<PAGE>
PROSPECTUS - MAY 1, 1999
Morgan Stanley Dean Witter
CALIFORNIA TAX-FREE INCOME FUND
[COVER PHOTO]
A MUTUAL FUND THAT SEEKS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME
EXEMPT FROM BOTH FEDERAL AND CALIFORNIA INCOME TAX,
CONSISTENT WITH THE PRESERVATION OF CAPITAL
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this PROSPECTUS. Any representation to
the contrary is a criminal offense.
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
The Fund Investment Objective.................................. 1
Principal Investment Strategies....................... 1
Principal Risks....................................... 2
Past Performance...................................... 4
Fees and Expenses..................................... 5
Additional Investment Strategy Information............ 6
Additional Risk Information........................... 6
Fund Management....................................... 8
Shareholder Information Pricing Fund Shares................................... 9
How to Buy Shares..................................... 9
How to Exchange Shares................................ 11
How to Sell Shares.................................... 12
Distributions......................................... 14
Tax Consequences...................................... 14
Share Class Arrangements.............................. 16
Financial Highlights ...................................................... 22
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 PRIMARY GOAL OF SELECTING SECURITIES TO PAY
OUT INCOME.
(END SIDEBAR)
THE FUND
ICON INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter California Tax-Free Income Fund is a
mutual fund that seeks to provide a high level of current income
exempt from federal and California income tax, consistent with the
preservation of capital. There is no guarantee that the Fund will
achieve this objective.
ICON PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund will normally invest at least 80% of its assets in
securities that pay interest exempt from federal and California state
income taxes. The Fund's "Investment Manager," Morgan Stanley Dean
Witter Advisors Inc., generally invests the Fund's assets in
investment grade, California municipal obligations.
Municipal obligations are bonds, notes or short-term
commercial paper issued by state governments, local
governments and their respective agencies. These
municipal obligations will have the following
ratings at the time of purchase:
- municipal bonds -- within the four
highest grades by
Moody's Investors
Service Inc.
("Moody's"),
Standard & Poor's
Corporation ("S&P"),
or Fitch IBCA, Inc.
("Fitch");
- municipal notes -- within the two
highest grades or,
if not rated, have
outstanding bonds
within the four
highest grades by
Moody's, S&P or
Fitch; and
- municipal commercial paper -- within the highest
grade by Moody's, S&P
or Fitch.
The Fund may also invest in unrated securities which are judged by
the Investment Manager to have comparable quality to the securities
described above.
The Fund may invest up to 20% of its assets in taxable money market
instruments, tax-exempt securities of other states and
municipalities, futures, and securities that pay interest income
subject to the "alternative minimum tax". Since some investors may
have to pay tax on a Fund distribution of this income, the Fund may
not be a suitable investment for them. See the "Tax Consequences"
section for more details.
Municipal bonds, notes and commercial paper are commonly classified
as either "general obligation" or "revenue." General obligation
bonds, notes, and commercial paper are secured by the issuer's faith
and credit, as well as its taxing power, for payment of principal and
interest. Revenue bonds, notes and commercial paper, however, are
generally payable from a specific source of income. They are issued
to
1
<PAGE>
finance a wide variety of municipal projects which may include:
educational, electric utility, hospital/healthcare, industrial
development/pollution control, single & multi-family housing,
transportation and water & sewer facilities. Included in the revenue
bonds category are participations in lease obligations. The Fund's
municipal obligation investments may include zero coupon securities,
which are purchased at a discount and make no interest payments until
maturity.
In pursuing the Fund's investment objective, the Investment Manager
has considerable leeway in deciding which investments it buys, holds
or sells on a day-to-day basis -- and which investment strategies it
uses. For example, the Investment Manager in its discretion may
determine to use some permitted investment strategies while not using
others.
ICON PRINCIPAL RISKS
- --------------------------------------------------------------------------------
The Fund's share price will fluctuate with changes in the market
value of the Fund's portfolio securities. When you sell Fund shares,
they may be worth less than what you paid for them and, accordingly,
you can lose money investing in this Fund.
CREDIT AND INTEREST RATE RISKS. Principal risks of investing in the
Fund are associated with its municipal investments, particularly its
concentration in municipal obligations of a single state. Municipal
obligations, like other debt securities, are subject to two types of
risks: credit risk and interest rate risk.
Credit risk refers to the possibility that the issuer of a security
will be unable or unwilling to make interest payments and/or repay
the principal on its debt. In the case of revenue bonds, notes or
commercial paper, for example, the credit risk is the possibility
that the user fees from a project or other specified revenue sources
are insufficient to meet interest and/or principal payment
obligations. Private activity bonds used to finance such projects in
sectors such as industrial development and pollution control may also
be negatively impacted by the general credit of the user of the
project. Unlike most fixed-income mutual funds, the Fund is subject
to the added credit risk of concentrating its investments in a single
state. The Fund could be affected by political, economic and
regulatory developments concerning these issuers. Should any
difficulties develop concerning these municipalities' abilities to
pay principal and/or interest on their debt obligations, the Fund's
value and yield could be adversely affected.
Interest rate risk refers to fluctuations in the value of a
fixed-income security resulting from changes in the general level of
interest rates. When the general level of interest rates goes up, the
prices of most fixed-income securities go down. When the general
level of interest rates goes down, the prices of most fixed-income
securities go up. Zero coupon securities are typically subject to
greater price fluctuations than comparable
2
<PAGE>
securities that pay interest. As a general illustration of the
relationship between fixed-income securities and interest rates, the
following table shows how interest rates affect bond prices.
<TABLE>
<CAPTION>
PRICE PER $1,000 OF A MUNICIPAL BOND IF
INTEREST RATES:
------------------------------------------
HOW INTEREST RATES AFFECT BOND PRICES INCREASE DECREASE
- -------------------------------------------------- ------------ ----------------
BOND MATURITY COUPON 1% 2% 1% 2%
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
1 Year 1999 3.00% $990 $981 $1,010 $1,020
- --------------------------------------------------------------------------------------
5 Years 2003 3.75% $956 $914 $1,046 $1,095
- --------------------------------------------------------------------------------------
10 Years 2008 4.10% $922 $852 $1,085 $1,180
- --------------------------------------------------------------------------------------
20 Years 2018 4.90% $883 $785 $1,138 $1,302
- --------------------------------------------------------------------------------------
30 Years 2028 4.95% $861 $749 $1,175 $1,396
- --------------------------------------------------------------------------------------
</TABLE>
Source: MUNICIPAL MARKET DATA ( a division of Thomson Financial
Municipal Group): "Aaa" yield curve as of 12/31/98.
* Assumes no effect from market discount calculation.
** Assumes bonds are non-callable.
The Fund is not limited as to the maturities of the municipal
obligations in which it may invest. Thus, a rise in the general level
of interest rates may cause the price of the Fund's portfolio
securities to fall substantially. In addition, while the Fund may
invest in securities with the lowest investment grade rating. These
securities may have speculative characteristics.
OTHER RISKS. The performance of the Fund also will depend on whether
the Investment Manager is successful in pursuing the Fund's
investment strategy. The Fund is also subject to other risks from its
permissible investments including the risks associated with its
futures and lease obligations investments.
Shares of the Fund are not bank deposits and are not guaranteed or
insured by any bank, governmental entity, or the FDIC.
3
<PAGE>
(SIDEBAR)
ANNUAL TOTAL RETURNS
THIS CHART SHOWS HOW THE PERFORMANCE OF THE FUND'S CLASS B SHARES HAS VARIED
FROM YEAR TO YEAR OVER THE LAST 10 CALENDAR YEARS.
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 9.54%
'90 5.69%
'91 10.18%
'92 7.83%
'93 10.97%
'94 -5.97%
'95 14.96%
'96 3.13%
'97 7.51%
'98 5.63%
</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 6.11% (quarter ended March 31, 1995) and the lowest return for a
calendar quarter was -5.10% (quarter ended March 31, 1994). Year-to-date total
return as of March 31, 1999 was 0.75%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIOD ENDED THE 1998 CALENDAR YEAR)
- -------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
Class A(1) 1.02% -- --
- -------------------------------------------------------------------------------
Class B(1,2) 0.67% 4.51% 6.81%
- -------------------------------------------------------------------------------
Class C(1) 4.23% -- --
- -------------------------------------------------------------------------------
Class D(1) 5.77% -- --
- -------------------------------------------------------------------------------
Lehman Brothers Municipal Bond
Index(3) 6.48% 6.22% 8.22%
- -------------------------------------------------------------------------------
Lipper California Municipal Debt
Funds Index(4) 6.15% 5.81% 7.74%
- -------------------------------------------------------------------------------
</TABLE>
1 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.
2 Prior to July 28, 1997, the Fund only issued Class B shares.
3 The Lehman Brothers Municipal Bond Index tracks the performance of
municipal bonds with maturities of two years or more and a minimum credit
rating of Baa or BBB, as measured by Moody's Investors Service or Standard
& Poor's Corp. The Index is unmanaged and should not be considered an
investment.
4 The Lipper California Municipal Debt Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper California Municipal Debt Funds objective. The Index, which is
adjusted for capital gains distributions and income dividends, is unmanaged
and should not be considered an investment. There are currently 30 funds
represented in this index.
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 0.53% 0.53% 0.53% 0.53%
- ---------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25% 0.75% 0.75% None
- ---------------------------------------------------------------------------------------
Other expenses 0.05% 0.05% 0.05% 0.05%
- ---------------------------------------------------------------------------------------
Total annual Fund operating expenses 0.83% 1.33% 1.33% 0.58%
- ---------------------------------------------------------------------------------------
</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 $506 $679 $866 $1,407 $506 $679 $866 $1,407
- ---------------------------------------------------------- -----------------------------------------
CLASS B $635 $721 $929 $1,601 $135 $421 $729 $1,601
- ---------------------------------------------------------- -----------------------------------------
CLASS C $235 $421 $729 $1,601 $135 $421 $729 $1,601
- ---------------------------------------------------------- -----------------------------------------
CLASS D $ 59 $186 $324 $ 726 $ 59 $186 $324 $ 726
- ---------------------------------------------------------- -----------------------------------------
</TABLE>
5
<PAGE>
ICON ADDITIONAL INVESTMENT STRATEGY INFORMATION
- --------------------------------------------------------------------------------
The Fund seeks to provide a high level of current income exempt from
federal and California income tax, consistent with the preservation
of capital. There is no guarantee that the Fund will achieve this
objective.
This section provides additional information concerning the Fund's
principal strategies.
The Fund's policy of investing at least 80% of its assets in
securities the interest on which is exempt from federal income taxes
and California state income taxes, except for "defensive" investing
discussed below, is fundamental. This fundamental policy may not be
changed without shareholder approval.
LEASE OBLIGATIONS. Included within the revenue bonds category are
participations in lease obligations or installment purchase contracts
of municipalities. Generally, state and local agencies or authorities
issue lease obligations to finance equipment and facilities for
public and private purposes.
FUTURES. The Fund may purchase or sell futures contracts with respect
to financial instruments and municipal bond indexes. Futures may be
used to seek to hedge against interest rate changes.
DEFENSIVE INVESTING. The Fund may take temporary "defensive"
positions in attempting to respond to adverse market conditions. The
Fund may invest any amount of its assets in taxable money market
securities, non-California tax-exempt securities or in tax-exempt
securities subject to the alternative minimum tax for individual
shareholders when the Investment Manager believes it is advisable to
do so. The Fund will only purchase municipal obligations of other
states that satisfy the same standards as set forth for the
California tax-exempt securities. Although taking a defensive posture
is designed to protect the Fund from an anticipated market downturn,
it could have the effect of reducing the Fund's ability to provide
California tax-exempt income.
ICON ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information regarding the principal
risks of investing in the Fund.
BOND INSURANCE RISK. Many of the municipal obligations the Fund
invests in will be covered by insurance at the time of issuance or at
a later date. Such insurance covers the remaining term of the
security. Insured municipal obligations would generally be assigned a
lower rating if the rating were based primarily on the credit quality
of the issuer without regard to the insurance feature. If the
claims-paying ability of the insurer were downgraded, the ratings on
the municipal obligations it insures may also be downgraded.
LEASE OBLIGATIONS. Lease obligations may have risks not normally
associated with general obligation or other revenue bonds. Leases and
installment purchase or conditional sale contracts (which may provide
for title to the leased asset to pass eventually to the issuer) have
developed in part, as a means for governmental issuers to
6
<PAGE>
acquire property and equipment without the necessity of complying
with the constitutional and statutory requirements generally
applicable for the issuance of debt. Certain lease obligations
contain "non-appropriation" clauses that provide that the
governmental issuer has no obligation to make future payments under
the lease or contract unless money is appropriated for that purpose
by the appropriate legislative body on an annual or other periodic
basis. Consequently, continued lease payments on those lease
obligations containing "non-appropriation" clauses are dependent on
future legislative actions. If these legislative actions do not
occur, the holders of the lease obligation may experience difficulty
in exercising their rights, including disposition of the property.
FUTURES. If the Fund purchases and sells futures contracts, its
participation in these markets would subject the Fund's portfolio to
certain risks. The Investment Manager's predictions of movements in
the direction of interest rate markets may be inaccurate, and the
adverse consequences to the Fund (e.g., a reduction in the Fund's net
asset value or a reduction in the amount of income available for
distribution) may leave the Fund in a worse position than if these
strategies were not used. Other risks inherent in the use of futures
include, for example, the possible imperfect correlation between the
price of futures contracts and movements in the prices of the
securities being hedged, and the possible absence of a liquid
secondary market for any particular instrument. The risk of imperfect
correlations may be increased by the fact that futures contracts in
which the Fund may invest are taxable securities rather than
tax-exempt securities. The prices of taxable securities may not move
in a similar manner to prices of tax-exempt securities.
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 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.
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, governmental data
processing errors may result in overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs,
which may be substantial. Accordingly, the Fund's investments may be
adversely affected.
7
<PAGE>
(SIDEBAR)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
THE INVESTMENT MANAGER IS WIDELY RECOGNIZED AS A LEADER IN THE MUTUAL FUND
INDUSTRY AND TOGETHER WITH MORGAN STANLEY DEAN WITTER SERVICES COMPANY, INC.,
ITS WHOLLY-OWNED SUBSIDIARY, HAS MORE THAN $129 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
Tax-Exempt Group. James F. Willison, a Senior Vice President of the
Investment Manager, has been a primary portfolio manager of the
Fund since its inception. Joseph R. Arcieri, a Vice President of
the
Investment Manager, has been a primary portfolio manager of the Fund
since February 1997. Mr. Willison and Mr. Arcieri have been portfolio
managers with the Investment Manager for over five years.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund,
and for Fund expenses assumed by the Investment Manager. The fee is
based on the Fund's average daily net assets. For the fiscal year
ended December 31, 1998, the Fund accrued total compensation to the
Investment Manager amounting to 0.53% of the Fund's average daily net
assets.
8
<PAGE>
(SIDEBAR)
CONTACTING A FINANCIAL ADVISOR
IF YOU ARE NEW TO THE MORGAN STANLEY DEAN WITTER FAMILY OF FUNDS AND WOULD LIKE
TO CONTACT A FINANCIAL ADVISOR, CALL (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
ICON PRICING FUND SHARES
- --------------------------------------------------------------------------------
The price of Fund shares (excluding sales charges), called "net asset
value," is based on the value of the Fund's portfolio securities.
While the assets of each Class are invested in a single portfolio of
securities, the net asset value of each Class will differ because the
Classes have different ongoing distribution fees.
The net asset value per share of the Fund is determined once daily at
4:00 p.m. Eastern time on each day that the New York Stock Exchange
is open (or, on days when the New York Stock Exchange closes prior to
4:00 p.m., at such earlier time). Shares will not be priced on days
that the New York Stock Exchange is closed.
The value of the Fund's portfolio securities (except for short-term
taxable debt securities and certain other investments) are valued by
an outside independent pricing service. The service uses a
computerized grid matrix of tax-exempt securities and its evaluations
in determining what it believes is the fair value of the portfolio
securities. The Fund's Board of Trustees believes that timely and
reliable market quotations are generally not readily available to the
Fund to value tax-exempt securities and the valuations that the
pricing service supplies are more likely to approximate the fair
value of the securities.
An exception to the Fund's general pricing policy concerns its
short-term debt portfolio securities. Debt securities with remaining
maturities of sixty days or less at the time of purchase are valued
at amortized cost. However, if the cost does not reflect the
securities' market value, these securities will be valued at their
fair value.
ICON HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may open a new account to buy Fund shares or buy additional
Fund shares for an existing account by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Your Financial Advisor will assist you,
step-by-step, with the procedures to invest in the Fund. You may
also purchase shares directly by calling the Fund's transfer agent
and requesting an application.
Because every investor has different immediate financial needs and
long-term investment goals, the Fund offers investors four Classes
of shares: Classes A, B, C and D. Class D shares are only offered
to a limited group of investors. Each Class of shares offers a
distinct structure of sales charges, distribution and service fees,
and other features that are designed to address a variety of needs.
Your Financial Advisor or other authorized financial representative
can help you decide which Class may be most appropriate for you.
When purchasing Fund shares, you must specify which Class of shares
you wish to purchase.
9
<PAGE>
When you buy Fund shares, the shares are purchased at the next
share price calculated, less any applicable front-end sales charge,
after we receive your investment order in proper form. We reserve
(SIDEBAR) the right to reject any order for the purchase of Fund shares.
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
- ------------------------------------------------------------------------------------------------
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 California Tax-Free Income Fund.
- Mail the letter and check to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 1040, Jersey City, NJ 07303.
10
<PAGE>
ICON HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of any Class of
the Fund for the same Class of any other continuously offered
Multi-Class Fund, or for shares of a No-Load Fund, 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 and policies and 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 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.
11
<PAGE>
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 discussion of how applicable
contingent deferred sales charges (CDSCs) are calculated for shares
of one Morgan Stanley Dean Witter Fund that are exchanged for shares
of another.
For further information regarding exchange privileges, you should
contact your Morgan Stanley Dean Witter Financial Advisor or call
(800) 869-NEWS.
ICON HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell some or all of your Fund shares at any time. If you sell
Class A, Class B or Class C shares, your net sale proceeds are
reduced by the amount of any applicable CDSC. Your shares will be
sold at the next share price calculated after we receive your order
to sell as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
- --------------------------------------------------------------------------------
Contact your To sell your shares, simply call your Morgan Stanley Dean
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.
------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
By Letter, If you are requesting payment to anyone other than the
continued registered owner(s) or that payment be sent to any address
other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature
guarantee. You can obtain a signature guarantee from an
eligible guarantor acceptable to Morgan Stanley Dean Witter
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,New Jersey 07303. If you hold
share certificates, you must return the certificates, along
with the letter and any required additional documentation.
------------------------------------------------------------
A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
instructions.
- --------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter
Withdrawal Plan Family of Funds has a total market value of at least
ICON $10,000, you may elect to withdraw amounts of $25 or more,
or in any whole percentage of a Fund's balance (provided the
amount is at least $25), on a monthly, quarterly,
semi-annual or annual basis, from any Fund with a balance of
at least $1,000. Each time you add a Fund to the plan, you
must meet the plan requirements.
------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC
may be waived under certain circumstances. See the Class B
waiver categories listed in the "Share Class Arrangements"
section of this PROSPECTUS.
------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your
Morgan Stanley Dean Witter Financial Advisor or call (800)
869-NEWS. You may terminate or suspend your plan at any
time. Please remember that withdrawals from the plan are
sales of shares, not Fund "distributions," and ultimately
may exhaust your account balance. The Fund may terminate or
revise the plan at any time.
- --------------------------------------------------------------------------------
</TABLE>
PAYMENT FOR SOLD SHARES. After we receive your complete instructions
to sell as described above, a check will be mailed to you within
seven days, although we will attempt to make payment within one
business day. Payment may also be sent to your brokerage account.
Payment may be postponed or the right to sell your shares suspended
under unusual circumstances. If you request to sell shares that were
recently purchased by check, 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).
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.
13
<PAGE>
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
(SIDEBAR) details.
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)
ICON 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 will be higher
than for Class B and Class C because distribution fees that Class B
and Class C pay are higher. Normally, income dividends are declared
on each day the New York Stock Exchange is open for business, and
are distributed to shareholders monthly, and capital gains are
distributed at least 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, the Fund will mail a check to you no
later than seven business days after the distribution is declared.
No interest will accrue on uncashed checks. If you wish to change
how your distributions are paid, your request should be received by
the Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at
least five business days prior to the record date of the
distributions.
ICON TAX CONSEQUENCES
- --------------------------------------------------------------------------------
As with any investment, you should consider how your Fund
investment will be taxed. The tax information in this PROSPECTUS is
provided as general information. You should consult your own tax
professional about the tax consequences of an investment in the
Fund.
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.
14
<PAGE>
TAXES ON DISTRIBUTIONS. Your income dividend distributions are
normally exempt from federal and California's personal income taxes
-- to the extent they are derived from California's municipal
obligations. Income derived from other portfolio securities may be
subject to federal, state and/or local income taxes.
Income derived from some municipal securities is subject to the
federal "alternative minimum tax." Certain tax-exempt securities
whose proceeds are used to finance private, for-profit
organizations are subject to this special tax system that ensures
that individuals pay at least some federal taxes. Although interest
on these securities is generally exempt from federal income tax,
some taxpayers who have many tax deductions or exemptions
nevertheless may have to pay tax on the income.
If you borrow money to purchase shares of the Fund, the interest on
the borrowed money is generally not deductible for personal income
tax purposes.
If the Fund makes any capital gain distributions, those
distributions will normally be subject to federal and California
income tax when they are paid, whether you take them in cash or
reinvest them in the Fund shares. Any long-term capital gain
distributions are taxable to you as long-term capital gains, no
matter how long you have owned shares in the Fund.
The Fund may derive gains in part from municipal obligations the
Fund purchased below their principal or face values. All, or a
portion, of these gains may be taxable to you as ordinary income
rather than capital gains.
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.
15
<PAGE>
ICON SHARE CLASS ARRANGEMENTS
- --------------------------------------------------------------------------------
The Fund offers several Classes of shares having different
distribution arrangements designed to provide you with different
purchase options according to your investment needs. Your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative can help you decide which Class may be appropriate for
you.
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
(SIDEBAR) for the distribution financing of shares of that Class.
FRONT-END SALES CHARGE OR FSC
AN INITIAL SALES CHARGE YOU PAY WHEN PURCHASING CLASS A SHARES THAT IS BASED ON
A PERCENTAGE OF THE OFFERING PRICE. THE PERCENTAGE DECLINES BASED UPON THE
DOLLAR VALUE OF CLASS A SHARES YOU PURCHASE. WE OFFER THREE WAYS TO REDUCE YOUR
CLASS A SALES CHARGES - THE COMBINED PURCHASE PRIVILEGE, RIGHT OF ACCUMULATION
AND LETTER OF INTENT.
(END SIDEBAR)
The 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>
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 APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION PUBLIC 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>
16
<PAGE>
The reduced sales charge schedule is applicable to purchases of Class
A shares in a single transaction by:
- A single account (including an individual, trust or fiduciary
account).
- Family member accounts (limited to husband, wife and children under
the age of 21).
- Pension, profit sharing or other employee benefit plans of
companies and their affiliates.
- Tax-exempt organizations.
- Groups organized for a purpose other than to buy mutual fund
shares.
COMBINED PURCHASE PRIVILEGE. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares of the
Fund in a single transaction with purchases of Class A shares of
other Multi-Class Funds and shares of FSC Funds.
RIGHT OF ACCUMULATION. You also may benefit from a reduction of sales
charges if the cumulative net asset value of Class A shares of the
Fund purchased in a single transaction, together with shares of other
Funds you currently own which were previously purchased at a price
including a front-end sales charge (including shares acquired through
reinvestment of distributions), amounts to $25,000 or more. Also, if
you have a cumulative net asset value of all your Class A and Class D
shares equal to at least $5 million (or $25 million for certain
employee benefit plans), you are eligible to purchase Class D shares
of any Fund subject to the Fund's minimum initial investment
requirement.
You must notify your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative (or Morgan Stanley Dean
Witter Trust FSB if you purchase directly through the Fund), at the
time a purchase order is placed, that the purchase qualifies for the
reduced charge under the Right of Accumulation. Similar notification
must be made in writing when an order is placed by mail. The reduced
sales charge will not be granted if: (i) notification is not
furnished at the time of the order; or (ii) a review of the records
of Dean Witter Reynolds or other authorized dealer of Fund shares or
the Fund's transfer agent does not confirm your represented holdings.
LETTER OF INTENT. The schedule of reduced sales charges for larger
purchases also will be available to you if you enter into a written
"letter of intent." A letter of intent provides for the purchase of
shares within a thirteen-month period. It is available for purchases
of Class A shares of Multi-Class Funds and/or shares of FSC Funds.
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.
17
<PAGE>
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.
- 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 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 purchase, 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
(SIDEBAR) accounts for which any of such persons is a beneficiary.
CONTINGENT DEFERRED SALES CHARGE OR CDSC
A FEE YOU PAY WHEN YOU SELL SHARES OF CERTAIN MORGAN STANLEY DEAN WITTER FUNDS
PURCHASED WITHOUT AN INITIAL SALES CHARGE. THIS FEE DECLINES THE LONGER YOU HOLD
YOUR SHARES AS SET FORTH IN THE TABLE.
(END SIDEBAR)
CLASS B SHARES Class B shares are offered at net asset value with no
initial sales charge but are subject to a contingent deferred sales
charge, or CDSC, as set forth in the table below. For the purpose of
calculating the CDSC, shares are deemed to have been purchased on the
last day of the month during which they were purchased.
<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
<S> <C>
- --------------------------------------------------------------
First 5.0%
- --------------------------------------------------------------
Second 4.0%
- --------------------------------------------------------------
Third 3.0%
- --------------------------------------------------------------
Fourth 2.0%
- --------------------------------------------------------------
Fifth 2.0%
- --------------------------------------------------------------
Sixth 1.0%
- --------------------------------------------------------------
Seventh and thereafter None
- --------------------------------------------------------------
</TABLE>
Each time you place an order to sell or exchange
shares, shares with no CDSC will be sold or
exchanged first, then shares with the lowest CDSC
will be sold or exchanged next. For any shares
subject to a CDSC, the CDSC will be assessed on an
amount equal to the lesser of the current market
value or the cost of the shares being sold.
18
<PAGE>
CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived in the
case of:
- Sales of shares held at the time you die or become disabled (within
the definition in Section 72(m)(7) of the Internal Revenue Code
which relates to the ability to engage in gainful employment), if
the shares are: (i) registered either in your name (not a trust) or
in the names of you and your spouse as joint tenants with right of
survivorship; or (ii) held in a qualified corporate or
self-employed retirement plan, IRA or 403(b) Custodial Account,
provided in either case that the sale is requested within one year
of your death or initial determination of disability.
- Sales in connection with the following retirement plan
"distributions": (i) lump-sum or other distributions from a
qualified corporate or self-employed retirement plan following
retirement (or, in the case of a "key employee" of a "top heavy"
plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age 59
1/2; or (iii) a tax-free return of an excess IRA contribution (a
"distribution" does not include a direct transfer of IRA, 403(b)
Custodial Account or retirement plan assets to a successor
custodian or trustee).
- Sales of shares 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 are also subject to an annual
distribution (12b-1) fee of up to 0.75% 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
reinvestment 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.)
19
<PAGE>
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.
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 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.
20
<PAGE>
CLASS D SHARES Class D shares are offered without any sales charge on
purchases or sales and without any distribution (12b-1) fee. Class D
shares are offered only to investors meeting an initial investment
minimum of $5 million and the following investor categories:
- 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.
- 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.
- 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 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.
21
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 5 fiscal years of the Fund.
Certain information reflects financial results for a single Fund share.
The total returns in the table represent the rate an investor would have
earned or lost on an investment in the Fund (assuming reinvestment of
all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the Fund's financial
statements, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31 1998 1997* 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.92 $ 12.57 $ 12.92 $ 11.87 $ 13.31
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.58 0.57 0.58 0.61 0.64
Net realized and unrealized gain (loss) 0.13 0.35 (0.21) 1.13 (1.42)
------- ------- -------- -------- -----------
Total from investment operations 0.71 0.92 0.37 1.74 (0.78)
- ----------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.58) (0.57) (0.58) (0.61) (0.64)
Paid-in-capital (0.24) -- (0.14) (0.08) (0.02)
------- ------- -------- -------- -----------
Total dividends and distributions (0.82) (0.57) (0.72) (0.69) (0.66)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.81 $ 12.92 $ 12.57 $ 12.92 $ 11.87
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN+ 5.63% 7.51% 3.13% 14.96% (5.97)%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses 0.95%(2)(3) 1.33% 1.32%(1) 1.33% 1.32%
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 4.46%(2)(3) 4.51% 4.66% 4.90% 5.10%
- ----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ 897 $ 914 $ 976 $ 1,055 $ 1,008
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 15% 11% 23% 12%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of the
Fund held prior to that date have been designated as Class B 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) Does not reflect the effect of expenses offset of 0.01%.
(2) Reflects overall Fund ratios for investment income and non-class specific
expenses.
(3) If the Distributor had not rebated a portion of its fees to Fund, the
expenses and net investment income ratios would have been 1.33% and 4.08%,
respectively.
22
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
DECEMBER 31, 1998 THROUGH DECEMBER 31, 1997
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.89 $12.80
- --------------------------------------------------------------------------------------------------
Net investment income 0.59 0.27
Net realized and unrealized gain 0.10 0.09
------- -------
Total from investment operations 0.69 0.36
- --------------------------------------------------------------------------------------------------
Less dividends from:
Net investment income (0.59) (0.27)
Net realized gain (0.24) --
------- -------
Total dividends and distributions (0.83) (0.27)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $12.75 $12.89
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN+ 5.50% 2.82%(1)
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- --------------------------------------------------------------------------------------------------
Expenses 0.83%(3) 0.78%(2)
- --------------------------------------------------------------------------------------------------
Net investment income 4.58%(3) 4.47%(2)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $3,788 $1,175
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 15%
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:(1)
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.92 $12.80
- --------------------------------------------------------------------------------------------------
Net investment income 0.53 0.23
Net realized and unrealized gain 0.13 0.12
------- -------
Total from investment operations 0.66 0.35
- --------------------------------------------------------------------------------------------------
Less dividends from:
Net investment income (0.53) (0.23)
Net realized gain (0.24) --
------- -------
Total dividends and distributions (0.77) (0.23)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $12.81 $12.92
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN+ 5.22% 2.80%(1)
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- --------------------------------------------------------------------------------------------------
Expenses 1.33%(3) 1.31%(2)
- --------------------------------------------------------------------------------------------------
Net investment income 4.08%(3) 4.24%(2)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $9,849 $3,610
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 15%
- --------------------------------------------------------------------------------------------------
</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.
23
<PAGE>
<TABLE>
<CAPTION>
CLASS D SHARES
- --------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
DECEMBER 31, 1998 THROUGH DECEMBER 31, 1997
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.92 $12.80
- --------------------------------------------------------------------------------------------------
Net investment income 0.63 0.28
Net realized and unrealized gain 0.10 0.12
------- -------
Total from investment operations 0.73 0.40
- --------------------------------------------------------------------------------------------------
Less dividends from:
Net investment income (0.63) (0.28)
Net realized gain (0.24) --
------- -------
Total dividends and distributions (0.87) (0.28)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $12.78 $12.92
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN+ 5.77% 3.18%(1)
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- --------------------------------------------------------------------------------------------------
Expenses 0.58%(3) 0.60%(2)
- --------------------------------------------------------------------------------------------------
Net investment income 4.83%(3) 5.34%(2)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $ 554 $ 45
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 15%
- --------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
24
<PAGE>
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
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas" Portfolio
European Growth Fund
Fund of Funds - International Portfolio
Global Dividend Growth Securities
International SmallCap Fund
Japan Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH & 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
Strategist Fund
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Real Estate Fund
Utilities Fund
- --------------------------------------------------------------------------------
INCOME FUNDS
- ---------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
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)
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 mutual fund offering
multiple Classes of shares. The other types of funds are: NL - No-Load (Mutual)
Fund; MM - Money Market Fund; FSC - A mutual fund sold with a front-end sales
charge and a distribution (12b-1) fee.
<PAGE>
PROSPECTUS - MAY 1, 1999
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
CALIFORNIA TAX-FREE
INCOME FUND
[BACK COVER PHOTO]
A MUTUAL FUND THAT SEEKS TO
PROVIDE A HIGH LEVEL OF
CURRENT INCOME EXEMPT FROM
BOTH FEDERAL AND CALIFORNIA
INCOME TAX, CONSISTENT WITH
THE PRESERVATION OF CAPITAL
TICKER SYMBOLS:
CLASS A: CLFAX CLASS C: CLFCX
- -------------------- --------------------
CLASS B: CLFBX CLASS D: CLFDX
- -------------------- --------------------
