $ 5,092,203,719
---------------
---------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................ $ 5,694,016,539
Net unrealized appreciation................................................................ 315,928,361
Accumulated net realized loss.............................................................. (917,741,181)
---------------
NET ASSETS............................................................................ $ 5,092,203,719
---------------
---------------
CLASS A SHARES:
Net Assets................................................................................. $58,537,905
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................. 6,376,543
NET ASSET VALUE PER SHARE............................................................. $9.18
---------------
---------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 4.44% OF NET ASSET VALUE)..................................... $9.59
---------------
---------------
CLASS B SHARES:
Net Assets................................................................................. $4,996,187,325
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................. 543,307,518
NET ASSET VALUE PER SHARE............................................................. $9.20
---------------
---------------
CLASS C SHARES:
Net Assets................................................................................. $17,086,723
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................. 1,846,174
NET ASSET VALUE PER SHARE............................................................. $9.26
---------------
---------------
CLASS D SHARES:
Net Assets................................................................................. $20,391,766
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................. 2,221,111
NET ASSET VALUE PER SHARE............................................................. $9.18
---------------
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
29
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................................................... $376,887,864
------------
EXPENSES
Plan of distribution fee (Class A shares)..................................................... 91,004
Plan of distribution fee (Class B shares)..................................................... 38,748,945
Plan of distribution fee (Class C shares)..................................................... 77,373
Investment management fee..................................................................... 22,607,800
Transfer agent fees and expenses.............................................................. 3,542,838
Custodian fees................................................................................ 845,103
Shareholder reports and notices............................................................... 185,084
Professional fees............................................................................. 67,077
Registration fees............................................................................. 61,315
Trustees' fees and expenses................................................................... 19,706
Other......................................................................................... 65,053
------------
TOTAL EXPENSES........................................................................... 66,311,298
------------
NET INVESTMENT INCOME.................................................................... 310,576,566
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss............................................................................. (2,384,102)
Net change in unrealized appreciation......................................................... 54,569,658
------------
NET GAIN................................................................................. 52,185,556
------------
NET INCREASE.................................................................................. $362,762,122
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................................ $ 310,576,566 $ 363,800,467
Net realized loss.................................................................... (2,384,102) (3,836,410)
Net change in unrealized appreciation................................................ 54,569,658 118,550,225
-------------------- ---------------------
NET INCREASE.................................................................... 362,762,122 478,514,282
-------------------- ---------------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares....................................................................... (2,396,071) (342,413)
Class B shares....................................................................... (306,635,357) (363,065,315)
Class C shares....................................................................... (600,619) (61,336)
Class D shares....................................................................... (944,519) (326,681)
-------------------- ---------------------
TOTAL DIVIDENDS................................................................. (310,576,566) (363,795,745)
-------------------- ---------------------
Net decrease from transactions in shares of beneficial interest...................... (425,398,131) (1,098,840,399)
-------------------- ---------------------
NET DECREASE.................................................................... (373,212,575) (984,121,862)
NET ASSETS:
Beginning of period.................................................................. 5,465,416,294 6,449,538,156
-------------------- ---------------------
END OF PERIOD................................................................... $ 5,092,203,719 $ 5,465,416,294
-------------------- ---------------------
-------------------- ---------------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July, 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter U.S. Government Securities Trust (the "Fund"),
formerly Dean Witter U.S. Government Securities Trust, 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 high
current income consistent with safety of principal. The Fund seeks to achieve
its objective by investing in obligations issued or guaranteed by the U.S.
Government or its instrumentalities. The Fund was organized as a Massachusetts
business trust on September 29, 1983 and commenced operations on June 29, 1984.
On July 28, 1997, the Fund commenced offering three additional classes of
shares, with the then current shares, other then shares held by certain employee
benefit plans established by Dean Witter Reynolds Inc. and its affiliate, SPS
Transaction Services, Inc., designated as Class B shares. Shares held by those
employee benefit plans prior to July 28, 1997 have been designated Class D
shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) all portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (2) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager"), formerly Dean Witter InterCapital Inc., that sale or bid prices are
not reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Trustees (valuation of debt securities for
which market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and maturity
or an appropriate matrix utilizing similar factors); and (3) certain portfolio
securities may be valued by an outside pricing service approved by the Trustees.
The pricing service may utilize a
32
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the securities valued by
such pricing service; (4) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
33
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with 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 Fund's net assets
determined at the close of each business day: 0.50% to the portion of daily net
assets not exceeding $1 billion; 0.475% to the portion of daily net assets
exceeding $1 billion but not exceeding $1.5 billion; 0.45% to the portion of
daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.425% to
the portion of daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.40% to the portion of daily net assets exceeding $2.5 billion but not
exceeding $5 billion; 0.375% to the portion of daily net assets exceeding $5
billion but not exceeding $7.5 billion; 0.35% to the portion of daily net assets
exceeding $7.5 billion but not exceeding $10 billion; 0.325% to the portion of
daily net assets exceeding $10 billion but not exceeding $12.5 billion; and
0.30% to the portion of daily net assets exceeding $12.5 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
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 0.75% (0.65%
on amounts over $10 billion) of the lesser of: (a) the average daily aggregate
gross sales of the Class B shares since the inception of the Fund (not including
reinvestment of dividend or capital gain distributions) less the average daily
aggregate net asset value of the Class B shares redeemed since the Fund's
inception upon which a contingent deferred sales charge has been imposed or
waived; or (b) the average daily net assets of Class B; and (iii) Class C - up
to 0.75% of the average daily net assets of Class C. In the case of Class A
shares, amounts paid under the Plan are paid to the Distributor for services
provided. In the case of Class B and Class C shares, amounts paid under the Plan
are paid to the Distributor for (1) services provided and the expenses borne by
it and others in the distribution of the shares of these Classes, including the
payment of commissions for sales of these
34
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
Classes and incentive compensation to, and expenses of, Morgan Stanley Dean
Witter Financial Advisors and others who engage in or support distribution of
the shares or who service shareholder accounts, including overhead and telephone
expenses; (2) printing and distribution of prospectuses and reports used in
connection with the offering of these shares to other than current shareholders;
and (3) preparation, printing and distribution of sales literature and
advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan, in the case of Class B shares, to compensate Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and Distributor,
and other selected broker-dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $8,899,443 at December 31, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 0.75% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended December 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
0.75%, respectively.
The Distributor has informed the Fund that for the year ended December 31, 1998
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $9,698, $3,058,326
and $19,701, respectively and received $64,425 in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such charges
which are not an expense of the Fund.
35
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The costs of purchases and proceeds from sales/prepayments of portfolio
securities, excluding short-term investments, for the year ended December 31,
1998 were $717,875,107 and $1,347,282,631, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $96,000.
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, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $6,216. At December 31, 1998, the Fund had an accrued pension liability of
$52,503 included in accrued expenses in the Statement of Assets and Liabilities.
5. ACQUISITION OF DEAN WITTER RETIREMENT SERIES -- U.S. GOVERNMENT SECURITIES
SERIES
As of the close of business on September 11, 1998, the Fund acquired all the net
assets of Dean Witter Retirement Series - U.S. Government Securities Series
("Retirement U.S. Government") pursuant to a plan of reorganization (the "Plan")
approved by the shareholders of Retirement U.S. Government on August 19, 1998.
The acquisition was accomplished by a tax-free exchange of 986,985 Class D
shares of the Fund at a net asset value of $9.21 per share for 899,123 shares of
Retirement U.S. Government. The net assets of the Fund and Retirement U.S.
Government immediately before the acquisition were $5,193,431,112 and
$9,087,435, respectively, including unrealized appreciation of $322,808 for
Retirement U.S. Government. Immediately after the acquisition, the combined net
assets of the Fund amounted to $5,202,518,547.
36
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997+*
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 4,837,972 $ 44,356,004 2,724,542 $ 24,540,441
Reinvestment of dividends........................................ 145,211 1,330,450 7,949 72,059
Redeemed......................................................... (898,895) (8,228,417) (440,236) (3,982,964)
----------- -------------- ----------- ------------
Net increase - Class A........................................... 4,084,288 37,458,037 2,292,255 20,629,536
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 103,474,883 948,990,970 67,708,563 606,120,050
Reinvestment of dividends........................................ 17,451,085 159,732,499 20,782,743 185,683,576
Redeemed......................................................... (173,896,303) (1,593,120,481) (214,633,493) (1,917,929,811)
----------- -------------- ----------- ------------
Net decrease - Class B........................................... (52,970,335) (484,397,012) (126,142,187) (1,126,126,185)
----------- -------------- ----------- ------------
CLASS C SHARES
Sold............................................................. 4,818,849 44,609,503 552,334 5,029,381
Reinvestment of dividends........................................ 41,862 386,582 4,930 45,056
Redeemed......................................................... (3,492,672) (32,338,148) (79,129) (724,422)
----------- -------------- ----------- ------------
Net increase - Class C........................................... 1,368,039 12,657,937 478,135 4,350,015
----------- -------------- ----------- ------------
CLASS D SHARES
Sold............................................................. 1,554,909 14,290,193 324,174 2,938,529
Reinvestment of dividends........................................ 97,395 892,667 34,780 314,925
Acquisition of Dean Witter Retirement Series - U.S. Government
Securities Trust Series 986,985 9,087,435 -- --
Redeemed......................................................... (1,666,314) (15,387,388) (104,962) (947,219)
----------- -------------- ----------- ------------
Net increase - Class D........................................... 972,975 8,882,907 253,992 2,306,235
----------- -------------- ----------- ------------
Net decrease in Fund............................................. (46,545,033) $ (425,398,131) (123,117,805) $(1,098,840,399)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
- ---------------------
+ On July 28, 1997, 994,144 shares representing $8,977,118 were transferred
to Class D.
* For Class A, C and D shares, for the period July 28, 1997 (issue date)
through December 31, 1997.
37
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
7. FEDERAL INCOME TAX STATUS
At December 31, 1998, the Fund had a net capital loss carryover of approximately
$916,574,000, which may be used to offset future capital gains to the extent
provided by regulations which is available through December 31 of the following
years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
- --------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006
- ------------- ------------- ------------- ------------- ------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 261,525 $ 154,964 $ 263,492 $ 118,056 $ 63,667 $ 49,153 $ 3,006 $ 2,711
- ------------- ------------- ------------- ------------- ------------- ----------- ----------- ---------
- ------------- ------------- ------------- ------------- ------------- ----------- ----------- ---------
</TABLE>
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $1,048,000 during fiscal 1998.
At December 31, 1998, the Fund had temporary book/tax differences primarily
attributable to post-October losses and permanent book/tax differences
attributable to an expired capital loss carryover. To reflect reclassifications
arising from the permanent differences, paid-in-capital was charged and
accumulated net realized loss was credited $108,730,990.
38
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------------------------
1998 1997* 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.............. $ 9.10 $ 8.92 $ 9.21 $ 8.41 $ 9.31
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income.......................... 0.54 0.56 0.56 0.57 0.58
Net realized and unrealized gain (loss)........ 0.10 0.18 (0.29) 0.80 (0.90)
-------- -------- -------- -------- --------
Total income (loss) from investment operations.... 0.64 0.74 0.27 1.37 (0.32)
-------- -------- -------- -------- --------
Less dividends from net investment income......... (0.54) (0.56) (0.56) (0.57) (0.58)
-------- -------- -------- -------- --------
Net asset value, end of period.................... $ 9.20 $ 9.10 $ 8.92 $ 9.21 $ 8.41
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN+..................................... 7.27% 8.56% 3.16% 16.74% (3.51)%
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.27%(1) 1.26% 1.25% 1.24% 1.22%
Net investment income............................. 5.94%(1) 6.22% 6.28% 6.44% 6.57%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions............ $4,996 $5,429 $6,450 $7,955 $8,211
Portfolio turnover rate........................... 14% %4 %8 14% 26%
</TABLE>
- ---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares held by certain
employee benefit plans established by Dean Witter Reynolds Inc. and its
affiliate, SPS Transaction Services, Inc., have been designated Class B
shares. Shares held by those employee benefit plans prior to July 28, 1997
have been designated Class D shares.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.............. $ 9.09 $ 9.03
------ ------
Income from investment operations:
Net investment income.......................... 0.59 0.25
Net realized and unrealized gain............... 0.09 0.06
------ ------
Total income from investment operations........... 0.68 0.31
------ ------
Less dividends from net investment income......... (0.59) (0.25)
------ ------
Net asset value, end of period.................... $ 9.18 $ 9.09
------ ------
------ ------
TOTAL RETURN+..................................... 7.70% 3.50%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 0.76%(3) 0.77%(2)
Net investment income............................. 6.45%(3) 6.57%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $58,538 $20,841
Portfolio turnover rate........................... 14% 4%
</TABLE>
<TABLE>
<S> <C> <C>
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.............. $ 9.17 $ 9.03
------ ------
Income from investment operations:
Net investment income.......................... 0.55 0.23
Net realized and unrealized gain............... 0.09 0.14
------ ------
Total income from investment operations........... 0.64 0.37
------ ------
Less dividends from net investment income......... (0.55) (0.23)
------ ------
Net asset value, end of period.................... $ 9.26 $ 9.17
------ ------
------ ------
TOTAL RETURN+..................................... 7.14% 4.14%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.27%(3) 1.25%(2)
Net investment income............................. 5.94%(3) 5.81%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $17,087 $4,385
Portfolio turnover rate........................... 14% 4%
</TABLE>
- ---------------------
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.............. $ 9.11 $ 9.03
------ ------
Income from investment operations:
Net investment income.......................... 0.61 0.27
Net realized and unrealized gain............... 0.07 0.08
------ ------
Total income from investment operations........... 0.68 0.35
------ ------
Less dividends from net investment income......... (0.61) (0.27)
------ ------
Net asset value, end of period.................... $ 9.18 $ 9.11
------ ------
------ ------
TOTAL RETURN+..................................... 7.72% 3.87%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 0.52%(3) 0.52%(2)
Net investment income............................. 6.69%(3) 6.91%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $20,392 $11,367
Portfolio turnover rate........................... 14% 4%
</TABLE>
- ---------------------
* The date shares were first issued. Shareholders who held shares of the Fund
prior to July 28, 1997 (the date the Fund converted to a multiple class
share structure) should refer to the Financial Highlights of Class B to
obtain the historical per share data and ratio information of their shares.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT
SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES 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 U.S.
Government Securities Trust (the "Fund"), formerly Dean Witter U.S. Government
Securities Trust, at December 31, 1998, 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 periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 8, 1999
42
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PART C OTHER INFORMATION
Item 23. EXHIBITS
1. Form of Amendment to the Declaration of Trust of the
Registrant.
4. Form of Amended Investment Management Agreement between the
Registrant and Morgan Stanley Dean Witter Advisors Inc.
5.(a) Form of Amended Distribution Agreement between the Registrant
and Morgan Stanley Dean Witter Distributors Inc.
5.(b) Form of Selected Dealer Agreement.
8.(a) Form of Amended and Restated Transfer Agency and Service
Agreement between the Registrant and Morgan Stanley Dean
Witter Trust FSB.
8.(b) Form of Amended Services Agreement between Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean Witter Services
Company Inc.
10. Consent of Independent Accountants.
14. Financial Data Schedules.
15. Amended Multiple Class Plan pursuant to Rule 18f-3.
- -----------------------------------------------------------------------------
All other exhibits were previously filed via EDGAR and are hereby incorporated
by reference.
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.
<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
principal address of the Morgan Stanley Dean Witter Funds is Two World Trade
Center, New York, New York 10048.
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
2
<PAGE>
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities
OPEN-END INVESTMENT COMPANIES
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Value Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Appreciation Fund
(12) Morgan Stanley Dean Witter Capital Growth Securities
(13) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(14) Morgan Stanley Dean Witter Convertible Securities Trust
(15) Morgan Stanley Dean Witter Developing Growth Securities Trust
(16) Morgan Stanley Dean Witter Diversified Income Trust
(17) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(18) Morgan Stanley Dean Witter Equity Fund
(19) Morgan Stanley Dean Witter European Growth Fund Inc.
(20) Morgan Stanley Dean Witter Federal Securities Trust
(21) Morgan Stanley Dean Witter Financial Services Trust
(22) Morgan Stanley Dean Witter Fund of Funds
(23) Morgan Stanley Dean Witter Global Dividend Growth Securities
(24) Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
(25) Morgan Stanley Dean Witter Global Utilities Fund
(26) Morgan Stanley Dean Witter Growth Fund
(27) Morgan Stanley Dean Witter Hawaii Municipal Trust
(28) Morgan Stanley Dean Witter Health Sciences Trust
(29) Morgan Stanley Dean Witter High Yield Securities Inc.
(30) Morgan Stanley Dean Witter Income Builder Fund
3
<PAGE>
(31) Morgan Stanley Dean Witter Information Fund
(32) Morgan Stanley Dean Witter Intermediate Income Securities
(33) Morgan Stanley Dean Witter International SmallCap Fund
(34) Morgan Stanley Dean Witter Japan Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(45) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(46) Morgan Stanley Dean Witter S&P 500 Index Fund
(47) Morgan Stanley Dean Witter S&P 500 Select Fund
(48) Morgan Stanley Dean Witter Select Dimensions Investment Series
(49) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(50) Morgan Stanley Dean Witter Short-Term Bond Fund
(51) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(52) Morgan Stanley Dean Witter Special Value Fund
(53) Morgan Stanley Dean Witter Strategist Fund
(54) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(55) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(56) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(57) Morgan Stanley Dean Witter U.S. Government Securities Trust
(58) Morgan Stanley Dean Witter Utilities Fund
(59) Morgan Stanley Dean Witter Value-Added Market Series
(60) Morgan Stanley Dean Witter Value Fund
(61) Morgan Stanley Dean Witter Variable Investment Series
(62) Morgan Stanley Dean Witter World Wide Income Trust
The term "TCW/DW Funds" refers to the following registered investment
companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
4
<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 and Director of Morgan Stanley Dean
Director 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"); Vice President of the Morgan Stanley
Dean Witter Funds, TCW/DW Funds and Discover Brokerage
Index Series; Executive Vice President and Director of
Dean Witter Reynolds Inc. ("DWR"); Director of various
MSDW subsidiaries.
Thomas C. Schneider Executive Vice President and Chief Strategic and
Executive Vice Administrative Officer of MSDW; Executive Vice
President and Chief President and Chief Financial Officer of MSDW Services;
Financial Officer Director of DWR and MSDW.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds
Executive Vice and Discover Brokerage Index Series; Director of MSDW
President and Chief Trust.
Investment Officer
Ronald E. Robison Executive Vice President and Chief Administrative
Executive Vice Officer and Director of MSDW Services; Vice President
President and Chief of the Morgan Stanley Dean Witter Funds, TCW/DW
Administrative Funds and Discover Brokerage Index Series.
Officer
Edward C. Oelsner, III
Executive Vice
President
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Senior Vice President, Assistant Secretary
and Counsel and Assistant General Counsel of MSDW Distributors; Vice
Director President, Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds, TCW/DW Funds and Discover
Brokerage Index Series.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
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
- -------------------- --------------------------------------------------
Rosalie Clough
Senior Vice President
and Director of
Marketing
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW Trust;
Vice President of the Morgan Stanley Dean Witter Funds,
TCW/DW Funds and Discover Brokerage Index Series.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds and Discover Brokerage Index Series.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
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
- -------------------- ---------------------------------------------------
James Solloway
Senior Vice President
Jayne M. Stevlingson Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Elizabeth A. Vetell
Senior Vice President
and Director of
Shareholder
Communication
James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Douglas Brown
First Vice President
and Assistant Secretary
Frank Bruttomesso First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of the Morgan Stanley
and Assistant Secretary Dean Witter Funds, TCW/DW Funds and Discover
Brokerage Index Series.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and
Treasurer Accounting Officer of the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
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 the Morgan Stanley Dean Witter Funds,
TCW/DW Funds and Discover Brokerage Index Series.
Salvatore DeSteno Vice President of MSDW Services.
First Vice President
Michael Interrante First Vice President and Controller of MSDW Services;
First Vice President Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
LouAnne D. McInnis First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of the Morgan Stanley
and Assistant Secretary Dean Witter Funds, TCW/DW Funds and Discover
Brokerage Index Series.
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
- -------------------- ---------------------------------------------------
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of the Morgan Stanley
and Assistant Secretary Dean Witter Funds, TCW/DW Funds and Discover
Brokerage Index Series.
Ruth Rossi First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of the Morgan Stanley
and Assistant Secretary Dean Witter Funds, TCW/DW Funds and Discover
Brokerage Index Series.
James P. Wallin
First Vice President
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Dale Boetcher
Vice President
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Philip Casparius
Vice President
David Dineen
Vice President
Michael Durbin
Vice President
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
- -------------------- --------------------------------------------------
Sheila Finnerty Vice President of Morgan Stanley Dean Witter Prime
Vice President Income Trust.
Jeffrey D. Geffen
Vice President
Sandra Gelpieryn
Vice President
Michael Geringer
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
David Hoffman
Vice President
Christopher Jones
Vice President
Kevin Jung
Vice President
Carol Espejo Kane
Vice President
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Thomas Lawlor
Vice President
Todd Lebo Vice President and Assistant Secretary of MSDW
Vice President Services; Assistant Secretary of the Morgan Stanley
Dean Witter Funds, TCW/DW Funds and Discover
Brokerage Index Series.
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
- -------------------- ----------------------------------------------------
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Login
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P 500
Vice President Select Fund.
Mark Mitchell
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
Richard Norris
Vice President
George Paoletti Vice President of Morgan Stanley Dean Witter
Vice President Information Fund.
Anne Pickrell Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
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
- -------------------- ---------------------------------------------------
Michael Roan
Vice President
John Roscoe
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Robert Stearns
Vice President
Naomi Stein
Vice President
Michael Strayhorn
Vice President
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Marybeth Swisher
Vice President
Robert Vanden Assem
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
- -------------------- --------------------------------------------------
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
Item 27. PRINCIPAL UNDERWRITERS
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Value Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Appreciation Fund
(12) Morgan Stanley Dean Witter Capital Growth Securities
(13) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(14) Morgan Stanley Dean Witter Convertible Securities Trust
(15) Morgan Stanley Dean Witter Developing Growth Securities Trust
(16) Morgan Stanley Dean Witter Diversified Income Trust
(17) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(18) Morgan Stanley Dean Witter Equity Fund
(19) Morgan Stanley Dean Witter European Growth Fund Inc.
(20) Morgan Stanley Dean Witter Federal Securities Trust
(21) Morgan Stanley Dean Witter Financial Services Trust
(22) Morgan Stanley Dean Witter Fund of Funds
(23) Morgan Stanley Dean Witter Global Dividend Growth Securities
(24) Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
(25) Morgan Stanley Dean Witter Global Utilities Fund
(26) Morgan Stanley Dean Witter Growth Fund
(27) Morgan Stanley Dean Witter Hawaii Municipal Trust
(28) Morgan Stanley Dean Witter Health Sciences Trust
(29) Morgan Stanley Dean Witter High Yield Securities Inc.
(30) Morgan Stanley Dean Witter Income Builder Fund
(31) Morgan Stanley Dean Witter Information Fund
(32) Morgan Stanley Dean Witter Intermediate Income Securities
12
<PAGE>
(33) Morgan Stanley Dean Witter International SmallCap Fund
(34) Morgan Stanley Dean Witter Japan Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(45) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(46) Morgan Stanley Dean Witter Prime Income Trust
(47) Morgan Stanley Dean Witter S&P 500 Index Fund
(48) Morgan Stanley Dean Witter S&P 500 Select Fund
(49) Morgan Stanley Dean Witter Short-Term Bond Fund
(50) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(51) Morgan Stanley Dean Witter Special Value Fund
(52) Morgan Stanley Dean Witter Strategist Fund
(53) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(54) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(55) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(56) Morgan Stanley Dean Witter U.S. Government Securities Trust
(57) Morgan Stanley Dean Witter Utilities Fund
(58) Morgan Stanley Dean Witter Value-Added Market Series
(59) Morgan Stanley Dean Witter Value Fund
(60) Morgan Stanley Dean Witter Variable Investment Series
(61) Morgan Stanley Dean Witter World Wide Income Trust
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return 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
- ---- -------------------------------------------
Christine Edwards Executive Vice President, Secretary, Director and Chief
Legal Officer.
Michael T. Gregg Vice President and Assistant Secretary.
James F. Higgins Director
13
<PAGE>
Name Positions and Office with MSDW Distributors
- ---- --------------------------------------------
Fredrick K. Kubler Senior Vice President, Assistant Secretary and Chief
Compliance Officer.
Philip J. Purcell Director
John Schaeffer Director
Charles Vidala 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
None.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it 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 26 day of February, 1999.
MORGAN STANLEY DEAN WITTER
U.S. GOVERNMENT SECURITIES 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. 17 has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 02/26/99
--------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 02/26/99
--------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 02/26/99
--------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien
By /s/ David M. Butowsky 02/26/99
--------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
EXHIBIT INDEX
1. Form of Amendment to the Declaration of Trust of the Registrant.
4. Form of Amended Investment Management Agreement between the
Registrant and Morgan Stanley Dean Witter Advisors Inc.
5.(a) Form of Amended Distribution Agreement between the Registrant and
Morgan Stanley Dean Witter Distributors Inc.
5.(b) Form of Selected Dealer Agreement.
8.(a) Form of Amended and Restated Transfer Agency and Service Agreement
between the Registrant and Morgan Stanley Dean Witter Trust FSB.
8.(b) Form of Amended Services Agreement between Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean Witter Services
Company Inc.
10. Consent of Independent Accountants.
14. Financial Data Schedules.
15. Amended Multiple Class Plan pursuant to Rule 18f-3.
<PAGE>
CERTIFICATE
The undersigned hereby certifies that he is the Secretary of Dean Witter
U.S. Government Securities Trust (the "Trust"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, that annexed
hereto is an Amendment to the Declaration of Trust of the Trust adopted by the
Trustees of the Trust on April 30, 1998 as provided in Section 9.3 of the said
Declaration, said Amendment to take effect on June 22, 1998, and I do hereby
further certify that such amendment has not been amended and is on the date
hereof in full force and effect.
Dated this 22nd day of June, 1998.
--------------------------------
Barry Fink
Secretary
<PAGE>
AMENDMENT
Dated: June 22, 1998
To be Effective: June 22, 1998
TO
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
DECLARATION OF TRUST
DATED
SEPTEMBER 29, 1983
<PAGE>
Amendment dated June 22, 1998 to the Declaration of Trust
(the "Declaration") of Dean Witter U.S. Government Securities Trust (the
"Trust") dated September 29, 1983
WHEREAS, the Trust was established by the Declaration on the date
hereinabove set forth under the laws of the Commonwealth of Massachusetts; and
WHEREAS, the Trustees of the Trust have deemed it advisable to change the
name of the Trust to "Morgan Stanley Dean Witter U.S. Government Securities
Trust," such change to be effective on June 22,1998;
NOW, THEREFORE:
1. Section 1.1 of Article I of the Declaration is hereby amended so that
that Section shall read in its entirety as follows:
"Section 1.1. NAME. The name of the Trust created hereby is the
Morgan Stanley Dean Witter U.S. Government Securities Trust and so far
as may be practicable the Trustees shall conduct the Trust's
activities, execute all documents and sue or be sued under that name,
which name (and the word "Trust" whenever herein used) shall refer to
the Trustees as Trustees, and not as individuals, or personally, and
shall not refer to the officers, agents, employees or Shareholders of
the Trust. Should the Trustees determine that the use of such name is
not advisable, they may use such other name for the Trust as they deem
proper and the Trust may hold its property and conduct its activities
under such other name."
2. Subsection (n) of Section 1.2 of Article I of the Declaration is hereby
amended so that that subsection shall read in its entirety as follows:
"Section 1.2. DEFINITIONS"
"(n) "TRUST" means the Morgan Stanley Dean Witter U.S. Government
Securities Trust."
3. Section 11.7 of Article XI of the Declaration is hereby amended so that
that section shall read as follows:
"Section 11.7. USE OF THE NAME "MORGAN STANLEY DEAN WITTER." Morgan
Stanley Dean Witter & Co. ("MSDW") has consented to the use by the
Trust of the identifying name "Morgan Stanley Dean Witter," which is a
property right of MSDW. The Trust will only use the name "Morgan
Stanley Dean Witter" as a component of its
<PAGE>
name and for no other purpose, and will not purport to grant to any
third party the right to use the name "Morgan Stanley Dean Witter" for
any purpose. MSDW, or any corporate affiliate of MSDW, may use or
grant to others the right to use the name "Morgan Stanley Dean
Witter," or any combination or abbreviation thereof, as all or a
portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company. At
the request of MSDW or any corporate affiliate of MSDW, the Trust will
take such action as may be required to provide its consent to the use
of the name "Morgan Stanley Dean Witter," or any combination or
abbreviation thereof, by MSDW or any corporate affiliate of MSDW, or
by any person to whom MSDW or a corporate affiliate of MSDW shall have
granted the right to such use. Upon the termination of any investment
advisory agreement into which a corporate affiliate of MSDW and the
Trust may enter, the Trust shall, upon request of MSDW or any
corporate affiliate of MSDW, cease to use the name "Morgan Stanley
Dean Witter" as a component of its name, and shall not use the name,
or any combination or abbreviation thereof, as part of its name or for
any other commercial purpose, and shall cause its officers, Trustees
and Shareholders to take any and all actions which MSDW or any
corporate affiliate of MSDW may request to effect the foregoing and to
reconvey to MSDW any and all rights to such name."
4. The Trustees of the Trust hereby reaffirm the Declaration, as amended,
in all respects.
5. This Amendment may be executed in more than one counterpart, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
<PAGE>
IN WITNESS WHEREOF, the undersigned, the Trustees of the Trust, have executed
this instrument this 22nd day of June, 1998.
/s/ Michael Bozic /s/ Manuel H. Johnson
- ------------------------------ ------------------------------
Michael Bozic, as Trustee Manuel H. Johnson, as Trustee
and not individually and not individually
c/o Levitz Furniture Corp. c/o Johnson Smick International Inc.
6111 Broken Sound Parkway, NW 1133 Connecticut Avenue, NW
Boca Raton, FL 33487 Washington, D.C. 20036
/s/ Charles A. Fiumefreddo /s/ Michael E. Nugent
- ------------------------------ ------------------------------
Charles A. Fiumefreddo, as Trustee Michael E. Nugent, as Trustee
and not individually and not individually
Two World Trade Center c/o Triumph Capital, L.P.
New York, NY 10048 237 Park Avenue
New York, NY 10017
/s/ Edwin J. Garn /s/ Philip J. Purcell
- ------------------------------ ------------------------------
Edwin J. Garn, as Trustee Philip J. Purcell, as Trustee
and not individually and not individually
c/o Huntsman Corporation 1585 Broadway
500 Huntsman Way New York, NY 10036
Salt Lake City, UT 84111
/s/ John R. Haire /s/ John L. Schroeder
- ------------------------------ ------------------------------
John R. Haire, as Trustee John L. Schroeder, as Trustee
and not individually and not individually
Two World Trade Center c/o Gordon Altman Butowsky Weitzen
New York, NY 10048 Shalov & Wein
Counsel to the Independent Trustees
114 West 47th Street
New York, NY 10036
/s/ Wayne E. Hedien
- ------------------------------
Wayne E. Hedien, as Trustee
and not individually
c/o Gordon Altman Butowsky Weitzen
Shalov & Wein
Counsel to the Independent Trustees
114 West 47th Street
New York, NY 10036
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On this 22nd day of June, 1998, MICHAEL BOZIC, CHARLES A. FIUMEFREDDO, EDWIN J.
GARN, JOHN R. HAIRE, WAYNE E. HEDIEN, MANUEL H. JOHNSON, MICHAEL E. NUGENT,
PHILIP J. PURCELL and JOHN L. SCHROEDER, known to me to be the individuals
described in and who executed the foregoing instrument, personally appeared
before me and they severally acknowledged the foregoing instrument to be their
free act and deed.
/s/ Marilyn K. Cranney
----------------------
Notary Public
MARILYN K. CRANNEY
NOTARY PUBLIC, State of New York
No. 24-4795538
Qualified in Kings County
Commission Expires May 31, 1999
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 31st day of May, 1997, and amended as of April 30,
1998, by and between Dean Witter U.S. Government Securities Trust, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter called the "Fund"), and Dean Witter InterCapital
Inc., a Delaware corporation (hereinafter called the "Investment Manager"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Trustees, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously manage
the assets of the Fund in a manner consistent with the investment objectives and
policies of the Fund; shall determine the securities and commodities to be
purchased, sold or otherwise disposed of by the Fund and the timing of such
purchases, sales and dispositions; and shall take such further action, including
the placing of purchase and sale orders on behalf of the Fund, as the Investment
Manager shall deem necessary or appropriate. The Investment Manager shall also
furnish to or place at the disposal of the Fund such of the information,
evaluations, analyses and opinions formulated or obtained by the Investment
Manager in the discharge of its duties as the Fund may, from time to time,
reasonably request.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Manager shall be deemed to
include persons employed or otherwise retained by the Investment Manager to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Manager may
desire. The Investment Manager shall, as agent for the Fund, maintain the Fund's
records and books of account (other than those maintained by the Fund's transfer
agent, registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, the
Investment Manager shall surrender to the Fund such of the books and records so
requested.
3. The Fund will, from time to time, furnish or otherwise make available to
the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Manager may reasonably require in order to discharge its duties and obligations
hereunder.
4. The Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this Agreement,
and shall, at its own expense, pay the compensation of the officers and
employees, if any, of the Fund who are also directors, officers or employees of
the Investment Manager, and provide such office space, facilities and equipment
and such clerical help and
<PAGE>
bookkeeping services as the Fund shall reasonably require in the conduct of its
business. The Investment Manager shall also bear the cost of telephone service,
heat, light, power and other utilities provided to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses of
the Fund, including without limitation: fees pursuant to any plan of
distribution that the Fund may adopt; the charges and expenses of any registrar,
any custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities or commodities and other property, and any stock
transfer or dividend agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio transactions to which the
Fund is a party; all taxes, including securities or commodities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the Securities and Exchange Commission and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the cost and expense of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
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 the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Trustees of the Fund who are not interested
persons (as defined in the Act) of the Fund or the Investment Manager, and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable 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 related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the Investment
Manager monthly compensation determined by applying the following annual rates
to the Fund's daily net assets: 0.50% of daily net assets up to $1 billion;
0.475% of the next $500 million; 0.450% of the next $500 million; 0.425% of the
next $500 million; 0.40% of the next $2.5 billion; 0.375% of the next $2.5
billion; 0.350% of the next $2.5 billion; 0.325% of the next $2.5 billion; and
0.30% of daily net assets over $12.5 billion. Except as hereinafter set forth,
compensation under this Agreement shall be calculated and accrued daily and the
amounts of the daily accruals shall be paid monthly. Such calculations shall be
made by applying 1/365ths of the annual rates to the Fund's net assets each day
determined as of the close of business on that day or the last previous business
day. If this Agreement becomes effective subsequent to the first day of a month
or shall terminate before the last day of a month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fees as set forth above.
Subject to the provisions of paragraph 7 hereof, payment of the Investment
Manager's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated by paragraph 7
hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any fiscal
year ending on a date on which this Agreement is in effect, exceed the expense
limitations applicable to the Fund imposed by state securities laws or
regulations thereunder, as such limitations may be raised or lowered from time
to time, the Investment Manager shall reduce its management fee to the extent of
such excess and, if required, pursuant to any such laws or regulations, will
reimburse the Fund for annual operating expenses in excess of any expense
limitation that may be applicable; provided, however, there shall be excluded
from such expenses the amount of any interest, taxes, brokerage commissions,
distribution fees and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or
2
<PAGE>
payable by the Fund. Such reduction, if any, shall be computed and accrued
daily, shall be settled on a monthly basis, and shall be based upon the expense
limitation applicable to the Fund as at the end of the last business day of the
month. Should two or more such expense limitations be applicable as at the end
of the last business day of the month, that expense limitation which results in
the largest reduction in the Investment Manager's fee shall be applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt securities in the Fund's portfolio accrued
to and including the last day of the Fund's fiscal year, and dividends declared
on equity securities in the Fund's portfolio, the record dates for which fall on
or prior to the last day of such fiscal year, but shall not include gains from
the sale of securities.
8. The Investment Manager will use its best efforts in the supervision and
management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund or
any of its investors for any error of judgment or mistake of law or for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors.
9. Nothing contained in this Agreement shall prevent the Investment Manager
or any affiliated person of the Investment Manager from acting as investment
adviser or manager for any other person, firm or corporation and shall not in
any way bind or restrict the Investment Manager or any such affiliated person
from buying, selling or trading any securities or commodities for their own
accounts or for the account of others for whom they may be acting. Nothing in
this Agreement shall limit or restrict the right of any Trustee, officer or
employee of the Investment Manager to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business whether of a similar or dissimilar nature.
10. This Agreement shall remain in effect until April 30, 1999 and from year
to year thereafter provided such continuance is approved at least annually by
the vote of holders of a majority, as defined in the Investment Company Act of
1940, as amended (the "Act"), of the outstanding voting securities of the Fund
or by the Trustees of the Fund; provided that in either event such continuance
is also approved annually by the vote of a majority of the Trustees of the Fund
who are not parties to this Agreement or "interested persons" (as defined in the
Act) of any such party, which vote must be cast in person at a meeting called
for the purpose of voting on such approval; provided, however, that (a) the Fund
may, at any time and without the payment of any penalty, terminate this
Agreement upon thirty days' written notice to the Investment Manager, either by
majority vote of the Trustees of the Fund or by the vote of a majority of the
outstanding voting securities of the Fund; (b) this Agreement shall immediately
terminate in the event of its assignment (to the extent required by the Act and
the rules thereunder) unless such automatic terminations shall be prevented by
an exemptive order of the Securities and Exchange Commission; and (c) the
Investment Manager may terminate this Agreement without payment of penalty on
thirty days' written notice to the Fund. Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed post-paid, to the other
party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or consent
of the shareholders of the Fund to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or if they
deem it necessary to conform this Agreement to the requirements of applicable
federal laws or regulations, but neither the Fund nor the Investment Manager
shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
13. The Investment Manager and the Fund each agree that the name "Dean
Witter," which comprises a component of the Fund's name, is a property right of
Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will only use
the name "Dean Witter" as a component of its name and for no other purpose, (ii)
it will not purport to grant to any third party the right to use the name "Dean
Witter" for any
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<PAGE>
purpose, (iii) the Investment Manager or its parent, Morgan Stanley Dean Witter
& Co., or any corporate affiliate of the Investment Manager's parent, may use or
grant to others the right to use the name "Dean Witter," or any combination or
abbreviation thereof, as all or a portion of a corporate or business name or for
any commercial purpose, including a grant of such right to any other investment
company, (iv) at the request of the Investment Manager or its parent, the Fund
will take such action as may be required to provide its consent to the use of
the name "Dean Witter," or any combination or abbreviation thereof, by the
Investment Manager or its parent or any corporate affiliate of the Investment
Manager's parent, or by any person to whom the Investment Manager or its parent
or any corporate affiliate of the Investment Manager's parent shall have granted
the right to such use, and (v) upon the termination of any investment advisory
agreement into which the Investment Manager and the Fund may enter, or upon
termination of affiliation of the Investment Manager with its parent, the Fund
shall, upon request by the Investment Manager or its parent, cease to use the
name "Dean Witter" as a component of its name, and shall not use the name, or
any combination or abbreviation thereof, as a part of its name or for any other
commercial purpose, and shall cause its officers, Trustees and shareholders to
take any and all actions which the Investment Manager or its parent may request
to effect the foregoing and to reconvey to the Investment Manager or its parent
any and all rights to such name.
14. The Declaration of Trust establishing Dean Witter U.S. Government
Securities Trust, dated September 29, 1983, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter U.S. Government Securities Trust refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of Dean Witter U.S.
Government Securities Trust shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise, in connection with the affairs of said Dean Witter U.S.
Government Securities Trust, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on April 30, 1998 in New York, New York.
<TABLE>
<S> <C>
DEAN WITTER U.S. GOVERNMENT
SECURITIES TRUST
By: /s/ BARRY FINK
.................................................................
Attest:
/s/ FRANK BRUTTOMESSO
................................................................
DEAN WITTER INTERCAPITAL INC.
By: /s/ CHARLES A. FIUMEFREDDO
.................................................................
Attest:
/s/ MARILYN K. CRANNEY
................................................................
</TABLE>
4
<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 28th day of July, 1997, and amended as of June 22,
1998, between each of the open-end investment companies to which Morgan Stanley
Dean Witter Advisors Inc. acts as investment manager, that are listed on
Schedule A, as may be amended from time to time (each, a "Fund" and
collectively, the "Funds"), and Morgan Stanley Dean Witter Distributors Inc., a
Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and it is in the
interest of each Fund to offer its shares for sale continuously, and
WHEREAS, each Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of each Fund's transferable
shares, of $0.01 par value (the "Shares"), to commence on the date listed above,
in order to promote the growth of each Fund and facilitate the distribution of
its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR.
(a) Each Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Fund to sell Shares to the public on the terms set forth
in this Agreement and that Fund's prospectus and the Distributor hereby accepts
such appointment and agrees to act hereunder. Each Fund, during the term of this
Agreement, shall sell Shares to the Distributor upon the terms and conditions
set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from each Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in that Fund's prospectus
(the "Prospectus") and statement of additional information included in the
Fund's registration statement (the "Registration Statement") most recently filed
from time to time with the Securities and Exchange Commission (the "SEC") and
effective under the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act or as the Prospectus may be otherwise amended or supplemented and filed
with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of each Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by each Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; (ii)
pursuant to reinvestment of dividends or capital gains distributions; or (iii)
pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM EACH FUND. The Shares are offered in
four classes (each, a "Class"), as described in the Prospectus, as amended or
supplemented from time to time.
(a) The Distributor shall have the right to buy from each Fund the Shares of
the particular class needed, but not more than the Shares needed (except for
clerical errors in transmission), to fill unconditional orders for Shares of the
applicable class placed with the Distributor by investors or securities dealers.
The price which the Distributor shall pay for the Shares so purchased from the
Fund shall be the net asset value, determined as set forth in the Prospectus,
used in determining the public offering price on which such orders were based.
(b) The Shares are to be resold by the Distributor at the public offering
price of Shares of the applicable class as set forth in the Prospectus, to
investors or to securities dealers, including DWR, who
1
<PAGE>
have entered into selected dealer agreements with the Distributor upon the terms
and conditions set forth in Section 7 hereof ("Selected Dealers").
(c) Each Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(f) hereof. Each Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of a Fund, makes it impracticable to sell its Shares.
(d) Each Fund, or any agent of a Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by a Fund; provided, however, that a Fund
will not arbitrarily or without reasonable cause refuse to accept orders for the
purchase of Shares. The Distributor will confirm orders upon their receipt, and
each Fund (or its agent) upon receipt of payment therefor and instructions will
deliver share certificates for such Shares or a statement confirming the
issuance of Shares. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct each Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to each Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES.
(a) Any of the outstanding Shares of a Fund may be tendered for redemption
at any time, and each Fund agrees to redeem its Shares so tendered in accordance
with the applicable provisions set forth in its Prospectus. The price to be paid
to redeem the Shares shall be equal to the net asset value determined as set
forth in the Prospectus less any applicable contingent deferred sales charge
("CDSC"). Upon any redemption of Shares the Fund shall pay the total amount of
the redemption price in New York Clearing House funds in accordance with
applicable provisions of the Prospectus.
(b) The redemption by a Fund of any of its Class A Shares purchased by or
through the Distributor will not affect the applicable front-end sales charge
secured by the Distributor or any Selected Dealer in the course of the original
sale, except that if any Class A Shares are tendered for redemption within seven
business days after the date of the confirmation of the original purchase, the
right to the applicable front-end sales charge shall be forfeited by the
Distributor and the Selected Dealer which sold such Shares.
(c) The proceeds of any redemption of Class A, Class B or Class C Shares
shall be paid by each Fund as follows: (i) any applicable CDSC shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of the Association of the National Association of Securities Dealers, Inc.
("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions of
its Prospectus in New York Clearing House funds. The Distributor is authorized
to direct a Fund to pay directly to the Selected Dealer any CDSC payable by a
Fund to the Distributor in respect of Class A, Class B, or Class C Shares sold
by the Selected Dealer to the redeeming shareholders.
(d) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in each
Fund's Prospectus. The Distributor shall promptly transmit to the transfer agent
of the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
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<PAGE>
(e) The Distributor is authorized, as agent for each Fund, to repurchase
Shares held in a shareholder's account with a Fund for which no share
certificate has been issued, upon the telephonic request of the shareholders, or
at the discretion of the Distributor. The Distributor shall promptly transmit to
the transfer agent of the Fund, for redemption, all such orders for repurchase
of Shares. Payment for Shares repurchased may be made by a Fund to the
Distributor for the account of the shareholder. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(f) Redemption of its Shares or payment by a Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or
during any other period when the SEC, by order, so permits.
(g) With respect to its Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of a Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payment made directly
to the Selected Dealer on behalf of the Distributor.
SECTION 5. DUTIES OF THE FUND.
(a) Each Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of its Shares, including one
certified copy, upon request by the Distributor, of all financial statements
prepared by the Fund and examined by independent accountants. Each Fund shall,
at the expense of the Distributor, make available to the Distributor such number
of copies of its Prospectus as the Distributor shall reasonably request.
(b) Each Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) Each Fund shall use its best efforts to pay the filing fees for an
appropriate number of its Shares to be sold under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by a Fund at any
time in its discretion. As provided in Section 8(c) hereof, such filing fees
shall be paid by the Fund. The Distributor shall furnish any information and
other material relating to its affairs and activities as may be required by a
Fund in connection with the sale of its Shares in any state.
(d) Each Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of its annual and
interim reports.
SECTION 6. DUTIES OF THE DISTRIBUTOR.
(a) The Distributor shall sell shares of each Fund through DWR and may sell
shares through other securities dealers and its own Financial Advisors, and
shall devote reasonable time and effort to promote sales of the Shares, but
shall not be obligated to sell any specific number of Shares. The services of
the Distributor hereunder are not exclusive and it is understood that the
Distributor may act as principal underwriter for other registered investment
companies, so long as the performance of its obligations hereunder is not
impaired thereby. It is also understood that Selected Dealers, including DWR,
may also sell shares for other registered investment companies.
3
<PAGE>
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the appropriate Fund.
(c) The Distributor agrees that it will at all times comply with the
applicable terms and limitations of the Rules of the Association of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS.
(a) The Distributor shall have the right to enter into selected dealer
agreements with Selected Dealers for the sale of Shares. In making agreements
with Selected Dealers, the Distributor shall act only as principal and not as
agent for a Fund. Shares sold to Selected Dealers shall be for resale by such
dealers only at the public offering price set forth in the Prospectus. With
respect to Class A Shares, in such agreement the Distributor shall have the
right to fix the portion of the applicable front-end sales charge which may be
allocated to the Selected Dealers.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by each
Fund, for the confirmation of sales of its Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. PAYMENT OF EXPENSES.
(a) Each Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors/Trustees
of each Fund who are not interested persons (as defined in the 1940 Act) of the
Fund or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.
(b) The Distributor shall bear all expenses incurred by it in connection
with its duties and activities under this Agreement including the payment to
Selected Dealers of any sales commissions, service fees and other expenses for
sales of a Fund's Shares (except such expenses as are specifically undertaken
herein by a Fund) incurred or paid by Selected Dealers, including DWR. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor or
furnished by it for use by Selected Dealers in connection with the offering of
the Shares for sale. Any expenses of advertising incurred in connection with
such offering will also be the obligation of the Distributor. It is understood
and agreed that, so long as a Fund's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 Plan") continues in effect, any expenses
incurred by the Distributor hereunder may be paid in accordance with the terms
of such Rule 12b-1 Plan.
(c) Each Fund shall pay the filing fees, and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying each Fund as a
broker or dealer, in such states of the United States or other jurisdictions as
shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION.
(a) Each Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any Shares, which may be based upon the 1933 Act, or on any other statute or at
common law, on the ground that the Registration Statement or related Prospectus
and Statement of Additional Information, as from time to time amended
4
<PAGE>
and supplemented, or the annual or interim reports to shareholders of a Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of a Fund in favor of the Distributor and any such
controlling persons to be deemed to protect the Distributor or any such
controlling persons thereof against any liability to a Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement; or (ii) is a Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or any such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Distributor or uch controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. Each Fund will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense,
of any such suit brought to enforce any such liability, but if a Fund elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
Each Fund shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or
Directors/Trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless each Fund and each
of its Directors/ Trustees and officers and each person, if any, who controls
the Fund against any loss, liability, claim, damage, or expense described in the
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to a Fund in writing by or on behalf of the Distributor
for use in connection with the Registration Statement or related Prospectus and
Statement of Additional Information, as from time to time amended, or the annual
or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless each Fund and
each Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which arise
as a result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to Section 4(g) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to Section 3(e) hereof.
(iii) In case any action shall be brought against a Fund or any person
so indemnified by this Section 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to a Fund, and the Fund and each person so indemnified shall have the rights and
duties given to the Distributor, by the provisions of subsection (a) of this
Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifiying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by a Fund on the one hand and the Distributor on the other
from the
5
<PAGE>
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of a Fund on the one hand and the Distributor on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by a Fund on the one hand and the Distributor on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by a Fund or the Distributor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Fund and the Distributor agree that it would not be
just and equitable ifcontribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall remain in force until April 30, 1999, and thereafter, but only so long as
such continuance is specifically approved at least annually by (i) the Board of
Directors/Trustees of each Fund, or by the vote of a majority of the outstanding
voting securities of the Fund, cast in person or by proxy, and (ii) a majority
of those Directors/ Trustees who are not parties to this Agreement or interested
persons of any such party and who have no direct or indirect financial interest
in this Agreement or in the operation of the Fund's Rule 12b-1 Plan or in any
agreement related thereto, cast in person at a meeting called for the purpose of
voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors/ Trustees of a Fund, by a majority of the
Directors/Trustees of a Fund who are not interested persons of the Fund and who
have no direct or indirect financial interest in this Agreement, or by vote of a
majority of the outstanding voting securities of a Fund, or by the Distributor,
on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Directors/Trustees of a Fund, or by the vote of a majority of outstanding voting
securities of a Fund, and (ii) a majority of those Directors/Trustees of a Fund
who are not parties to this Agreement or interested persons of any such party
and who have no direct or indirect financial interest in this Agreement or in
any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a meeting
called for the purpose of voting on such approval.
SECTION 12. ADDITIONAL FUNDS. If at any time another Fund desires to
appoint the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.
SECTION 13. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the
6
<PAGE>
State of New York, or any of the provisions herein, conflicts with the
applicable provisions of the 1940 Act, the latter shall control.
SECTION 14. PERSONAL LIABILITY. With respect to any Fund that is organized
as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts, its Declaration of the Trust (each, a "Declaration") is on file
in the office of the Secretary of the Commonwealth of Massachusetts. Each
Declaration provides that the name of the Fund refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of any Fund shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with the
affairs of any Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.
ON BEHALF OF THE FUNDS SET FORTH ON
SCHEDULE A, ATTACHED HERETO
By: ..................................
MORGAN STANLEY DEAN WITTER
DISTRIBUTORS INC.
By: ..................................
7
<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
AT DECEMBER 2, 1998
<TABLE>
<S> <C>
1) Morgan Stanley Dean Witter Aggressive Equity Fund
2) Morgan Stanley Dean Witter American Value Fund
3) Morgan Stanley Dean Witter Balanced Growth Fund
4) Morgan Stanley Dean Witter Balanced Income Fund
5) Morgan Stanley Dean Witter California Tax-Free Income Fund
6) Morgan Stanley Dean Witter Capital Appreciation Fund
7) Morgan Stanley Dean Witter Capital Growth Securities
8) Morgan Stanley Dean Witter Competitive Edge Fund
9) Morgan Stanley Dean Witter Convertible Securities Trust
10) Morgan Stanley Dean Witter Developing Growth Securities Trust
11) Morgan Stanley Dean Witter Diversified Income Trust
12) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
13) Morgan Stanley Dean Witter Equity Fund
14) Morgan Stanley Dean Witter European Growth Fund Inc.
15) Morgan Stanley Dean Witter Federal Securities Trust
16) Morgan Stanley Dean Witter Financial Services Trust
17) Morgan Stanley Dean Witter Fund of Funds
18) Morgan Stanley Dean Witter Global Dividend Growth Securities
19) Morgan Stanley Dean Witter Global Utilities Fund
20) Morgan Stanley Dean Witter Growth Fund
21) Morgan Stanley Dean Witter Health Sciences Trust
22) Morgan Stanley Dean Witter High Yield Securities Inc.
23) Morgan Stanley Dean Witter Income Builder Fund
24) Morgan Stanley Dean Witter Information Fund
25) Morgan Stanley Dean Witter Intermediate Income Securities
26) Morgan Stanley Dean Witter International Fund
27) Morgan Stanley Dean Witter International SmallCap Fund
28) Morgan Stanley Dean Witter Japan Fund
29) Morgan Stanley Dean Witter Managers Focus Fund
30) Morgan Stanley Dean Witter Market Leader Trust
31) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
32) Morgan Stanley Dean Witter Mid-Cap Growth Fund
33) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
34) Morgan Stanley Dean Witter New York Tax-Free Income Fund
35) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
36) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
37) Morgan Stanley Dean Witter Special Value Fund
38) Morgan Stanley Dean Witter S&P 500 Index Fund
39) Morgan Stanley Dean Witter S&P 500 Select Fund
40) Morgan Stanley Dean Witter Strategist Fund
41) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
42) Morgan Stanley Dean Witter U.S. Government Securities Trust
43) Morgan Stanley Dean Witter Utilities Fund
44) Morgan Stanley Dean Witter Value-Added Market Series
45) Morgan Stanley Dean Witter Value Fund
46) Morgan Stanley Dean Witter Worldwide High Income Fund
47) Morgan Stanley Dean Witter World Wide Income Trust
</TABLE>
8
<PAGE>
MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
OMNIBUS SELECTED DEALER AGREEMENT
Dear Sir or Madam:
We, Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") have a
distribution agreement (the "Distribution Agreement") with each of the open-end
investment companies listed in Schedule A attached hereto (each, a "Fund"),
pursuant to which we act as the Distributor for the sale of each Fund's shares
of common stock or beneficial interest, as the case may be, (the "Shares").
Under the Distribution Agreement, we have the right to distribute Shares for
resale.
Each Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended (the
"Securities Act"). You have received a copy of the Distribution Agreements
between us and each Fund and reference is made herein to certain provisions of
such Distribution Agreements. The terms used herein, including "Prospectus" and
"Registration Statement" of each Fund and "Selected Dealer" shall have the same
meaning in this Agreement as in the Distribution Agreements. As principal, we
offer to sell Shares to your customers, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act on behalf of your
customers which for purposes of this Agreement are limited to customers for
which Nations Banc Investments, Inc. is the Introducing Broker, and in no
transaction shall you have any authority to act as agent for a Fund, for us or
for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the public offering price applicable to each order, as set forth in the
applicable current Prospectus. The procedure relating to the handling of orders
shall be subject to written instructions which we or the applicable Fund shall
forward from time to time to you. All orders are subject to acceptance or
rejection by us or a Fund in the sole discretion of either. The Distributor of
the Fund will promptly notify you in writing of any such rejection.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable public offering price
and subject to the terms hereof and of the applicable Distribution Agreement and
Prospectus. In connection herewith, you agree to abide by the terms of the
applicable Distribution Agreement and Prospectus to the extent required
hereunder. Furthermore, you agree that (i) you will offer or sell any of the
Shares only under circumstances that will result in compliance with all
applicable Federal and state securities laws; (ii) you will not furnish or cause
to be furnished to any person any information relating to the Shares which is
inconsistent in any respect with the information contained in the applicable
Prospectus (as then amended or supplemented) or cause any advertisements to be
published by radio or television or in any newspaper or posted in any public
place or use any sales promotional material without our consent and the consent
of the applicable Fund; and (iii) you will endeavor to obtain proxies from
purchasers of Shares. You also agree that you will be liable to Distributor for
payment of the purchase price for Shares purchased by customers and that you
shall make payment for such shares when due.
4. We will compensate you for sales of shares of the Funds and personal
services to Fund shareholders by paying you a sales charge and/or other
commission (which may be in the form of a gross sales credit and/or an annual
residual commission) and/or a service fee, each as separately agreed by you and
us with respect to each Fund.
5. If any Shares sold to your customers under the terms of this Agreement
are repurchased by us for the account of a Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and refund
to us, any commission received by you with respect to such Shares.
6. No person is authorized to make any representations concerning the Shares
or the Funds except those contained in the current applicable Prospectus and in
such printed information subsequently issued by us or a Fund as information
supplemental to such Prospectus. In selling Shares, you shall rely solely on the
representations contained in the applicable Prospectus and supplemental
information mentioned above. Any printed information which we furnish you other
than the Prospectus and the Funds' periodic reports and
<PAGE>
proxy solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall have no
liability or responsibility to you in these respects unless expressly assumed in
connection therewith.
7. You are hereby authorized (i) to place orders directly with a Fund or its
agent for shares of the Fund to be sold by us subject to the applicable terms
and conditions governing the placement of orders for the purchase of Fund
Shares, as set forth in the Distribution Agreement, and (ii) to tender Shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in the Distribution Agreement. We will provide you with
copies of any updates to the Distribution Agreement.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Shares entirely. Each party hereto has the right to
cancel this agreement with respect to one or more Funds upon fifteen days prior
written notice to the other party.
9. I. You shall indemnify and hold us harmless from and against any and all
losses, costs, (including reasonable attorney's fees) claims, damages and
liabilities which arise as a result of action taken pursuant to instructions
from you, or on your behalf to: (a)(i) place orders for Shares of a Fund with
the Fund's transfer agent or direct the transfer agent to receive instructions
for the order of Shares, and (ii) accept monies or direct that the transfer
agent accept monies as payment for the order of such Shares, all as contemplated
by and in accordance with Section 3 of the applicable Distribution Agreement;
(b)(i) place orders for the redemption of Shares of a Fund with the Fund's
transfer agent or direct the transfer agent to receive instruction for the
redemption of such Shares and (ii) to pay redemption proceeds or to direct that
the transfer agent pay redemption proceeds in connection with orders for the
redemption of Shares, all as contemplated by and in accordance with Section 4 of
the applicable Distribution Agreement; Distributor agrees to indemnify and hold
harmless you and your affiliates, officers, directors, control persons and
employees from and against any and all losses, costs (including reasonable
attorney's fees), claims, damages and liabilities which arise as a result of
Distributor's failure to fulfill its obligations hereunder and from any alleged
inaccuracy, omission or misrepresentation contained in any prospectus or any
advertising, or sales literature prepared by Distributor or the Fund provided,
however, that in no case, (i) is this indemnity in favor of you or us and any of
other party's such controlling persons to be deemed to protect us or any such
controlling persons against any liability to which we or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of our duties or by reason of reckless
disregard of our obligations and duties under this Agreement or the applicable
Distribution Agreement; or (ii) are you to be liable under the indemnity
agreement contained in this paragraph with respect to any claim made against us
or any such controlling persons, unless we or any such controlling persons, as
the case may be, shall have notified you in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon us or such controlling persons (or
after we or such controlling persons shall have received notice of such service
on any designated agent), notwithstanding the failure to notify you of any such
claim shall not relieve you from any liability which you may have to the person
against whom such action is brought otherwise than on account of the indemnity
agreement contained in this paragraph.
II. You will be entitled to participate at your own expense in the defense,
or, if you so elect, to assume the defense, of any suit brought to enforce any
such liability, but if you elect to assume the defense, such defense shall be
conducted by counsel chosen by you and reasonably satisfactory to us or such
controlling person or persons, defendant or defendants in the suit. In the event
you elect to assume the defense of any such suit and retain such counsel, we or
such controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them, but, in
case you do not elect to assume the defense of any such suit, you will reimburse
us or such controlling person or persons, defendant or defendants in the suit,
for the reasonable fees and expenses of any counsel retained by them. Each party
shall promptly notify the other party to this Agreement of the commencement of
any litigation or proceedings against it or any of its officers or directors in
connection with the issuance or sale of the Shares pursuant to this Agreement.
2
<PAGE>
III. If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless the Distributor, as provided above in respect of
any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to herein, then you shall contribute to the amount paid or
payable by us as a result of such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by you on the one hand and us on the
other from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law, then you
shall contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative benefits but
also your relative fault on the one hand and our relative fault on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. You and we agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by us
as a result of the losses, claims, damages, liabilities or expenses (or actions
in respect thereof) referred to above shall be deemed to include any legal or
other expenses reasonably incurred by us in connection with investigating or
defending any such claim. Notwithstanding the provisions of this subsection
(III), you shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares distributed by you to the
public were offered to the public exceeds the amount of any damages which you
have otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
IV. Notwithstanding the provisions of subsections (I), (II) and (III), we
shall indemnify, defend and hold harmless you and your officers, directors,
employees, affiliates, agents, successors and assigns from and against any and
all claims and all related losses, expenses, damages, cost and liabilities
including reasonable attorneys' fees and expenses incurred in investigation or
defense, arising out of or related to any breach of any representation, warranty
or covenant by us contained in Section 15 of this Agreement.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Shares. Neither party shall be under any liability to the other
party except for lack of good faith and for obligations expressly assumed
herein. Nothing contained in this paragraph is intended to operate as, and the
provisions of this paragraph shall not in any way whatsoever constitute, a
waiver by you of compliance with any provision of the Securities Act, or of the
rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. Each party represents that it is a member in good standing of the
National Association of Securities Dealers, Inc. and, with respect to any sales
in the United States, each party hereby agrees to abide by the Rules of Fair
Practice of such Association relating to the performance of the obligations
hereunder.
13. We will inform you in writing as to the states in which we believe the
Shares have been qualified for sale under, or are exempt from the requirements
of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. Notwithstanding any other provision of this Agreement to the contrary,
we represent and warrant that the names and addresses of your customers (or
customers of your affiliates) which have or which may come to our attention in
connection with this Agreement are confidential and are your exclusive property
and shall not be utilized by us except in connection with the functions
performed by us in connection with this Agreement. Notwithstanding the
foregoing, should a customer request, that we or an organization affiliated with
us, provide services to such customer, we or such affiliated organization shall
in no way violate this representation and warranty, nor be considered in breach
of this Agreement.
15. We represent, warrant, and covenant to you that the marketing materials,
any communications distributed to the public and training materials designed by
us or our agents relating to the product sold under this Agreement are true and
accurate and do not omit to state a fact necessary to make the
3
<PAGE>
information contained therein not misleading and comply with applicable federal
and state laws. We further represent, warrant, and covenant to you that the
performance by us of our obligations under this Agreement in no way constitutes
an infringement on or other violation of copyright, trade secret, trademark,
proprietary information or non-disclosure rights of any other party.
16. We shall maintain a contingency disaster recovery plan, and, in the
event you are so required by any regulatory or governmental agency, we shall
make such plan available to you for inspection at your office upon reasonable
advance notice by you. Each party agrees that it will at all times conduct its
activities under this Agreement in an equitable, legal and professional manner.
17. We understand that the performance of your and our obligations under
this Agreement is subject to examination during business hours by your
authorized representatives and auditors and by federal and state regulatory
agencies, and we agree that upon being given reasonable notice and proper
identification we shall submit or furnish at a reasonable time and place to any
such representative or regulatory agency reports, information, or other data
relating to this Agreement as may reasonably be required or requested by you. We
shall maintain and make available to you upon reasonable notice all material,
data, files, and records relating to this Agreement for a period of not less
than three years after the termination of this Agreement.
18. The sales, advertising and promotional materials designed by either
party or its agents relating to products sold under this Agreement shall comply
with applicable federal and state laws. Each party agrees that the sales,
advertising and promotional materials shall be made available to the other party
prior to distribution to your employees or customers.
19. Any controversy or claim between or among the parties hereto arising out
of or relating to this Agreement, including any claim based on or arising from
an alleged tort, shall be determined by binding arbitration in accordance with
the rules of the National Association of Securities Dealers, Inc. Judgment upon
any arbitration award may be entered in any court having jurisdiction. Any party
to this Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which this
Agreement applies in any court having jurisdiction over such action.
20. All notices or other communications under this Agreement shall be in
writing and given as follows:
If to us: Morgan Stanley Dean Witter Distributors
Inc.
Attn: Barry Fink,
Two World Trade Center
New York, NY 10048
If to you: National Financial
Services Corporation
Attn: Robert Masabing
4201 Congress Street, Suite 245
Boston, MA
or such other address as the parties may hereafter specify in writing. Each such
notice to any party shall be either hand-delivered or transmitted, postage
prepaid, by registered or certified United States mail with return receipt
requested, and shall be deemed effective only upon receipt.
4
<PAGE>
21. This Agreement shall become effective as of the date of your acceptance
hereof, provided that you return to us promptly a signed and dated copy.
MORGAN STANLEY DEAN WITTER
DISTRIBUTORS INC.
By
...................................
(Authorized Signature)
Please return one signed copy
of this agreement to:
Morgan Stanley Dean Witter
Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name:
.........................
By:
..................................
Address: 200 Liberty Street
..............................
Date: October 17 , 1998
...............................
5
<PAGE>
SCHEDULE A
<TABLE>
<C> <S>
Dean Witter Global Asset Allocation Fund
Morgan Stanley Dean Witter American Value Fund
Morgan Stanley Dean Witter Balanced Growth Fund
Morgan Stanley Dean Witter Balanced Income Fund
Morgan Stanley Dean Witter California Tax-Free Income Fund
Morgan Stanley Dean Witter Capital Appreciation Fund
Morgan Stanley Dean Witter Capital Growth Securities
Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas" Portfolio
Morgan Stanley Dean Witter Convertible Securities Trust
Morgan Stanley Dean Witter Developing Growth Securities Trust
Morgan Stanley Dean Witter Diversified Income Trust
Morgan Stanley Dean Witter Dividend Growth Securities Inc.
Morgan Stanley Dean Witter Equity Fund
Morgan Stanley Dean Witter European Growth Fund Inc.
Morgan Stanley Dean Witter Federal Securities Trust
Morgan Stanley Dean Witter Financial Services Trust
Morgan Stanley Dean Witter Fund of Funds
Morgan Stanley Dean Witter Global Dividend Growth Securities
Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
Morgan Stanley Dean Witter Global Utilities Fund
Morgan Stanley Dean Witter Growth Fund
Morgan Stanley Dean Witter Hawaii Municipal Trust
Morgan Stanley Dean Witter Health Sciences Trust
Morgan Stanley Dean Witter High Yield Securities Inc.
Morgan Stanley Dean Witter Income Builder Fund
Morgan Stanley Dean Witter Information Fund
Morgan Stanley Dean Witter Intermediate Income Securities Inc.
Morgan Stanley Dean Witter International SmallCap Fund
Morgan Stanley Dean Witter Japan Fund
Morgan Stanley Dean Witter Limited Term Municipal Trust
Morgan Stanley Dean Witter Market Leader Trust
Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
Morgan Stanley Dean Witter Mid-Cap Growth Fund
Morgan Stanley Dean Witter Multi-State Municipal Series Trust
Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
Morgan Stanley Dean Witter New York Tax-Free Income Fund
Morgan Stanley Dean Witter Pacific Growth Fund Inc.
Morgan Stanley Dean Witter Precious Metals and Minerals Trust
Morgan Stanley Dean Witter S&P 500 Index Fund
Morgan Stanley Dean Witter S&P 500 Select Fund
Morgan Stanley Dean Witter Short-Term Bond Fund
Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
Morgan Stanley Dean Witter Special Value Fund
Morgan Stanley Dean Witter Strategist Fund
Morgan Stanley Dean Witter Tax-Exempt Securities Trust
Morgan Stanley Dean Witter U.S. Government Securities Trust
Morgan Stanley Dean Witter Utilities Fund
Morgan Stanley Dean Witter Value-Added Market Series
Morgan Stanley Dean Witter Value Fund
Morgan Stanley Dean Witter World Wide Income Trust
</TABLE>
A-1
<PAGE>
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
MORGAN STANLEY DEAN WITTER TRUST FSB
<PAGE>
TABLE OF CONTENTS
PAGE
Article 1 Terms of Appointment. . . . . . . . . . . . . . . . . . . .1
Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . .5
Article 3 Representations and Warranties of MSDW TRUST. . . . . . . .6
Article 4 Representations and Warranties of the Fund. . . . . . . . .7
Article 5 Duty of Care and Indemnification. . . . . . . . . . . . . .7
Article 6 Documents and Covenants of the Fund and MSDW TRUST. . . . 10
Article 7 Duration and Termination of Agreement . . . . . . . . . . 13
Article 8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . 14
Article 9 Affiliations. . . . . . . . . . . . . . . . . . . . . . . 14
Article 10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 15
Article 11 Applicable Law. . . . . . . . . . . . . . . . . . . . . . 15
Article 12 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 15
Article 13 Merger of Agreement . . . . . . . . . . . . . . . . . . . 17
Article 14 Personal Liability. . . . . . . . . . . . . . . . . . . . 17
-i-
<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 22nd day of June,
1998 by and between each of the Funds listed on the signature pages hereof, each
of such Funds acting severally on its own behalf and not jointly with any of
such other Funds (each such Fund hereinafter referred to as the "Fund"), each
such Fund having its principal office and place of business at Two World Trade
Center, New York, New York, 10048, and MORGAN STANLEY DEAN WITTER TRUST FSB
("MSDW TRUST"), a federally chartered savings bank, having its principal office
and place of business at Harborside Financial Center, Plaza Two, Jersey City,
New Jersey 07311.
WHEREAS, the Fund desires to appoint MSDW TRUST as its transfer
agent, dividend disbursing agent and shareholder servicing agent and MSDW TRUST
desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF MSDW TRUST
1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints MSDW TRUST to act as, and MSDW
TRUST agrees to act as, the transfer agent for each series and class of shares
of the Fund, whether now or hereafter authorized or issued ("Shares"), dividend
disbursing agent and shareholder servicing agent in
-1-
<PAGE>
connection with any accumulation, open-account or similar plans provided to the
holders of such Shares ("Shareholders") and set out in the currently effective
prospectus and statement of additional information ("prospectus") of the Fund,
including without limitation any periodic investment plan or periodic withdrawal
program.
1.2 MSDW TRUST agrees that it will perform the following
services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and MSDW TRUST, MSDW TRUST shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate documentation therefor to
the custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and issue certificates therefor or hold such Shares in book form in
the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption, pay over or cause to
be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
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(v) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding. MSDW
TRUST shall also provide to the Fund on a regular basis the total number of
Shares that are authorized, issued and outstanding and shall notify the Fund in
case any proposed issue of Shares by the Fund would result in an overissue. In
case any issue of Shares would result in an overissue, MSDW TRUST shall refuse
to issue such Shares and shall not countersign and issue any certificates
requested for such Shares. When recording the issuance of Shares, MSDW TRUST
shall have no obligation to take cognizance of any Blue Sky laws relating to the
issue of sale of such Shares, which functions shall be the sole responsibility
of the Fund.
(b) In addition to and not in lieu of the services set forth
in the above paragraph (a), MSDW TRUST shall:
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(i) perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant, shareholder servicing agent
in connection with dividend reinvestment, accumulation, open-account or similar
plans (including without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to, maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing appropriate forms required with respect to
dividends and distributions by federal tax authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity statements
for Shareholders and providing Shareholder account information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the
total number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to MSDW TRUST in writing those transactions and
assets to be treated as exempt from Blue Sky reporting for each State; and
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(ii) verify the inclusion on the system prior to activation of
each State in which Fund shares may be sold and thereafter monitor the daily
purchases and sales for shareholders in each State. The responsibility of MSDW
TRUST for the Fund's status under the securities laws of any State or other
jurisdiction is limited to the inclusion on the system of each State as to which
the Fund has informed MSDW TRUST that shares may be sold in compliance with
state securities laws and the reporting of purchases and sales in each such
State to the Fund as provided above and as agreed from time to time by the Fund
and MSDW TRUST.
(d) MSDW TRUST shall provide such additional services and
functions not specifically described herein as may be mutually agreed between
MSDW TRUST and the Fund. Procedures applicable to such services may be
established from time to time by agreement between the Fund and MSDW TRUST.
Article 2 FEES AND EXPENSES
2.1 For performance by MSDW TRUST pursuant to this Agreement,
each Fund agrees to pay MSDW TRUST an annual maintenance fee for each
Shareholder account and certain transactional fees, if applicable, as set out in
the respective fee schedule attached hereto as Schedule A. Such fees and
out-of-pocket expenses and advances identified under Section 2.2 below may be
changed from time to time subject to mutual written agreement between the Fund
and MSDW TRUST.
2.2 In addition to the fees paid under Section 2.1 above, the
Fund agrees to reimburse MSDW TRUST for out of pocket expenses in connection
with the services rendered
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by MSDW TRUST hereunder. In addition, any other expenses incurred by MSDW TRUST
at the request or with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses
within a reasonable period of time following the mailing of the respective
billing notice. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced to MSDW TRUST by
the Fund upon request prior to the mailing date of such materials.
Article 3 REPRESENTATIONS AND WARRANTIES OF MSDW TRUST
MSDW TRUST represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal
office is in New Jersey.
3.2 It is and will remain registered with the U.S. Securities
and Exchange Commission ("SEC") as a Transfer Agent pursuant to the requirements
of Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter
and By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
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Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to MSDW TRUST that:
4.1 It is a corporation duly organized and existing and in
good standing under the laws of Delaware or Maryland or a trust duly organized
and existing and in good standing under the laws of Massachusetts, as the case
may be.
4.2 It is empowered under applicable laws and by its Articles
of Incorporation or Declaration of Trust, as the case may be, and under its
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to
enter into and perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under
the Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933
(the "1933 Act") is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale.
Article 5 DUTY OF CARE AND INDEMNIFICATION
5.1 MSDW TRUST shall not be responsible for, and the Fund
shall indemnify and hold MSDW TRUST harmless from and against, any and all
losses, damages, costs,
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charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of MSDW TRUST or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by MSDW TRUST or its agents or
subcontractors of information, records and documents which (i) are received by
MSDW TRUST or its agents or subcontractors and furnished to it by or on behalf
of the Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by MSDW TRUST or its
agents or subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or the securities
or Blue Sky laws of any State or other jurisdiction that notice of offering of
such Shares in such State or other jurisdiction or in violation of any stop
order or other determination or ruling by any federal agency or any State or
other jurisdiction with respect to the offer or sale of such Shares in such
State or other jurisdiction.
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<PAGE>
5.2 MSDW TRUST shall indemnify and hold the Fund harmless
from or against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to any action or
failure or omission to act by MSDW TRUST as a result of the lack of good faith,
negligence or willful misconduct of MSDW TRUST, its officers, employees or
agents.
5.3 At any time, MSDW TRUST may apply to any officer of the
Fund for instructions, and may consult with legal counsel to the Fund, with
respect to any matter arising in connection with the services to be performed by
MSDW TRUST under this Agreement, and MSDW TRUST and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund for any action taken or
omitted by it in reliance upon such instructions or upon the opinion of such
counsel. MSDW TRUST, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided to MSDW TRUST or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by the
Fund, and shall not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Fund. MSDW TRUST, its
agents and subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper manual or
facsimile signature of the officers of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
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<PAGE>
5.4 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
5.5 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any act or failure to act hereunder.
5.6 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND MSDW TRUST
6.1 The Fund shall promptly furnish to MSDW TRUST the
following, unless previously furnished to Dean Witter Trust Company, the prior
transfer agent of the Fund:
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(a) If a corporation:
(i) A certified copy of the resolution of the Board of
Directors of the Fund authorizing the appointment of MSDW TRUST and the
execution and delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and
By-Laws of the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in
the form approved by the Board of Directors, with a certificate of the Secretary
of the Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of
Trustees of the Fund authorizing the appointment of MSDW TRUST and the execution
and delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws
of the Fund and all amendments thereto;
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<PAGE>
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in
the form approved by the Board of Trustees, with a certificate of the Secretary
of the Fund as to such approval;
(c) The current registration statements and any amendments
and supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating
to Shareholder accounts and/or relating to any plan, program or service offered
or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as MSDW
TRUST deems to be appropriate or necessary for the proper performance of its
duties.
6.2 MSDW TRUST hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for safekeeping of
Share certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
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<PAGE>
6.3 MSDW TRUST shall prepare and keep records relating to the
services to be performed hereunder, in the form and manner as it may deem
advisable and as required by applicable laws and regulations. To the extent
required by Section 31 of the 1940 Act, and the rules and regulations
thereunder, MSDW TRUST agrees that all such records prepared or maintained by
MSDW TRUST relating to the services performed by MSDW TRUST hereunder are the
property of the Fund and will be preserved, maintained and made available in
accordance with such Section 31 of the 1940 Act, and the rules and regulations
thereunder, and will be surrendered promptly to the Fund on and in accordance
with its request.
6.4 MSDW TRUST and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential and shall not be voluntarily disclosed to
any other person except as may be required by law or with the prior consent of
MSDW TRUST and the Fund.
6.5 In case of any request or demands for the inspection of
the Shareholder records of the Fund, MSDW TRUST will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. MSDW TRUST reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect
until August 1,
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<PAGE>
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days
written notice, and by MSDW TRUST on 90 days written notice, to the other party
without payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and other
materials will be borne by the Fund. Additionally, MSDW TRUST reserves the
right to charge for any other reasonable fees and expenses associated with such
termination.
Article 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.2 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
8.3 MSDW TRUST may, in its sole discretion and without
further consent by the Fund, subcontract, in whole or in part, for the
performance of its obligations and duties hereunder with any person or entity
including but not limited to companies which are affiliated with MSDW TRUST;
PROVIDED, HOWEVER, that such person or entity has and maintains the
qualifications, if any, required to perform such obligations and duties, and
that MSDW TRUST
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<PAGE>
shall be as fully responsible to the Fund for the acts and omissions of any
agent or subcontractor as it is for its own acts or omissions under this
Agreement.
Article 9 AFFILIATIONS
9.1 MSDW TRUST may now or hereafter, without the consent of
or notice to the Fund, function as transfer agent and/or shareholder servicing
agent for any other investment company registered with the SEC under the 1940
Act and for any other issuer, including without limitation any investment
company whose adviser, administrator, sponsor or principal underwriter is or may
become affiliated with Morgan Stanley Dean Witter & Co. or any of its direct or
indirect subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or
Trustees (as the case may be), officers, employees, agents and shareholders of
the Fund, and the directors, officers, employees, agents and shareholders of the
Fund's investment adviser and/or distributor, are or may be interested in MSDW
TRUST as directors, officers, employees, agents and shareholders or otherwise,
and that the directors, officers, employees, agents and shareholders of MSDW
TRUST may be interested in the Fund as Directors or Trustees (as the case may
be), officers, employees, agents and shareholders or otherwise, or in the
investment adviser and/or distributor as directors, officers, employees, agents,
shareholders or otherwise.
Article 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Directors or the Board of Trustees (as the case may be) of the
Fund.
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Article 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York.
Article 12 MISCELLANEOUS
12.1 In the event that one or more additional investment
companies managed or administered by Morgan Stanley Dean Witter Advisors Inc. or
any of its affiliates ("Additional Funds") desires to retain MSDW TRUST to act
as transfer agent, dividend disbursing agent and/or shareholder servicing agent,
and MSDW TRUST desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between MSDW TRUST and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any
Share certificate, no new certificate shall be issued in lieu thereof, unless
there shall first be furnished to MSDW TRUST an affidavit of loss or non-receipt
by the holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to MSDW TRUST and the
Fund issued by a surety company satisfactory to MSDW TRUST, except that MSDW
TRUST may accept an affidavit of loss and indemnity agreement executed by the
registered holder (or legal representative) without surety in such form as MSDW
TRUST deems appropriate indemnifying MSDW TRUST and the Fund for the issuance of
a replacement certificate, in cases where the alleged loss is in the amount of
$1,000 or less.
12.3 In the event that any check or other order for payment of
money on the
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account of any Shareholder or new investor is returned unpaid for any reason,
MSDW TRUST will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as MSDW TRUST may, in its sole
discretion, deem appropriate or as the Fund and, if applicable, the Distributor
may instruct MSDW TRUST.
12.4 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or to MSDW TRUST shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To MSDW TRUST:
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
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Article 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts
business trust, a copy of the Declaration of Trust of the Fund is on file with
the Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Board of Trustees of the Fund
as Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.
MORGAN STANLEY DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Morgan Stanley Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
8. Morgan Stanley Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
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EQUITY FUNDS
10. Morgan Stanley Dean Witter American Value Fund
11. Morgan Stanley Dean Witter Mid-Cap Growth Fund
12. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
13. Morgan Stanley Dean Witter Capital Growth Securities
14. Morgan Stanley Dean Witter Global Dividend Growth Securities
15. Morgan Stanley Dean Witter Income Builder Fund
16. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
17. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
18. Morgan Stanley Dean Witter Developing Growth Securities Trust
19. Morgan Stanley Dean Witter Health Sciences Trust
20. Morgan Stanley Dean Witter Capital Appreciation Fund
21. Morgan Stanley Dean Witter Information Fund
22. Morgan Stanley Dean Witter Value-Added Market Series
23. Morgan Stanley Dean Witter European Growth Fund Inc.
24. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
25. Morgan Stanley Dean Witter International SmallCap Fund
26. Morgan Stanley Dean Witter Japan Fund
27. Morgan Stanley Dean Witter Utilities Fund
28. Morgan Stanley Dean Witter Global Utilities Fund
29. Morgan Stanley Dean Witter Special Value Fund
30. Morgan Stanley Dean Witter Financial Services Trust
31. Morgan Stanley Dean Witter Market Leader Trust
32. Morgan Stanley Dean Witter Fund of Funds
33. Morgan Stanley Dean Witter S&P 500 Index Fund
34. Morgan Stanley Dean Witter Competitive Edge Fund
35. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
36. Morgan Stanley Dean Witter Equity Fund
37. Morgan Stanley Dean Witter Growth Fund
38. Morgan Stanley Dean Witter S&P 500 Select Fund
BALANCED FUNDS
39. Morgan Stanley Dean Witter Balanced Growth Fund
40. Morgan Stanley Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
41. Morgan Stanley Dean Witter Strategist Fund
42. Dean Witter Global Asset Allocation Fund
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FIXED INCOME FUNDS
43. Morgan Stanley Dean Witter High Yield Securities Inc.
44. Morgan Stanley Dean Witter High Income Securities
45. Morgan Stanley Dean Witter Convertible Securities Trust
46. Morgan Stanley Dean Witter Intermediate Income Securities
47. Morgan Stanley Dean Witter Short-Term Bond Fund
48. Morgan Stanley Dean Witter World Wide Income Trust
49. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
50. Morgan Stanley Dean Witter Diversified Income Trust
51. Morgan Stanley Dean Witter U.S. Government Securities Trust
52. Morgan Stanley Dean Witter Federal Securities Trust
53. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
54. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
55. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
56. Morgan Stanley Dean Witter Limited Term Municipal Trust
57. Morgan Stanley Dean Witter California Tax-Free Income Fund
58. Morgan Stanley Dean Witter New York Tax-Free Income Fund
59. Morgan Stanley Dean Witter Hawaii Municipal Trust
60. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
61. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
SPECIAL PURPOSE FUNDS
62. Dean Witter Retirement Series
63. Morgan Stanley Dean Witter Variable Investment Series
64. Morgan Stanley Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
65. TCW/DW North American Government Income Trust
66. TCW/DW Latin American Growth Fund
67. TCW/DW Income and Growth Fund
68. TCW/DW Small Cap Growth Fund
69. TCW/DW Total Return Trust
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70. TCW/DW Global Telecom Trust
71. TCW/DW Mid-Cap Equity Trust
72. TCW/DW Emerging Markets Opportunities Trust
By:
---------------------------------------------
Barry Fink
Vice President and General Counsel
ATTEST:
- ------------------------
Assistant Secretary
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
---------------------------------------------
John Van Heuvelen
President
ATTEST:
- ------------------------
Executive Vice President
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EXHIBIT A
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (INSET NAME OF INVESTMENT COMPANY) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to employ and appoint
Morgan Stanley Dean Witter Trust FSB ("MSDW TRUST") to act as transfer agent for
each series and class of shares of the Fund, whether now or hereafter authorized
or issued ("Shares"), dividend disbursing agent and shareholder servicing agent,
registrar and agent in connection with any accumulation, open-account or similar
plan provided to the holders of Shares, including without limitation any
periodic investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the
Fund to MSDW TRUST of fees as set out in the fee schedule attached hereto as
Schedule A, MSDW TRUST shall provide such services to the Fund pursuant to the
terms and conditions set forth in the Transfer Agency and Service Agreement
annexed hereto, as if the Fund was a signatory thereto.
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Please indicate MSDW TRUST's acceptance of employment and appointment
by the Fund in the capacities set forth above by so indicating in the space
provided below.
Very truly yours,
(NAME OF FUND)
By:
-----------------------------------------
Barry Fink
Vice President and General Counsel
ACCEPTED AND AGREED TO:
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
-----------------------
Its:
----------------------
Date:
---------------------
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SCHEDULE A
Fund: Morgan Stanley Dean Witter U.S. Government Securities Trust
Fees: (1) Annual maintenance fee of $13.20 per shareholder account, payable
monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
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SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995, and amended as of June 22,
1998, by and between Morgan Stanley Dean Witter Advisors Inc., a Delaware
corporation (herein referred to as "MSDW Advisors"), and Morgan Stanley Dean
Witter Services Company Inc., a Delaware corporation (herein referred to as
"MSDW Services").
WHEREAS, MSDW Advisors has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which MSDW Advisors is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));
WHEREAS, MSDW Advisors desires to retain MSDW Services to perform the
administrative services as described below; and
WHEREAS, MSDW Services desires to be retained by MSDW Advisors to perform
such administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. MSDW Services agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, MSDW
Services shall (i) administer the Fund's business affairs and supervise the
overall day-to-day operations of the Fund (other than rendering investment
advice); (ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts and
other records required under the Investment Company Act of 1940, as amended (the
"Act"), the notification to the Fund and MSDW Advisors of available funds for
investment, the reconciliation of account information and balances among the
Fund's custodian, transfer agent and dividend disbursing agent and MSDW
Advisors, and the calculation of the net asset value of the Fund's shares; (iii)
provide the Fund with the services of persons competent to perform such
supervisory, administrative and clerical functions as are necessary to provide
effective operation of the Fund; (iv) oversee the performance of administrative
and professional services rendered to the Fund by others, including its
custodian, transfer agent and dividend disbursing agent, as well as accounting,
auditing and other services; (v) provide the Fund with adequate general office
space and facilities; (vi) assist in the preparation and the printing of the
periodic updating of the Fund's registration statement and prospectus (and, in
the case of an open-end Fund, the statement of additional information), tax
returns, proxy statements, and reports to its shareholders and the Securities
and Exchange Commission; and (vii) monitor the compliance of the Fund's
investment policies and restrictions.
In the event that MSDW Advisors enters into an Investment Management
Agreement with another investment company, and wishes to retain MSDW Services to
perform administrative services hereunder, it shall notify MSDW Services in
writing. If MSDW Services is willing to render such services, it shall notify
MSDW Advisors in writing, whereupon such other Fund shall become a Fund as
defined herein.
2. MSDW Services shall, at its own expense, maintain such staff and employ
or retain such personnel and consult with such other persons as it shall from
time to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of MSDW Services shall be deemed to include
officers of MSDW Services and persons employed or otherwise retained by MSDW
Services (including officers and employees of MSDW Advisors, with the consent of
MSDW Advisors) to furnish services, statistical and other factual data,
information with respect to technical and scientific developments, and such
other information, advice and assistance as MSDW Services may desire. MSDW
Services shall maintain each Fund's records and books of account
1
98NYC8262
<PAGE>
(other than those maintained by the Fund's transfer agent, registrar, custodian
and other agencies). All such books and records so maintained shall be the
property of the Fund and, upon request therefor, MSDW Services shall surrender
to MSDW Advisors or to the Fund such of the books and records so requested.
3. MSDW Advisors will, from time to time, furnish or otherwise make
available to MSDW Services such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as MSDW Services
may reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation or
request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by MSDW Services, MSDW Advisors shall pay to MSDW Services
monthly compensation calculated daily (in the case of an open-end Fund) or
weekly (in the case of a closed-end Fund) by applying the annual rate or rates
set forth on Schedule B to the net assets of each Fund. Except as hereinafter
set forth, (i) in the case of an open-end Fund, compensation under this
Agreement shall be calculated by applying 1/365th of the annual rate or rates to
the Fund's or the Series' daily net assets determined as of the close of
business on that day or the last previous business day and (ii) in the case of a
closed-end Fund, compensation under this Agreement shall be calculated by
applying the annual rate or rates to the Fund's average weekly net assets
determined as of the close of the last business day of each week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth on Schedule B. Subject to the
provisions of paragraph 5 hereof, payment of MSDW Services' compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to MSDW Advisors pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof imposed
by state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Morgan Stanley Dean Witter Variable Investment Series or any
Series thereof, the expense limitation specified in the Fund's Investment
Management Agreement, the fee payable hereunder shall be reduced on a pro rata
basis in the same proportion as the fee payable by the Fund under the Investment
Management Agreement is reduced.
6. MSDW Services shall bear the cost of rendering the administrative
services to be performed by it under this Agreement, and shall, at its own
expense, pay the compensation of the officers and employees, if any, of the Fund
employed by MSDW Services, and such clerical help and bookkeeping services as
MSDW Services shall reasonably require in performing its duties hereunder.
7. MSDW Services will use its best efforts in the performance of
administrative activitives on behalf of each Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, MSDW Services shall not be liable to the Fund or any of
its investors for any error of judgment or mistake of law or for any act or
omission by MSDW Services or for any losses sustained by the Fund or its
investors. It is understood that, subject to the terms and conditions of the
Investment Management Agreement between each Fund and MSDW Advisors, MSDW
Advisors shall retain ultimate responsibility for all services to be performed
hereunder by MSDW Services. MSDW Services shall indemnify MSDW Advisors and hold
it harmless from any liability that MSDW Advisors may incur arising out of any
act or failure to act by MSDW Services in carrying out its responsibilities
hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, MSDW Services, and in any person
controlling, controlled by or under common control with MSDW Services, and that
MSDW Services and any person controlling, controlled by or under common control
with MSDW
2
<PAGE>
Services may have an interest in the Fund. It is also understood that MSDW
Services and any affiliated persons thereof or any persons controlling,
controlled by or under common control with MSDW Services have and may have
advisory, management, administration service or other contracts with other
organizations and persons, and may have other interests and businesses, and
further may purchase, sell or trade any securities or commodities for their own
accounts or for the account of others for whom they may be acting.
9. This Agreement shall continue until April 30, 1999, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the event that the Investment Management
Agreement between any Fund and MSDW Advisors is terminated, this Agreement will
automatically terminate with respect to such Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
11. This Agreement may be assigned by either party with the written consent
of the other party.
12. This Agreement shall be construed and interpreted in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER ADVISORS INC.
By:
------------------------------------------
Attest:
----------------------------------
MORGAN STANLEY DEAN WITTER SERVICES COMPANY
INC.
By:
------------------------------------------
Attest:
----------------------------------
</TABLE>
3
<PAGE>
SCHEDULE A
MORGAN STANLEY DEAN WITTER FUNDS
AS AMENDED AS OF DECEMBER 2, 1998
OPEN-END FUNDS
<TABLE>
<C> <S>
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Morgan Stanley Dean Witter Aggressive Equity Fund
6. Morgan Stanley Dean Witter American Value Fund
7. Morgan Stanley Dean Witter Balanced Growth Fund
8. Morgan Stanley Dean Witter Balanced Income Fund
9. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
10. Morgan Stanley Dean Witter California Tax-Free Income Fund
11. Morgan Stanley Dean Witter Capital Appreciation Fund
12. Morgan Stanley Dean Witter Capital Growth Securities
13. Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS" Portfolio
14. Morgan Stanley Dean Witter Convertible Securities Trust
15. Morgan Stanley Dean Witter Developing Growth Securities Trust
16. Morgan Stanley Dean Witter Diversified Income Trust
17. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
18. Morgan Stanley Dean Witter Equity Fund
19. Morgan Stanley Dean Witter European Growth Fund Inc.
20. Morgan Stanley Dean Witter Federal Securities Trust
21. Morgan Stanley Dean Witter Financial Services Trust
22. Morgan Stanley Dean Witter Fund of Funds
(i) Domestic Portfolio
(ii) International Portfolio
23. Morgan Stanley Dean Witter Global Dividend Growth Securities
24. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
25. Morgan Stanley Dean Witter Global Utilities Fund
26. Morgan Stanley Dean Witter Growth Fund
27. Morgan Stanley Dean Witter Hawaii Municipal Trust
28. Morgan Stanley Dean Witter Health Sciences Trust
29. Morgan Stanley Dean Witter High Yield Securities Inc.
30. Morgan Stanley Dean Witter Income Builder Fund
31. Morgan Stanley Dean Witter Information Fund
32. Morgan Stanley Dean Witter Intermediate Income Securities
33. Morgan Stanley Dean Witter International Fund
34. Morgan Stanley Dean Witter International SmallCap Fund
35. Morgan Stanley Dean Witter Japan Fund
36. Morgan Stanley Dean Witter Limited Term Municipal Trust
37. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
38. Morgan Stanley Dean Witter Managers Focus Fund
39. Morgan Stanley Dean Witter Market Leader Trust
40. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
41. Morgan Stanley Dean Witter Mid-Cap Growth Fund
42. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
43. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
</TABLE>
A-1
<PAGE>
<TABLE>
<C> <S>
44. Morgan Stanley Dean Witter New York Municipal Money Market Trust
45. Morgan Stanley Dean Witter New York Tax-Free Income Fund
46. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
47. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
48. Morgan Stanley Dean Witter Select Dimensions Investment Series
(i) American Value Portfolio
(ii) Balanced Growth Portfolio
(iii) Developing Growth Portfolio
(iv) Diversified Income Portfolio
(v) Dividend Growth Portfolio
(vi) Emerging Markets Portfolio
(vii) Global Equity Portfolio
(viii) Growth Portfolio
(ix) Mid-Cap Growth Portfolio
(x) Money Market Portfolio
(xi) North American Government Securities Portfolio
(xii) Utilities Portfolio
(xiii) Value-Added Market Portfolio
49. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
50. Morgan Stanley Dean Witter U.S. Government Money Market Trust
51. Morgan Stanley Dean Witter Utilities Fund
52. Morgan Stanley Dean Witter Short-Term Bond Fund
53. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
54. Morgan Stanley Dean Witter Special Value Fund
55. Morgan Stanley Dean Witter Strategist Fund
56. Morgan Stanley Dean Witter S&P 500 Index Fund
57. Morgan Stanley Dean Witter S&P 500 Select Fund
58. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
59. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
60. Morgan Stanley Dean Witter U.S. Government Securities Trust
61. Morgan Stanley Dean Witter Value Fund
62. Morgan Stanley Dean Witter Value-Added Market Series
63. Morgan Stanley Dean Witter Variable Investment Series
(i) Capital Appreciation Portfolio
(ii) Capital Growth Portfolio
(iii) Competitive Edge "Best Ideas" Portfolio
(iv) Dividend Growth Portfolio
(v) Equity Portfolio
(vi) European Growth Portfolio
(vii) Global Dividend Growth Portfolio
(viii) High Yield Portfolio
(ix) Income Builder Portfolio
(x) Money Market Portfolio
(xi) Quality Income Plus Portfolio
(xii) Pacific Growth Portfolio
(xiii) S&P 500 Index Portfolio
(xiv) Strategist Portfolio
(xv) Utilities Portfolio
64. Morgan Stanley Dean Witter World Wide Income Trust
65. Morgan Stanley Dean Witter Worldwide High Income Fund
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
CLOSED-END FUNDS
<C> <S>
66. High Income Advantage Trust
67. High Income Advantage Trust II
68. High Income Advantage Trust III
69. InterCapital Income Securities Inc.
70. Dean Witter Government Income Trust
71. InterCapital Insured Municipal Bond Trust
72. InterCapital Insured Municipal Trust
73. InterCapital Insured Municipal Income Trust
74. InterCapital California Insured Municipal Income Trust
75. InterCapital Insured Municipal Securities
76. InterCapital Insured California Municipal Securities
77. InterCapital Quality Municipal Investment Trust
78. InterCapital Quality Municipal Income Trust
79. InterCapital Quality Municipal Securities
80. InterCapital California Quality Municipal Securities
81. InterCapital New York Quality Municipal Securities
</TABLE>
A-3
<PAGE>
SCHEDULE B
MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES
AS AMENDED AS OF DECEMBER 2, 1998
Monthly compensation calculated daily by applying the following annual rates
to a fund's daily net assets:
<TABLE>
<S> <C>
FIXED INCOME FUNDS
Morgan Stanley Dean Witter Balanced Income Fund 0.060% of the daily net assets.
Morgan Stanley Dean Witter California Tax-Free Income Fund 0.055% of the portion of the daily net assets not exceeding $500
million; 0.0525% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.050% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.0475% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.25 billion; and
0.045% of the portion of the daily net assets exceeding $1.25
billion.
Morgan Stanley Dean Witter Convertible Securities Trust 0.060% of the portion of the daily net assets not exceeding $750
million; 0.055% of the portion of the daily net assets exceeding
$750 million but not exceeding $1 billion; 0.050% of the portion
of the daily net assets of the exceeding $1 billion but not
exceeding $1.5 billion; 0.0475% of the portion of the daily net
assets exceeding $1.5 billion but not exceeding $2 billion;
0.045% of the portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and 0.0425% of the portion
of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter Diversified Income Trust 0.040% of the daily net assets.
Morgan Stanley Dean Witter Federal Securities Trust 0.055% of the portion of the daily net assets not exceeding $1
billion; 0.0525% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.050% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2 billion; 0.0475% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.045% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $5 billion; 0.0425% of the portion of the daily net
assets exceeding $5 billion but not exceeding $7.5 billion;
0.040% of the portion of the daily net assets exceeding $7.5
billion but not exceeding $10 billion; 0.0375% of the portion of
the daily net assets exceeding $10 billion but not exceeding
$12.5 billion; and 0.035% of the portion of the daily net assets
exceeding $12.5 billion.
Morgan Stanley Dean Witter Global Short-Term Income Fund Inc. 0.055% of the portion of the daily net assets not exceeding $500
million; and 0.050% of the portion of the daily net assets
exceeding $500 million.
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Hawaii Municipal Trust 0.035% of the daily net assets.
Morgan Stanley Dean Witter High Yield Securities Inc. 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $2 billion; 0.0325%
of the portion of the daily net assets exceeding $2 billion but
not exceeding $3 billion; and 0.030% of the portion of daily net
assets exceeding $3 billion.
Morgan Stanley Dean Witter Intermediate Income Securities 0.060% of the portion of the daily net assets not exceeding $500
million; 0.050% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.040% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; and 0.030% of the portion of the daily net
assets exceeding $1 billion.
Morgan Stanley Dean Witter Limited Term Municipal Trust 0.050% of the daily net assets.
Morgan Stanley Dean Witter Multi-State Municipal Series Trust 0.035% of the daily net assets.
(10 Series)
Morgan Stanley Dean Witter New York Tax-Free Income Fund 0.055% of the portion of the daily net assets not exceeding $500
million; and 0.0525% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Select Dimensions Investment Series-- 0.039% of the daily net assets.
North American Government Securities Portfolio
Morgan Stanley Dean Witter Select Municipal Reinvestment Fund 0.050% of the daily net assets.
Morgan Stanley Dean Witter Short-Term Bond Fund 0.070% of the daily net assets.
Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust 0.035% of the daily net assets.
Morgan Stanley Dean Witter Tax-Exempt Securities Trust 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; and 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.25 billion;
.0325% of the portion of the daily net assets exceeding $1.25
billion.
</TABLE>
B-2
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter U.S. Government Securities Trust 0.050% of the portion of the daily net assets not exceeding $1
billion; 0.0475% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.045% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2 billion; 0.0425% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.040% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $5 billion; 0.0375% of the portion of the daily net
assets exceeding $5 billion but not exceeding $7.5 billion;
0.035% of the portion of the daily net assets exceeding $7.5
billion but not exceeding $10 billion; 0.0325% of the portion of
the daily net assets exceeding $10 billion but not exceeding
$12.5 billion; and 0.030% of the portion of the daily net assets
exceeding $12.5 billion.
Morgan Stanley Dean Witter Variable Investment Series--High Yield 0.050% of the portion of the daily net assets not exceeding $500
Portfolio million; and 0.0425% of the daily net assets exceeding $500
million.
Quality Income Plus Portfolio 0.050% of the portion of the daily the net assets up to $500
million; and 0.045% of the portion of the daily net assets
exceeds $500 million.
Morgan Stanley Dean Witter World Wide Income Trust 0.075% of the portion of the daily net assets up to $250 million;
0.060% of the portion of the daily net assets exceeding $250
million but not exceeding $500 million; 0.050% of the portion of
the daily net assets of the exceeding $500 million but not
exceeding $750 million; 0.040% of the portion of the daily net
assets exceeding $750 million but not exceeding $1 billion; and
0.030% of the portion of the daily net assets exceeding $1
billion.
Morgan Stanley Dean Witter Worldwide High Income Fund 0.060% of the daily net assets.
EQUITY FUNDS
Morgan Stanley Dean Witter Aggressive Equity Fund 0.075% of the daily net assets.
Morgan Stanley Dean Witter American Value Fund 0.0625% of the portion of the daily net assets not exceeding $250
million; 0.050% of the portion of the daily net assets exceeding
$250 million but not exceeding $2.25 billion; 0.0475% of the
portion of the daily net assets exceeding $2.25 billion but not
exceeding $3.5 billion; 0.0450% of the portion of the daily net
assets exceeding $3.5 billion but not exceeding $4.5 billion; and
0.0425% of the portion of the daily net assets exceeding $4.5
billion.
Morgan Stanley Dean Witter Balanced Growth Fund 0.060% of the daily net assets.
Morgan Stanley Dean Witter Capital Appreciation Fund 0.075% of the portion of the daily net assets not exceeding $500
million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
</TABLE>
B-3
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Capital Growth Securities 0.065% of the portion of the daily net assets not exceeding $500
million; 0.055% of the portion exceeding $500 million but not
exceeding $1 billion; 0.050% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion; and
0.0475% of the portion of the daily net assets exceeding $1.5
billion.
Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS" 0.065% of the portion of the daily net assets not exceeding $1.5
Portfolio billion; and 0.0625% of the portion of the daily net assets
exceeding $1.5 billion.
Morgan Stanley Dean Witter Developing Growth Securities Trust 0.050% of the portion of the daily net assets not exceeding $500
million; and 0.0475% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Dividend Growth Securities Inc. 0.0625% of the portion of the daily net assets not exceeding $250
million; 0.050% of the portion of the daily net assets exceeding
$250 million but not exceeding $1 billion; 0.0475% of the portion
of the daily net assets exceeding $1 billion but not exceeding $2
billion; 0.045% of the portion of the daily net assets exceeding
$2 billion but not exceeding $3 billion; 0.0425% of the portion
of the daily net assets exceeding $3 billion but not exceeding $4
billion; 0.040% of the portion of the daily net assets exceeding
$4 billion but not exceeding $5 billion; 0.0375% of the portion
of the daily net assets exceeding $5 billion but not exceeding $6
billion; 0.035% of the portion of the daily net assets exceeding
$6 billion but not exceeding $8 billion; 0.0325% of the portion
of the daily net assets exceeding $8 billion but not exceeding
$10 billion; 0.030% of the portion of the daily net assets
exceeding $10 billion but not exceeding $15 billion; and 0.0275%
of the portion of the daily net assets exceeding $15 billion.
Morgan Stanley Dean Witter Equity Fund 0.051% of the daily net assets.
Morgan Stanley Dean Witter European Growth Fund Inc. 0.057% of the portion of the daily net assets not exceeding $500
million; 0.054% of the portion of the daily net assets exceeding
$500 million but not exceeding $2 billion; and 0.051% of the
portion of the daily net assets exceeding $2 billion.
Morgan Stanley Dean Witter Financial Services Trust 0.075% of the daily net assets.
Morgan Stanley Dean Witter Fund of Funds-
Domestic Portfolio None
International Portfolio None
</TABLE>
B-4
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Global Dividend Growth Securities 0.075% of the portion of the daily net assets not exceeding $1
billion; 0.0725% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.070% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2.5 billion; 0.0675% of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3.5 billion; 0.0650% of
the portion of the daily net assets exceeding $3.5 billion but
not exceeding $4.5 billion; and 0.0625% of the portion of the
daily net assets exceeding $4.5 billion.
Morgan Stanley Dean Witter Global Utilities Fund 0.065% of the portion of the daily net assets not exceeding $500
million; and 0.0625% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Growth Fund 0.048% of the portion of daily net assets not exceeding $750
million; 0.045% of the portion of daily net assets exceeding $750
million but not exceeding $1.5 billion; and 0.042% of the portion
of daily net assets exceeding $1.5 billion.
Morgan Stanley Dean Witter Health Sciences Trust 0.10% of the portion of daily net assets not exceeding $500
million; and 0.095% of the portion of daily net assets exceeding
$500 million.
Morgan Stanley Dean Witter Income Builder Fund 0.075% of the portion of the net assets not exceeding $500
million; and 0.0725% of the portion of daily net assets exceeding
$500 million.
Morgan Stanley Dean Witter Information Fund 0.075% of the portion of the daily net assets not exceeding $500
million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter International Fund 0.060% of the daily net assets.
Morgan Stanley Dean Witter International SmallCap Fund 0.069% of the daily net assets.
Morgan Stanley Dean Witter 0.057% of the daily net assets.
Japan Fund
Morgan Stanley Dean Witter Managers Focus Fund 0.0625% of the daily net assets.
Morgan Stanley Dean Witter Market Leader Trust 0.075% of the daily net assets.
Morgan Stanley Dean Witter 0.075 of the daily net assets.
Mid-Cap Dividend Growth Securities
Morgan Stanley Dean Witter 0.075% of the portion of the daily net assets not exceeding $500
Mid-Cap Growth Fund million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.
Morgan Stanley Dean Witter Natural Resource Development 0.0625% of the portion of the daily net assets not exceeding $250
Securities Inc. million and 0.050% of the portion of the daily net assets
exceeding $250 million.
</TABLE>
B-5
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Pacific Growth Fund Inc. 0.057% of the portion of the daily net assets not exceeding $1
billion; 0.054% of the portion of the daily net assets exceeding
$1 billion but not exceeding $2 billion; and 0.051% of the
portion of the daily net assets exceeding $2 billion.
Morgan Stanley Dean Witter Precious Metals and 0.080% of the daily net assets.
Minerals Trust
Morgan Stanley Dean Witter Select Dimensions Investment Series--
American Value Portfolio 0.0625% of the daily net assets.
Balanced Growth Portfolio 0.065% of the daily net assets.
Developing Growth Portfolio 0.050% of the daily net assets.
Diversified Income Portfolio 0.040% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net assets not exceeding $500
million; and 0.050% of the portion of the daily net assets
exceeding $500 million.
Emerging Markets Portfolio 0.075% of the daily net assets.
Global Equity Portfolio 0.10% of the daily net assets.
Growth Portfolio 0.048% of the daily net assets.
Mid-Cap Growth Portfolio 0.075% of the daily net assets
Utilities Portfolio 0.065% of the daily net assets.
Value-Added Market Portfolio 0.050% of the daily net assets.
Morgan Stanley Dean Witter Special Value Fund 0.075% of the daily net assets.
Morgan Stanley Dean Witter Strategist Fund 0.060% of the portion of the daily net assets not exceeding $500
million; 0.055% of the portion of the daily net assets exceeding
$500 million but not exceeding $1 billion; 0.050% of the portion
of the daily net assets exceeding $1 billion but not exceeding
$1.5 billion; 0.0475% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2.0 billion; and 0.045%
of the portion of the daily net assets exceeding $2.0 billion.
Morgan Stanley Dean Witter 0.040% of the daily net assets.
S&P 500 Index Fund
Morgan Stanley Dean Witter 0.060% of the daily net assets.
S&P 500 Select Fund
Morgan Stanley Dean Witter Utilities Fund 0.065% of the portion of the daily net assets not exceeding $500
million; 0.055% of the portion of the daily net assets exceeding
$500 million but not exceeding $1 billion; 0.0525% of the portion
of the daily net assets exceeding $1 billion but not exceeding
$1.5 billion; 0.050% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2.5 billion; 0.0475% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $3.5 billion; 0.045% of the portion of the daily
net assets exceeding $3.5 but not exceeding $5 billion; and
0.0425% of the daily net assets exceeding $5 billion.
</TABLE>
B-6
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Value Fund 0.060% of the daily net assets.
Morgan Stanley Dean Witter Value-Added Market Series 0.050% of the portion of the daily net assets not exceeding $500
million; 0.45% of the portion of the daily net assets exceeding
$500 million but not exceeding $1 billion; 0.0425% of the portion
of the daily net assets exceeding $1.0 billion but not exceeding
$2.0 billion; and 0.040% of the portion of the daily net assets
exceeding $2 billion.
Morgan Stanley Dean Witter Variable Investment Series--
Capital Appreciation Portfolio 0.075% of the daily net assets.
Capital Growth Portfolio 0.065% of the daily net assets.
Competitive Edge "Best Ideas" Portfolio 0.065% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net assets not exceeding $500
million; and 0.050% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.0475% of
the portion of the daily net assets exceeding $1.0 billion but
not exceeding $2.0 billion; and 0.045% of the portion of the
daily net assets exceeding $2 billion.
Equity Portfolio 0.050% of the portion of the daily net assets not exceeding $1
billion; and 0.0475% of the portion of the daily net assets
exceeding $1 billion.
European Growth Portfolio 0.057% of the portion of the daily net assets not exceeding $500
million; and 0.054% of the portion of the daily net assets
exceeding $500 million.
Income Builder Portfolio 0.075% of the daily net assets.
Pacific Growth Portfolio 0.057% of the daily net assets.
S&P 500 Index Portfolio 0.040% of the daily net assets.
Strategist Portfolio 0.050% of the daily net assets.
Utilities Portfolio 0.065% of the portion of the daily net assets not exceeding $500
million and 0.055% of the portion of the daily net assets
exceeding $500 million.
MONEY MARKET FUNDS
Active Assets Trusts: 0.050% of the portion of the daily net assets not exceeding $500
(1) Active Assets Money Trust million; 0.0425% of the portion of the daily net assets exceeding
(2) Active Assets Tax-Free Trust $500 million but not exceeding $750 million; 0.0375% of the
(3) Active Assets California Tax-Free Trust portion of the daily net assets exceeding $750 million but not
(4) Active Assets Government Securities Trust exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
</TABLE>
B-7
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter California Tax-Free Daily 0.050% of the portion of the daily net assets not exceeding $500
Income Trust million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter Liquid Asset Fund Inc. 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.35 billion;
0.0325% of the portion of the daily net assets exceeding $1.35
billion but not exceeding $1.75 billion; 0.030% of the portion of
the daily net assets exceeding $1.75 billion but not exceeding
$2.15 billion; 0.0275% of the portion of the daily net assets
exceeding $2.15 billion but not exceeding $2.5 billion; 0.025% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $15 billion; 0.0249% of the portion of the daily
net assets exceeding $15 billion but not exceeding $17.5 billion;
and 0.0248% of the portion of the daily net assets exceeding
$17.5 billion.
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding $500
New York Municipal Money million; 0.0425% of the portion of the daily net assets exceeding
Market Trust $500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter Select Dimensions Investment Series--
Money Market Portfolio 0.050% of the daily net assets.
</TABLE>
B-8
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter 0.050% of the portion of the daily net assets not exceeding $500
Tax-Free Daily Income Trust million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter U.S. Government Money Market Trust 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.
Morgan Stanley Dean Witter Variable Investment Series-- Money 0.050% of the daily net assets.
Market Portfolio
</TABLE>
Monthly compensation calculated weekly by applying the following annual
rates to a fund's weekly net assets:
<TABLE>
<S> <C>
CLOSED-END FUNDS
Dean Witter Government 0.060% of the average weekly net assets.
Income Trust
High Income Advantage Trust 0.075% of the portion of the average weekly net assets not
exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750
million; 0.040% of the portion of average weekly net assets
exceeding $750 million and not exceeding $1 billion; and
0.030% of the portion of average weekly net assets exceeding
$1 billion.
</TABLE>
B-9
<PAGE>
<TABLE>
<S> <C>
CLOSED-END FUNDS
High Income Advantage Trust II 0.075% of the portion of the average weekly net assets not
exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750
million; 0.040% of the portion of average weekly net assets
exceeding $750 million and not exceeding $1 billion; and
0.030% of the portion of average weekly net assets exceeding
$1 billion.
High Income Advantage Trust III 0.075% of the portion of the average weekly net assets not
exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750
million; 0.040% of the portion of the average weekly net
assets exceeding $750 million and not exceeding $1 billion;
and 0.030% of the portion of average weekly net assets
exceeding $1 billion.
InterCapital Income Securities Inc. 0.050% of the average weekly net assets.
InterCapital Insured Municipal Bond Trust 0.035% of the average weekly net assets.
InterCapital Insured Municipal Trust 0.035% of the average weekly net assets.
InterCapital Insured Municipal Income Trust 0.035% of the average weekly net assets.
InterCapital California Insured Municipal 0.035% of the average weekly net assets.
Income Trust
InterCapital Quality Municipal Investment 0.035% of the average weekly net assets.
Trust
InterCapital New York Quality Municipal 0.035% of the average weekly net assets.
Securities
InterCapital Quality Municipal Income Trust 0.035% of the average weekly net assets.
InterCapital Quality Municipal Securities 0.035% of the average weekly net assets.
InterCapital California Quality Municipal 0.035% of the average weekly net assets.
Securities
InterCapital Insured Municipal Securities 0.035% of the average weekly net assets.
InterCapital Insured California Municipal 0.035% of the average weekly net assets.
Securities
</TABLE>
B-10
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 17 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 8, 1999, relating to the financial statements and financial
highlights of Morgan Stanley Dean Witter U.S. Government Securities Trust,
formerly Dean Witter U.S. Government Securities Trust, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings
"Custodian and Independent Accountants" and "Experts" in such Statement of
Additional Information and to the reference to us under the heading
"Financial Highlights" in such Propsectus.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
February 22, 1999
<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3
INTRODUCTION
This plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), effective as of
July 28, 1997, and amended as of June 22, 1998. The Plan relates to shares of
the open-end investment companies to which Morgan Stanley Dean Witter Advisors
Inc. acts as investment manager, that are listed on Schedule A, as may be
amended from time to time (each, a "Fund" and collectively, the "Funds"). The
Funds are distributed pursuant to a system (the "Multiple Class System") in
which each class of shares (each, a "Class" and collectively, the "Classes") of
a Fund represents a pro rata interest in the same portfolio of investments of
the Fund and differs only to the extent outlined below.
I. DISTRIBUTION ARRANGEMENTS
One or more Classes of shares of the Funds are offered for purchase by
investors with the sales load structures described below. In addition, pursuant
to Rule 12b-1 under the 1940 Act, the Funds have each adopted a Plan of
Distribution (the "12b-1 Plan") under which shares of certain Classes are
subject to the service and/or distribution fees ("12b-1 fees") described below.
1. CLASS A SHARES
Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges applicable to a Fund and the circumstances under which
the sales charges are subject to reduction are set forth in each Fund's current
prospectus. As stated in each Fund's current prospectus, Class A shares may be
purchased at net asset value (without a FESL): (i) in the case of certain large
purchases of such shares; and (ii) by certain limited categories of investors,
in each case, under the circumstances and conditions set forth in each Fund's
current prospectus. Class A shares purchased at net asset value may be subject
to a contingent deferred sales charge ("CDSC") on redemptions made within one
year of purchase. Further information relating to the CDSC, including the manner
in which it is calculated, is set forth in paragraph 6 below. Class A shares are
also subject to payments under each Fund's 12b-1 Plan to reimburse Morgan
Stanley Dean Witter Distributors Inc., Dean Witter Reynolds Inc. ("DWR"), its
affiliates and other broker-dealers for distribution expenses incurred by them
specifically on behalf of the Class, assessed at an annual rate of up to 0.25%
of average daily net assets. The entire amount of the 12b-1 fee represents a
service fee within the meaning of National Association of Securities Dealers,
Inc. ("NASD") guidelines.
2. CLASS B SHARES
Class B shares are offered without a FESL, but will in most cases be subject
to a six-year declining CDSC which is calculated in the manner set forth in
paragraph 6 below. Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a three-year declining CDSC
which is calculated in the manner set forth in paragraph 6 below. The schedule
of CDSC charges applicable to each Fund is set forth in each Fund's current
prospectus. With the exception of certain of the Funds which have a different
formula described below (Morgan Stanley Dean Witter American Value Fund, Morgan
Stanley Dean Witter Natural Resource Development Securities Inc., Morgan Stanley
Dean Witter Strategist Fund and Morgan
1
<PAGE>
Stanley Dean Witter Dividend Growth Securities Inc.)(1), Class B shares are also
subject to a fee under each Fund's respective 12b-1 Plan, assessed at the annual
rate of up to 1.0% of either: (a) the lesser of (i) the average daily aggregate
gross sales of the Fund's Class B shares since the inception of the Fund (not
including reinvestment of dividends or capital gains distributions), less the
average daily aggregate net asset value of the Fund's Class B shares redeemed
since the Fund's inception upon which a CDSC has been imposed or waived, or (ii)
the average daily net assets of Class B; or (b) the average daily net assets of
Class B. A portion of the 12b-1 fee equal to up to 0.25% of the Fund's average
daily net assets is characterized as a service fee within the meaning of the
NASD guidelines and the remaining portion of the 12b-1 fee, if any, is
characterized as an asset-based sales charge. Also, Class B shares have a
conversion feature ("Conversion Feature") under which such shares convert to
Class A shares after a certain holding period. Details of the Conversion Feature
are set forth in Section IV below.
3. CLASS C SHARES
Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph 6
below. In addition, Class C shares, under each Fund's 12b-1 Plan, are subject to
12b-1 payments to reimburse Morgan Stanley Dean Witter Distributors Inc., DWR,
its affiliates and other broker-dealers for distribution expenses incurred by
them specifically on behalf of the Class, assessed at the annual rate of up to
1.0% of the average daily net assets of the Class. A portion of the 12b-1 fee
equal to up to 0.25% of the Fund's average daily net assets is characterized as
a service fee within the meaning of NASD guidelines. Unlike Class B shares,
Class C shares do not have the Conversion Feature.
4. CLASS D SHARES
Class D shares are offered without imposition of a FESL, CDSC or a 12b-1 fee
for purchases of Fund shares by (i) investors meeting an initial minimum
investment requirement and (ii) certain other limited categories of investors,
in each case, as may be approved by the Boards of Directors/Trustees of the
Funds and as disclosed in each Fund's current prospectus.
5. ADDITIONAL CLASSES OF SHARES
The Boards of Directors/Trustees of the Funds have the authority to create
additional Classes, or change existing Classes, from time to time, in accordance
with Rule 18f-3 under the 1940 Act.
- ------------
(1)The payments under the 12b-1 Plan for each of Morgan Stanley Dean Witter
American Value Fund, Morgan Stanley Dean Witter Natural Resource Development
Securities Inc. and Morgan Stanley Dean Witter Dividend Growth Securities Inc.
are assessed at the annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B shares since the inception of the
Fund's Plan (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the Plan's inception upon which a contingent
deferred sales charge has been imposed or waived, or (b) the average daily net
assets of Class B attributable to shares issued, net of related shares redeemed,
since inception of the Plan. The payments under the 12b-1 Plan for the Morgan
Stanley Dean Witter Strategist Fund are assessed at the annual rate of: (i) 1%
of the lesser of (a) the average daily aggregate gross sales of the Fund's Class
B shares since the effectiveness of the first amendment of the Plan on November
8, 1989 (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the effectiveness of the first amended Plan, upon
which a contingent deferred sales charge has been imposed or waived, or (b) the
average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since the effectiveness of the first amended Plan; plus
(ii) 0.25% of the average daily net assets of Class B attributable to shares
issued, net of related shares redeemed, prior to effectiveness of the first
amended Plan.
2
<PAGE>
6. CALCULATION OF THE CDSC
Any applicable CDSC is calculated based upon the lesser of net asset value
of the shares at the time of purchase or at the time of redemption. The CDSC
does not apply to amounts representing an increase in share value due to capital
appreciation and shares acquired through the reinvestment of dividends or
capital gains distributions. The CDSC schedule applicable to a Fund and the
circumstances in which the CDSC is subject to waiver are set forth in each
Fund's prospectus.
II. EXPENSE ALLOCATIONS
Expenses incurred by a Fund are allocated among the various Classes of
shares pro rata based on the net assets of the Fund attributable to each Class,
except that 12b-1 fees relating to a particular Class are allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees), may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Fund's Board of Directors/Trustees.
III. CLASS DESIGNATION
All shares of the Funds held prior to July 28, 1997 (other than the shares
held by certain employee benefit plans established by DWR and its affiliate, SPS
Transaction Services, Inc., shares of Funds offered with a FESL, and shares of
Morgan Stanley Dean Witter Balanced Growth Fund and Morgan Stanley Dean Witter
Balanced Income Fund) have been designated Class B shares. Shares held prior to
July 28, 1997 by such employee benefit plans have been designated Class D
shares. Shares held prior to July 28, 1997 of Funds offered with a FESL have
been designated Class D shares. In addition, shares of Morgan Stanley Dean
Witter American Value Fund purchased prior to April 30, 1984, shares of Morgan
Stanley Dean Witter Strategist Fund purchased prior to November 8, 1989 and
shares of Morgan Stanley Dean Witter Natural Resource Development Securities
Inc. and Morgan Stanley Dean Witter Dividend Growth Securities Inc. purchased
prior to July 2, 1984 (with respect to such shares of each Fund, including such
proportion of shares acquired through reinvestment of dividends and capital
gains distributions as the total number of shares acquired prior to each of the
preceding dates in this sentence bears to the total number of shares purchased
and owned by the shareholder of that Fund) have been designated Class D shares.
Shares of Morgan Stanley Dean Witter Balanced Growth Fund and Morgan Stanley
Dean Witter Balanced Income Fund held prior to July 28, 1997 have been
designated Class C shares except that shares of Morgan Stanley Dean Witter
Balanced Growth Fund and Morgan Stanley Dean Witter Balanced Income Fund held
prior to July 28, 1997 that were acquired in exchange for shares of an
investment company offered with a CDSC have been designated Class B shares and
those that were acquired in exchange for shares of an investment company offered
with a FESL have been designated Class A shares.
IV. THE CONVERSION FEATURE
Class B shares held before May 1, 1997 will convert to Class A shares in
May, 2007, except that Class B shares which were purchased before July 28, 1997
by trusts for which Morgan Stanley Dean Witter Trust FSB ("MSDW Trust") provides
discretionary trustee services converted to Class A shares on August 29, 1997
(the CDSC was not applicable to such shares upon the conversion). In all other
instances, Class B shares of each Fund will automatically convert to Class A
shares, based on the relative net asset values of the shares of the two Classes
on the conversion date, which will be approximately ten (10) years after the
date of the original purchase. Conversions will be effected once a month. The 10
year period will be calculated from the last day of the month in which the
shares were purchased or, in the case of Class B shares acquired through an
exchange or a series of exchanges, from the last day of the month in which the
original Class B shares were purchased, provided that shares originally
purchased before May 1, 1997 will convert to Class A shares in May, 2007. Except
as set forth below, the conversion of shares purchased on or after May 1, 1997
will take place in the month following the tenth anniversary of the purchase.
There will also be converted at that time such proportion of Class B shares
acquired through automatic reinvestment of dividends owned by the shareholder as
the total number of his or her Class B shares converting at the time bears to
the total number of outstanding Class B shares purchased and owned by the
shareholder. In the case of Class B shares held by a 401(k) plan or other plan
qualified under Section 401(a) of the Internal Revenue Code (the "Code") and
3
<PAGE>
for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement, all
Class B shares will convert to Class A shares on the conversion date of the
first shares of a Fund purchased by that plan. In the case of Class B shares
previously exchanged for shares of an "Exchange Fund" (as such term is defined
in the prospectus of each Fund), the period of time the shares were held in the
Exchange Fund (calculated from the last day of the month in which the Exchange
Fund shares were acquired) is excluded from the holding period for conversion.
If those shares are subsequently re-exchanged for Class B shares of a Fund, the
holding period resumes on the last day of the month in which Class B shares are
reacquired.
Effectiveness of the Conversion Feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel to the effect that (i) the conversion of shares does not constitute a
taxable event under the Code; (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion; and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The Conversion Feature may be suspended if the Ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B fees under the applicable Fund's 12b-1 Plan.
V. EXCHANGE PRIVILEGES
Shares of each Class may be exchanged for shares of the same Class of the
other Funds and for shares of certain other investment companies without the
imposition of an exchange fee as described in the prospectuses and statements of
additional information of the Funds. The exchange privilege of each Fund may be
terminated or revised at any time by the Fund upon such notice as may be
required by applicable regulatory agencies as described in each Fund's
prospectus.
VI. VOTING
Each Class shall have exclusive voting rights on any matter that relates
solely to its 12b-1 Plan, except that Class B shareholders will have the right
to vote on any proposed material increase in Class A's expenses, including
payments under the Class A 12b-1 Plan, if such proposal is submitted separately
to Class A shareholders. If the amount of expenses, including payments under the
Class A 12b-1 Plan, is increased materially without the approval of Class B
shareholders, the Fund will establish a new Class A for Class B shareholders
whose shares automatically convert on the same terms as applied to Class A
before the increase. In addition, each Class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one Class
differ from the interests of any other Class.
4
<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
SCHEDULE A
AT DECEMBER 2, 1998
<TABLE>
<S> <C>
1) Morgan Stanley Dean Witter Aggressive Equity Fund
2) Morgan Stanley Dean Witter American Value Fund
3) Morgan Stanley Dean Witter Balanced Growth Fund
4) Morgan Stanley Dean Witter Balanced Income Fund
5) Morgan Stanley Dean Witter California Tax-Free Income Fund
6) Morgan Stanley Dean Witter Capital Appreciation Fund
7) Morgan Stanley Dean Witter Capital Growth Securities
8) Morgan Stanley Dean Witter Competitive Edge Fund
9) Morgan Stanley Dean Witter Convertible Securities Trust
10) Morgan Stanley Dean Witter Developing Growth Securities Trust
11) Morgan Stanley Dean Witter Diversified Income Trust
12) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
13) Morgan Stanley Dean Witter Equity Fund
14) Morgan Stanley Dean Witter European Growth Fund Inc.
15) Morgan Stanley Dean Witter Federal Securities Trust
16) Morgan Stanley Dean Witter Financial Services Trust
17) Morgan Stanley Dean Witter Fund of Funds
18) Morgan Stanley Dean Witter Global Dividend Growth Securities
19) Morgan Stanley Dean Witter Global Utilities Fund
20) Morgan Stanley Dean Witter Growth Fund
21) Morgan Stanley Dean Witter Health Sciences Trust
22) Morgan Stanley Dean Witter High Yield Securities Inc.
23) Morgan Stanley Dean Witter Income Builder Fund
24) Morgan Stanley Dean Witter Information Fund
25) Morgan Stanley Dean Witter Intermediate Income Securities
26) Morgan Stanley Dean Witter International Fund
27) Morgan Stanley Dean Witter International SmallCap Fund
28) Morgan Stanley Dean Witter Japan Fund
29) Morgan Stanley Dean Witter Managers Focus Fund
30) Morgan Stanley Dean Witter Market Leader Trust
31) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
32) Morgan Stanley Dean Witter Mid-Cap Growth Fund
33) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
34) Morgan Stanley Dean Witter New York Tax-Free Income Fund
35) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
36) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
37) Morgan Stanley Dean Witter Special Value Fund
38) Morgan Stanley Dean Witter S&P 500 Index Fund
39) Morgan Stanley Dean Witter S&P 500 Select Fund
40) Morgan Stanley Dean Witter Strategist Fund
41) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
42) Morgan Stanley Dean Witter U.S. Government Securities Trust
43) Morgan Stanley Dean Witter Utilities Fund
44) Morgan Stanley Dean Witter Value-Added Market Series
45) Morgan Stanley Dean Witter Value Fund
46) Morgan Stanley Dean Witter Worldwide High Income Fund
47) Morgan Stanley Dean Witter World Wide Income Trust
</TABLE>
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> DW U.S. GOVERNMENT SECURITIES TRUST - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 4,816,826,788
<INVESTMENTS-AT-VALUE> 5,132,755,149
<RECEIVABLES> 34,356,806
<ASSETS-OTHER> 80,247
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,167,349,543
<PAYABLE-FOR-SECURITIES> 49,253,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,892,699
<TOTAL-LIABILITIES> 75,145,824
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,694,016,539
<SHARES-COMMON-STOCK> 6,376,543
<SHARES-COMMON-PRIOR> 2,292,255
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (917,741,181)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315,928,361
<NET-ASSETS> 58,537,905
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 376,887,864
<OTHER-INCOME> 0
<EXPENSES-NET> 66,311,298
<NET-INVESTMENT-INCOME> 310,576,566
<REALIZED-GAINS-CURRENT> (2,384,102)
<APPREC-INCREASE-CURRENT> 54,569,658
<NET-CHANGE-FROM-OPS> 362,762,122
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,396,071)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,837,972
<NUMBER-OF-SHARES-REDEEMED> (898,895)
<SHARES-REINVESTED> 145,211
<NET-CHANGE-IN-ASSETS> (373,212,575)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 66,311,298
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<PER-SHARE-NAV-BEGIN> 9.09
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<PER-SHARE-NAV-END> 9.18
<EXPENSE-RATIO> 0.77
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> DW U.S. GOVERNMENT SECURITIES TRUST - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 4,816,826,788
<INVESTMENTS-AT-VALUE> 5,132,756,149
<RECEIVABLES> 34,356,806
<ASSETS-OTHER> 80,247
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,167,349,543
<PAYABLE-FOR-SECURITIES> 49,253,125
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<OTHER-ITEMS-LIABILITIES> 25,892,699
<TOTAL-LIABILITIES> 75,145,824
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<PAID-IN-CAPITAL-COMMON> 5,694,016,539
<SHARES-COMMON-STOCK> 543,307,518
<SHARES-COMMON-PRIOR> 596,277,853
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> (917,741,181)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 316,928,361
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 376,887,864
<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> 310,576,566
<REALIZED-GAINS-CURRENT> (2,384,102)
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<DISTRIBUTIONS-OF-INCOME> (306,635,357)
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<NUMBER-OF-SHARES-SOLD> 103,474,883
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<SHARES-REINVESTED> 17,451,085
<NET-CHANGE-IN-ASSETS> (373,212,576)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> DW U.S. GOVERNMENT SECURITIES TRUST - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 4,816,826,788
<INVESTMENTS-AT-VALUE> 5,132,755,149
<RECEIVABLES> 34,356,806
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,167,349,543
<PAYABLE-FOR-SECURITIES> 49,253,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,892,699
<TOTAL-LIABILITIES> 75,145,824
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<PAID-IN-CAPITAL-COMMON> 5,694,016,539
<SHARES-COMMON-STOCK> 1,845,174
<SHARES-COMMON-PRIOR> 478,135
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (917,741,181)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315,928,361
<NET-ASSETS> 17,086,723
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 376,887,864
<OTHER-INCOME> 0
<EXPENSES-NET> 66,311,298
<NET-INVESTMENT-INCOME> 310,576,566
<REALIZED-GAINS-CURRENT> (2,384,102)
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<DISTRIBUTIONS-OF-INCOME> (600,619)
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<NUMBER-OF-SHARES-SOLD> 4,818,849
<NUMBER-OF-SHARES-REDEEMED> (3,492,672)
<SHARES-REINVESTED> 41,862
<NET-CHANGE-IN-ASSETS> (373,212,575)
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 66,311,298
<AVERAGE-NET-ASSETS> 10,316,426
<PER-SHARE-NAV-BEGIN> 9.17
<PER-SHARE-NII> 0.56
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<PER-SHARE-NAV-END> 9.26
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 014
<NAME> DW U.S. GOVERNMENT SECURITIES TRUST - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 4,816,826,788
<INVESTMENTS-AT-VALUE> 5,132,755,149
<RECEIVABLES> 34,356,806
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<TOTAL-ASSETS> 5,167,349,543
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,694,018,539
<SHARES-COMMON-STOCK> 2,221,111
<SHARES-COMMON-PRIOR> 1,248,136
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (917,741,181)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315,928,361
<NET-ASSETS> 20,391,766
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 376,887,864
<OTHER-INCOME> 0
<EXPENSES-NET> 66,311,298
<NET-INVESTMENT-INCOME> 310,576,566
<REALIZED-GAINS-CURRENT> (2,384,102)
<APPREC-INCREASE-CURRENT> 54,569,658
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<DISTRIBUTIONS-OF-INCOME> (944,519)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,554,909
<NUMBER-OF-SHARES-REDEEMED> (1,668,314)
<SHARES-REINVESTED> 97,395
<NET-CHANGE-IN-ASSETS> (373,212,575)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,024,088,069)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 66,311,298
<AVERAGE-NET-ASSETS> 14,304,912
<PER-SHARE-NAV-BEGIN> 9.11
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> (0.61)
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
