<PAGE>
Filed Pursuant to Rule 497(b)
Registration File No.: 333-31274
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
NEW YORK SERIES
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(800) 869-NEWS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 2000
TO THE SHAREHOLDERS OF THE NEW YORK SERIES, A SERIES OF MORGAN STANLEY DEAN
WITTER MULTI-STATE MUNICIPAL SERIES TRUST :
Notice is hereby given of a Special Meeting of the Shareholders of the New
York Series ("New York Series"), a portfolio of Morgan Stanley Dean Witter
Multi-State Municipal Series Trust ("Multi-State"), to be held in Conference
Room A, Forty-Fourth Floor, Two World Trade Center, New York, New York 10048,
at 10:00 A.M., New York time, on June 22, 2000, and any adjournments thereof
(the "Meeting"), for the following purposes:
1. To consider and vote upon an Agreement and Plan of Reorganization, dated
January 26, 2000 (the "Reorganization Agreement"), between Multi-State, on
behalf of New York Series, and Morgan Stanley Dean Witter New York
Tax-Free Income Fund ("New York Tax-Free"), pursuant to which
substantially all of the assets of New York Series would be combined with
those of New York Tax-Free and shareholders of New York Series would
become shareholders of New York Tax-Free receiving Class D shares of New
York Tax-Free with a value equal to the value of their holdings in New
York Series (the "Reorganization"); and
2. To act upon such other matters as may properly come before the Meeting.
The Reorganization is more fully described in the accompanying Proxy
Statement and Prospectus and a copy of the Reorganization Agreement is attached
as Exhibit A thereto. Shareholders of record at the close of business on March
17, 2000 are entitled to notice of, and to vote at, the Meeting. Please read
the Proxy Statement and Prospectus carefully before telling us, through your
proxy or in person, how you wish your shares to be voted. Alternatively, if you
are eligible to vote telephonically by touchtone telephone or electronically on
the Internet (as discussed in the enclosed Proxy Statement) you may do so in
lieu of attending the Meeting in person. THE BOARD OF TRUSTEES OF MULTI-STATE
RECOMMENDS YOU VOTE IN FAVOR OF THE REORGANIZATION. WE URGE YOU TO SIGN, DATE
AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
BARRY FINK,
Secretary
March 31, 2000
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO
ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE
TO BE PRESENT IN PERSON, PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY
IN ORDER THAT THE NECESSARY QUORUM BE REPRESENTED AT THE MEETING. THE
ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. AS
DISCUSSED IN THE ENCLOSED PROXY STATEMENT, CERTAIN SHAREHOLDERS WILL BE ABLE
TO VOTE TELEPHONICALLY BY TOUCHTONE TELEPHONE OR ELECTRONICALLY ON THE
INTERNET BY FOLLOWING INSTRUCTIONS ON THEIR PROXY CARDS OR ON THE ENCLOSED
VOTING INFORMATION CARD.
<PAGE>
MORGAN STANLEY DEAN WITTER
NEW YORK TAX-FREE INCOME FUND
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
(800) 869-NEWS
ACQUISITION OF THE ASSETS OF
THE NEW YORK SERIES, A SERIES OF
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
BY AND IN EXCHANGE FOR CLASS D SHARES OF
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
This Proxy Statement and Prospectus is being furnished to shareholders of
the New York Series ("New York Series"), a portfolio of Morgan Stanley Dean
Witter Multi-State Municipal Series Trust ("Multi-State"), in connection with
an Agreement and Plan of Reorganization, dated January 26, 2000 (the
"Reorganization Agreement"), pursuant to which substantially all the assets of
New York Series will be combined with those of Morgan Stanley Dean Witter New
York Tax-Free Income Fund ("New York Tax-Free") in exchange for Class D shares
of New York Tax-Free (the "Reorganization"). As a result of this transaction,
shareholders of New York Series will become shareholders of New York Tax-Free
and will receive Class D shares of New York Tax-Free with a value equal to the
value of their holdings in New York Series. The terms and conditions of this
transaction are more fully described in this Proxy Statement and Prospectus and
in the Reorganization Agreement between Multi-State, on behalf of New York
Series, and New York Tax-Free, attached hereto as Exhibit A. The address of New
York Series is that of New York Tax-Free set forth above. This Proxy Statement
also constitutes a Prospectus of New York Tax-Free, which is dated March 29,
2000, filed by New York Tax-Free with the Securities and Exchange Commission
(the "Commission") as part of its Registration Statement on Form N-14 (the
"Registration Statement").
New York Tax-Free is an open-end diversified management investment company
whose investment objective is to provide a high level of current income exempt
from federal, New York State and New York City income tax or other local income
taxes, consistent with preservation of capital. The fund seeks to achieve its
objective by investing at least 80% of its assets in securities that pay
interest exempt from federal and New York State and New York City income taxes.
This Proxy Statement and Prospectus sets forth concisely information about
New York Tax-Free that shareholders of New York Series should know before
voting on the Reorganization Agreement. A copy of the Prospectus for New York
Tax-Free dated February 22, 2000, is attached as Exhibit B and incorporated
herein by reference. Also enclosed and incorporated herein by reference is New
York Tax-Free's Annual Report for the fiscal year ended December 31, 1999. A
Statement of Additional Information relating to the Reorganization, described
in this Proxy Statement and Prospectus (the "Additional Statement"), dated
March 29, 2000, has been filed with the Commission and is also incorporated
herein by reference. Also incorporated herein by reference are Multi-State's
Prospectus, dated February 25, 2000, and Annual Report for its fiscal year
ended November 30, 1999. Such documents are available without charge by calling
(800) 869-NEWS (TOLL FREE).
Investors are advised to read and retain this Proxy Statement and Prospectus
for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROXY STATEMENT AND PROSPECTUS IS DATED MARCH 29, 2000.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION ............................................................................. 1
General ................................................................................ 1
Record Date; Share Information ......................................................... 1
Proxies ................................................................................ 2
Expenses of Solicitation ............................................................... 3
Vote Required .......................................................................... 3
SYNOPSIS ................................................................................. 4
The Reorganization ..................................................................... 4
Fee Table .............................................................................. 4
Tax Consequences of the Reorganization ................................................. 6
Comparison of New York Series and New York Tax-Free .................................... 6
PRINCIPAL RISK FACTORS ................................................................... 8
THE REORGANIZATION ....................................................................... 9
The Proposal ........................................................................... 9
The Board's Consideration .............................................................. 9
The Reorganization Agreement ........................................................... 11
Tax Aspects of the Reorganization ...................................................... 12
Description of Shares .................................................................. 13
Capitalization Table (unaudited) ....................................................... 14
Appraisal Rights ....................................................................... 14
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS ........................... 14
Investment Objectives and Policies ..................................................... 14
Investment Restrictions ................................................................ 15
ADDITIONAL INFORMATION ABOUT NEW YORK SERIES AND NEW YORK
TAX-FREE ................................................................................ 16
General ................................................................................ 16
Financial Information .................................................................. 16
Management ............................................................................. 16
Description of Securities and Shareholder Inquiries .................................... 16
Dividends, Distributions and Taxes ..................................................... 16
Purchases, Repurchases and Redemptions ................................................. 16
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE .............................................. 16
FINANCIAL STATEMENTS AND EXPERTS ......................................................... 16
LEGAL MATTERS ............................................................................ 17
AVAILABLE INFORMATION .................................................................... 17
OTHER BUSINESS ........................................................................... 17
Exhibit A - Agreement and Plan of Reorganization, dated January 26, 2000, by and between
Multi-State, on behalf of New York Series, and New York Tax-Free ........................ A-1
Exhibit B - Prospectus of New York Tax-Free dated February 22, 2000 ...................... B-1
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
NEW YORK SERIES
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(800) 869-NEWS
--------------------
PROXY STATEMENT AND PROSPECTUS
--------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 2000
INTRODUCTION
GENERAL
This Proxy Statement and Prospectus is being furnished to the shareholders
of the New York Series ("New York Series"), a portfolio of Morgan Stanley Dean
Witter Multi-State Municipal Series Trust ("Multi-State"), an open-end
non-diversified management investment company, in connection with the
solicitation by the Board of Trustees of Multi-State (the "Board") of proxies
to be used at the Special Meeting of Shareholders of New York Series to be held
in Conference Room A, Forty-Fourth Floor, Two World Trade Center, New York, New
York 10048 at 10:00 A.M., New York time, on June 22, 2000, and any adjournments
thereof (the "Meeting"). It is expected that the mailing of this Proxy
Statement and Prospectus will be made on or about April 5, 2000.
At the Meeting, New York Series shareholders ("Shareholders") will
consider and vote upon an Agreement and Plan of Reorganization, dated January
26, 2000 (the "Reorganization Agreement"), between Multi-State, on behalf of
New York Series, and Morgan Stanley Dean Witter New York Tax-Free Income Fund
("New York Tax-Free") pursuant to which substantially all of the assets of New
York Series will be combined with those of New York Tax-Free in exchange for
Class D shares of New York Tax-Free. As a result of this transaction,
Shareholders will become shareholders of New York Tax-Free and will receive
Class D shares of New York Tax-Free equal to the value of their holdings in New
York Series on the date of such transaction (the "Reorganization"). The Class D
shares to be issued by New York Tax-Free pursuant to the Reorganization (the
"New York Tax-Free Shares") will be issued at net asset value without an
initial sales charge. Further information relating to New York Tax-Free is set
forth herein and in New York Tax-Free's current Prospectus, dated February 22,
2000 ("New York Tax-Free's Prospectus"), attached to this Proxy Statement and
Prospectus and incorporated herein by reference.
The information concerning New York Series contained herein has been
supplied by Multi-State and the information concerning New York Tax-Free
contained herein has been supplied by New York Tax-Free.
RECORD DATE; SHARE INFORMATION
The Board has fixed the close of business on March 17, 2000 as the record
date (the "Record Date") for the determination of the Shareholders entitled to
notice of, and to vote at, the Meeting. As of the Record Date, there were
1,055,648.828 shares of New York Series issued and outstanding. Shareholders on
the Record Date are entitled to one vote per share on each matter submitted to
a vote at the Meeting. A majority of the outstanding shares entitled to vote,
represented in person or by proxy, will constitute a quorum at the Meeting.
1
<PAGE>
No person was known to own of record or beneficially 5% or more of the
outstanding shares of New York Series as of the Record Date. As of the Record
Date, the trustees and officers of Multi-State, as a group, owned less than 1%
of the outstanding shares of New York Series.
The following persons were known to own of record or beneficially 5% or
more of the outstanding shares of a Class of New York Tax-Free as of the Record
Date: Class A -- Alice Lazoff, EXEC Estate of Mischa Lazoff, 400 E. 56th Street
#36B, New York, NY 10022-4147 (50.6%); Mr. Gerald J. Tesauro, 9 Dove Court Apt.
D, Croton-on-Hudson, NY 10520-1621 (15.1%); Ann V. William, 6825 Yacht Club
Rd., Cicero, NY 13039-9754 (11.2%); Peter J. Spinelli & Patricia A. Spinelli
TEN COM, 11 Founders Green, Pittsford, NY 14534-2164 (11.2%). Class C -- Helen
S. Wepman REVOCABLE LIVING TR, Helen S. Wepman & Barry Wepman TTEES DTD
08/5/92, 201 West 70th Street #33F, New York, NY 10023-4331 (21.2%); Edward
Bradfield, 3 Peter Cooper Road, New York NY 10010-6612 (18.1%); Mrs. Azadouhi
Norian, 37 Wilton Street, New Hyde Park, NY 11040-3829 (16.2%); Kathleen Ford,
1570 East Ave. #125, Rochester, NY 14610-1656 (16.1%); Ann Moos, 630 Ft.
Washington Ave. Apt. 1C, New York, NY 10040-3948 (7.6%). Class D -- Anamae
Mitchell Trust Dtd 12/30/92, Marilyn M. Sweeney TTEE, P.O. Box 5448, Oswego, NY
13126-5448 (33.4%); Seymour Marcus, 892 Knota Rd., Woodmere, NY 11598-2043
(27.6%); Edward J. Kruser & Jeanne S. Kruser JTTEN, RR 1 Box 3B, Franklin, NY
13775-9705 (12.4%); Cabrina J. McAllister, 250 West 89th Street #4C, New York,
NY 10024 (7.9%); Robert Stoll, 104 Olive Lane, New Hyde Park, NY 11040-2334
(6.2%); Morgan Stanley Dean Witter Advisors Inc., Attn: Maurice Bendrihem, 2
World Trade Center 73rd Fl., New York, NY 10048-0002 (6.0%); Paul Gleicher &
Phyllis Marcus JTTEN, 892 Knota Rd., Woodmere, NY 11598-2043 (5.3%). As of the
Record Date, the trustees and officers of New York Tax-Free, as a group, owned
less than 1% of the outstanding shares of New York Tax-Free.
PROXIES
The enclosed form of proxy, if properly executed and returned, will be
voted in accordance with the choice specified thereon. The proxy will be voted
in favor of the Reorganization Agreement unless a choice is indicated to vote
against or to abstain from voting on the Reorganization Agreement. The Board
knows of no business, other than that set forth in the Notice of Special
Meeting of Shareholders, to be presented for consideration at the Meeting.
However, the proxy confers discretionary authority upon the persons named
therein to vote as they determine on other business, not currently
contemplated, which may come before the Meeting. Abstentions and, if
applicable, broker "non-votes" will not count as votes in favor of the
Reorganization Agreement, and broker "non-votes" will not be deemed to be
present at the meeting for purposes of determining whether the Reorganization
Agreement has been approved. Broker "non-votes" are shares held in street name
for which the broker indicates that instructions have not been received from
the beneficial owners or other persons entitled to vote and for which the
broker does not have discretionary voting authority. If a Shareholder executes
and returns a proxy but fails to indicate how the votes should be cast, the
proxy will be voted in favor of the Reorganization Agreement. The proxy may be
revoked at any time prior to the voting thereof by: (i) delivering written
notice of revocation to the Secretary of Multi-State at Two World Trade Center,
New York, New York 10048; (ii) attending the Meeting and voting in person; or
(iii) completing and returning a new proxy (whether by mail or, as discussed
below, by touchtone telephone or the Internet) (if returned and received in
time to be voted). Attendance at the Meeting will not in and of itself revoke a
proxy.
In the event that the necessary quorum to transact business or the vote
required to approve or reject the Reorganization Agreement is not obtained at
the Meeting, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of the holders of a majority of shares of New
York Series present in person or by proxy at
2
<PAGE>
the Meeting. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
Reorganization Agreement and will vote against any such adjournment those
proxies required to be voted against the Reorganization Agreement.
EXPENSES OF SOLICITATION
The expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement and Prospectus, are expected to approximate
$50,000 of which $25,000 will be borne by Morgan Stanley Dean Witter Advisors
Inc. ("MSDW Advisors" or the "Investment Manager") and $25,000 will be borne by
New York Series. New York Series and New York Tax-Free will bear all of their
respective other expenses associated with the Reorganization. In addition to
the solicitation of proxies by mail, proxies may be solicited by officers of
Multi-State, and officers and regular employees of MSDW Advisors and Morgan
Stanley Dean Witter Trust FSB ("MSDW Trust"), an affiliate of MSDW Advisors,
personally or by mail, telephone, telegraph or otherwise, without compensation
therefor. Brokerage houses, banks and other fiduciaries may be requested to
forward soliciting material to the beneficial owners of shares and to obtain
authorization for the execution of proxies.
Shareholders whose shares are registered with MSDW Trust will be able to
vote their shares by touchtone telephone or by Internet by following the
instructions on the proxy card or on the Voting Information Card accompanying
this Proxy Statement and Prospectus. To vote by touchtone telephone,
Shareholders can call the toll-free number 1-800-690-6903. To vote by Internet,
Shareholders can access the websites www.msdwt.com or www.proxyvote.com.
Telephonic and Internet voting with MSDW Trust presently are not available to
Shareholders whose shares are held in street name.
In certain instances, MSDW Trust, an affiliate of MSDW Advisors, may call
Shareholders to ask if they would be willing to have their votes recorded by
telephone. The telephone voting procedure is designed to authenticate
Shareholders' identities, to allow Shareholders to authorize the voting of
their shares in accordance with their instructions and to confirm that their
instructions have been recorded properly. No recommendation will be made as to
how a Shareholder should vote on the Reorganization Agreement other than to
refer to the recommendation of the Board. Multi-State, on behalf of New York
Series, has been advised by counsel that these procedures are consistent with
the requirements of applicable law. Shareholders voting by telephone in this
manner will be asked for their social security number or other identifying
information and will be given an opportunity to authorize proxies to vote their
shares in accordance with their instructions. To ensure that the Shareholders'
instructions have been recorded correctly, they will receive a confirmation of
their instructions in the mail. A special toll-free number set forth in the
confirmation will be available in case the information contained in the
confirmation is incorrect. Although a Shareholder's vote may be taken by
telephone, each Shareholder will receive a copy of this Proxy Statement and
Prospectus and may vote by mail using the enclosed proxy card or by touchtone
telephone or the Internet as set forth above. The last proxy vote received in
time to be voted, whether by proxy card, touchtone telephone or Internet, will
be the vote that is counted and will revoke all previous votes by the
Shareholder.
VOTE REQUIRED
Approval of the Reorganization Agreement by the Shareholders requires the
affirmative vote of a majority (i.e., more than 50%) of the shares of New York
Series represented in person or by proxy and entitled to vote at the Meeting,
provided a quorum is present at the Meeting. If the Reorganization Agreement is
not approved by Shareholders, New York Series will continue in existence and
the Board will consider alternative actions.
3
<PAGE>
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus. This synopsis
is only a summary and is qualified in its entirety by the more detailed
information contained or incorporated by reference in this Proxy Statement and
Prospectus and the Reorganization Agreement. Shareholders should carefully
review this Proxy Statement and Prospectus and Reorganization Agreement in
their entirety and, in particular, New York Tax-Free's Prospectus, which is
attached to this Proxy Statement and incorporated herein by reference.
THE REORGANIZATION
The Reorganization Agreement provides for the transfer of substantially
all the assets of New York Series, subject to stated liabilities, to New York
Tax-Free in exchange for the New York Tax-Free Shares. The aggregate net asset
value of the New York Tax-Free Shares issued in the exchange will equal the
aggregate value of the net assets of New York Series received by New York
Tax-Free. On or after the closing date scheduled for the Reorganization (the
"Closing Date"), New York Series will distribute the New York Tax-Free Shares
received by New York Series to Shareholders as of the Valuation Date (as
defined below under "The Reorganization Agreement") in complete liquidation of
New York Series and New York Series will thereafter be dissolved as a portfolio
of Multi-State under Massachusetts law. As a result of the Reorganization, each
Shareholder will receive that number of full and fractional New York Tax-Free
Shares equal in value to such Shareholder's pro rata interest in the net assets
of New York Series transferred to New York Tax-Free. Accordingly, as a result
of the Reorganization, each Shareholder of New York Series will become a holder
of Class D shares of New York Tax-Free. Shareholders holding their shares of
New York Series in certificate form will be asked to surrender their
certificates in connection with the Reorganization. Shareholders who do not
surrender their certificates prior to the Closing Date will still receive their
shares of New York Tax-Free; however, such Shareholders will not be able to
redeem, transfer or exchange the New York Tax-Free Shares received until the
old certificates have been surrendered. The Board has determined that the
interests of Shareholders will not be diluted as a result of the
Reorganization.
FOR THE REASONS SET FORTH BELOW UNDER "THE REORGANIZATION -- THE BOARD'S
CONSIDERATION," THE BOARD, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED
PERSONS" OF MULTI-STATE, ON BEHALF OF NEW YORK SERIES ("INDEPENDENT TRUSTEES"),
AS THAT TERM IS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE
"1940 ACT"), HAS CONCLUDED THAT THE REORGANIZATION IS IN THE BEST INTERESTS OF
NEW YORK SERIES AND ITS SHAREHOLDERS AND RECOMMENDS APPROVAL OF THE
REORGANIZATION AGREEMENT.
FEE TABLE
New York Series and New York Tax-Free each pay expenses for management of
their assets, distribution of their shares and other services, and those
expenses are reflected in the net asset value per share of each fund. Class D
shares of New York Tax-Free do not pay distribution-related fees; however, the
other three Classes offered by New York Tax-Free pay fees for the distribution
of their shares. The following table briefly describes the fees and expenses
that a shareholder of New York Series and a Class D shareholder of New York
Tax-Free may pay if they buy and hold shares of each respective fund. These
expenses are deducted from each respective fund's assets and are based on
expenses paid by New York Series for its fiscal year ended November 30, 1999,
and by Class D shares of New York Tax-Free for its fiscal year ended December
31, 1999. The table also sets forth pro forma fees for the surviving combined
fund (New York Tax-Free) reflecting what the fee schedule would have been on
December 31, 1999, if the Reorganization had been consummated twelve (12)
months prior to that date and assuming Class D fees and expenses.
4
<PAGE>
Shareholder Fees
<TABLE>
<CAPTION>
NEW YORK PRO FORMA
NEW YORK TAX-FREE COMBINED
SERIES (CLASS D) (CLASS D)
-------------- ----------- ----------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES
(AS A PERCENTAGE OF OFFERING PRICE) 4.0%(1) none none
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED
DIVIDENDS none none none
MAXIMUM CONTINGENT DEFERRED SALES CHARGE (LOAD) (AS A
PERCENTAGE OF THE LESSER OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PROCEEDS) none none none
REDEMPTION FEES none none none
EXCHANGE FEE none none none
</TABLE>
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
<TABLE>
<CAPTION>
NEW YORK PRO FORMA
NEW YORK TAX-FREE COMBINED
SERIES (CLASS D) (CLASS D)
--------------- ------------- -----------
<S> <C> <C> <C>
MANAGEMENT FEES 0.35% 0.55% 0.55%
DISTRIBUTION AND SERVICE (12B-1) FEES 0.15%(2) none none
OTHER EXPENSES 0.43% 0.18% 0.17%
TOTAL ANNUAL FUND OPERATING EXPENSES 0.93% 0.73% 0.72%
</TABLE>
- ----------
(1) Reduced for purchases of $25,000 and over.
(2) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1 fee
payable by New York Series is characterized as a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD")
guidelines and are payments made for personal service and/or maintenance
of shareholder accounts.
5
<PAGE>
EXAMPLE
To attempt to show the effect of these expenses on an investment over
time, the hypotheticals shown below have been created. The Example assumes that
an investor invests $10,000 in either New York Series or Class D shares of New
York Tax-Free or the new combined fund (New York Tax-Free), that the investment
has a 5% return each year and that the operating expenses for each fund remain
the same (as set forth in the chart above). Although a shareholder's actual
costs may be higher or lower, the tables below show a shareholder's costs at
the end of each period based on these assumptions depending upon whether or not
a shareholder sold his shares at the end of each period.
If a Shareholder SOLD His Shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
New York Series ....................... $491 $685 $894 $1,497
New York Tax-Free (Class D) ........... $ 75 $233 $406 $ 906
Pro Forma Combined (Class D) .......... $ 74 $230 $401 $ 894
</TABLE>
If a Shareholder HELD His Shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
New York Series ....................... $491 $685 $894 $1,497
New York Tax-Free (Class D) ........... $ 75 $233 $406 $ 906
Pro Forma Combined (Class D) .......... $ 74 $230 $401 $ 894
</TABLE>
The purpose of the foregoing fee table is to assist the investor or
shareholder in understanding the various costs and expenses that an investor or
shareholder in the fund will bear directly or indirectly. For a more complete
description of these costs and expenses, see "Comparison of New York Series and
New York Tax-Free -- Investment Management and Distribution Plan Fees, Other
Significant Fees, and Purchases, Exchanges and Redemptions" below.
TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to the Reorganization, Multi-State, on behalf of New York
Series, and New York Tax-Free, will receive an opinion of Mayer, Brown & Platt
to the effect that the Reorganization will constitute a tax-free reorganization
for federal income tax purposes, and that no gain or loss will be recognized by
New York Series or the shareholders of New York Series for federal income tax
purposes as a result of the transactions included in the Reorganization. For
further information about the tax consequences of the Reorganization, see "The
Reorganization -- Tax Aspects of the Reorganization" below.
COMPARISON OF NEW YORK SERIES AND NEW YORK TAX-FREE
INVESTMENT OBJECTIVES AND POLICIES. New York Series and New York Tax-Free
have similar investment objectives. Both New York Series and New York Tax-Free
seek to provide a high level of current income
6
<PAGE>
exempt from federal and New York State income taxes consistent with the
preservation of capital. New York Tax-Free also seeks, as its investment
objective, a high level of current income exempt from New York City or other
local income taxes.
Both funds seek to achieve their investment objectives by investing at
least 80% of their respective total assets in securities, the interest of which
is exempt from federal and New York state income taxes and, in the case of New
York Tax-Free, New York City income taxes.
The investment policies of both funds are essentially the same; the
principal differences between them are described under "Comparison of
Investment Objectives, Policies and Restrictions" below.
Other than each fund's policy of investing at least 80% of its assets in
New York tax-exempt securities, the investment policies of both New York Series
and New York Tax-Free are not fundamental and may be changed by their
respective Boards of Trustees.
INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. New York Series and New
York Tax-Free obtain management services from MSDW Advisors. With respect to
New York Series, the fund pays MSDW Advisors monthly compensation calculated
daily at an annual rate of 0.35% of the fund's average daily net assets. With
respect to New York Tax-Free, the fund pays MSDW Advisors monthly compensation
calculated daily by applying the annual rate of 0.55% to the portion of the
fund's average daily net assets not exceeding $500 million and 0.525% to the
portion of such daily net assets exceeding $500 million. Each class of shares
of New York Tax-Free is subject to the same management fee rates.
Multi-State has adopted a distribution plan ("Plan") pursuant to Rule
12b-1 under the 1940 Act whereby each series, including New York Series,
reimburses the Distributor and others for the expenses of certain activities
and services incurred by them in connection with the distribution of each
respective series' shares. Reimbursement for these expenses is made in monthly
payments by, in this case, New York Series, to the Distributor, which will in
no event exceed amounts equal to payment at the annual rate of 0.15% of the
average daily net assets of New York Series. There are no 12b-1 fees applicable
to New York Tax Free's Class D shares. For further information relating to the
12b-1 fees applicable to each class of New York Tax-Free's shares, see the
section entitled "Share Class Arrangements" in New York Tax-Free's Prospectus,
attached hereto.
OTHER SIGNIFICANT FEES. Both New York Series and New York Tax-Free pay
additional fees in connection with their operations, including legal, auditing,
transfer agent, trustees fees and custodial fees. See "Synopsis -- Fee Table"
above for the percentage of average net assets represented by such "Other
Expenses."
PURCHASES, EXCHANGES AND REDEMPTIONS. Shares of New York Series are sold
at net asset value plus an initial sales charge of up to 4.0%. The initial
sales charge is reduced for certain purchases. Shares of New York Series may be
redeemed for cash without redemption or other charge at any time at the net
asset value per share next determined. Class D shares of New York Tax-Free are
currently offered at net asset value and such shares may be redeemed for cash
without redemption or other charge at the net asset value per share next
determined. Normally, Class D shares of New York Tax-Free are offered only to a
limited group of investors. Subsequent to the Reorganization, all New York
Series shares will be designated Class D shares of New York Tax-Free. However,
additional investments (except for reinvestment of distributions received on
shares acquired as a result of the Reorganization) in Class D shares of New
York Tax-Free (or in Class D shares of any other Morgan Stanley Dean Witter
Fund) by Shareholders holding such shares may only be made if those
Shareholders are otherwise eligible to purchase Class D shares. Class D shares
acquired in the Reorganization may, however, be exchanged for Class D shares of
another Morgan Stanley Dean Witter Fund pursuant to Class D's exchange
privileges discussed below.
7
<PAGE>
New York Tax-Free offers four classes of shares (Class A, Class B, Class C
and Class D) which differ principally in terms of sales charges, distribution
and service fees and ongoing expenses. For further information relating to each
of the classes of New York Tax-Free's shares, see the section entitled "Share
Class Arrangements" in New York Tax-Free's Prospectus.
Shares of New York Series currently may be exchanged for shares of any
other Multi-State series, for Class A shares of any Morgan Stanley Dean Witter
Fund that offers its shares in more than one class, for shares of Morgan
Stanley Dean Witter Hawaii Municipal Trust, Morgan Stanley Dean Witter
Short-Term U.S. Treasury Trust, Morgan Stanley Dean Witter North American
Government Income Trust, Morgan Stanley Dean Witter Limited Term Municipal
Trust, Morgan Stanley Dean Witter Short-Term Bond Fund and for shares of the
five Morgan Stanley Dean Witter Funds that are money market funds. Class D
shares of New York Tax-Free may be exchanged for Class D shares of any other
Morgan Stanley Dean Witter Fund that offers its shares in more than one class,
or any of Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust, Morgan
Stanley Dean Witter North American Government Income Trust, Morgan Stanley Dean
Witter Limited Term Municipal Trust, Morgan Stanley Dean Witter Short-Term Bond
Fund and the five Morgan Stanley Dean Witter Funds that are money market funds
(the foregoing funds are collectively referred to as the "Exchange Funds"),
without the imposition of an exchange fee.
Both New York Series and New York Tax-Free provide telephone exchange
privileges to their shareholders. For greater details relating to exchange
privileges applicable to New York Tax-Free, see the section entitled "How to
Exchange Shares" in New York Tax-Free's Prospectus.
Both New York Series and New York Tax-Free may redeem involuntarily, at
net asset value, most accounts valued at less than $100. However, both funds
offer a reinstatement privilege whereby a shareholder who has not previously
exercised such privilege whose shares have been redeemed or repurchased may,
within thirty-five days after the date of redemption or repurchase, reinstate
any portion or all of the proceeds thereof in shares of the same class from
which such shares were redeemed or repurchased.
DIVIDENDS. New York Series and New York Tax-Free each declare income
dividends daily and pay dividends from net investment income monthly. Both New
York Series and New York Tax-Free distribute net capital gains, if any, at
least annually in December. Each, however, may determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. With respect to both New York Series and New York Tax-Free,
dividends and capital gains distributions are automatically reinvested in
additional shares at net asset value unless the shareholder elects to receive
cash.
PRINCIPAL RISK FACTORS
The share price or net asset value of New York Tax-Free and New York
Series will fluctuate with changes in the market value of their respective
portfolio securities. The market value of the funds' portfolio securities will
increase or decrease due to a variety of economic, market and political
factors, including changes in prevailing interest rates, which cannot be
predicted. The principal risks of an investment in either New York Tax-Free or
New York Series are the risks associated with their respective fixed-income
securities which primarily consist of municipal obligations. Fixed income
securities are subject to two types of risks: credit risk, and interest rate
risk.
Credit risk refers to the possibility that the issuer of a security will
be unable or unwilling to make interest payments and/or repay the principal on
its debt. In the case of certain municipal obligations known as revenue bonds,
the credit risk refers to the possibility that the user fees from a project or
specified revenue source are insufficient to meet interest and/or principal
payment obligations or the credit impairment of the user. New York Tax-Free and
New York Series are subject to the added credit risk of concentrating their
investments in
8
<PAGE>
a single state - New York. Because both funds concentrate their investments in
securities issued by New York state and local governments and government
authorities, both funds will be significantly affected by the political,
economic and regulatory developments concerning those issuers. Should any
difficulties develop concerning New York issuers' abilities to pay principal
and/or interest on their debt obligations, the value and yield of both funds
could be adversely affected. Interest rate risk refers to fluctuations in the
value of a fixed-income security resulting from changes in the general level of
interest rates. When the general level of interest rates goes up, the prices of
most fixed-income securities go down. When the general level of interest rates
goes down, the prices of most fixed-income securities go up.
Unlike New York Tax-Free, New York Series is classified as
"non-diversified" and, as such, its investments are not required to meet
certain diversification requirements under federal law. Compared with
"diversified" funds such as New York Tax-Free, New York Series may invest a
greater percentage of its assets in the securities of an individual issuer.
Thus, New York Series' assets may be concentrated in fewer securities than New
York Tax-Free. A decline in the value of those investments may cause New York
Series' overall value to decline to a greater degree than New York Tax-Free.
Both New York Tax-Free and New York Series may invest a portion of their
respective assets in inverse floating rate municipal obligations which are
obligations that are typically created through a division of a fixed rate
municipal obligation in two separate instruments, a short-term obligation and a
long-term obligation. The interest rates on inverse floating rate municipal
obligations generally move in the reverse direction of market interest rates.
Inverse floating rate municipal obligations offer the potential for higher
income than is available from fixed rate obligations of comparable maturity and
credit rating but they also carry greater risks. In particular, the prices of
inverse floating rate municipal obligations are more volatile, i.e., they
increase and decrease in response to changes in interest rates to a greater
extent than comparable fixed rate obligations.
Both New York Tax-Free and New York Series may invest in municipal lease
obligations which are obligations issued by state and local agencies or
authorities to finance equipment and facilities. Certain lease obligations
contain clauses whereby future payments under the lease are dependent upon
annual or periodic legislative appropriations. If these legislative
appropriations do not occur, holders of such municipal lease obligations may
experience difficulty exercising their rights, including disposition of the
property. Both New York Tax-Free and New York Series may also invest in futures
obligations which are considered speculative in nature and involve certain
risks.
The foregoing discussion is a summary of the principal risk factors. For a
more complete discussion of the risks of each fund, see "Principal Risks" and
"Additional Risk Information" in the Prospectus of Multi-State and in New York
Tax-Free's Prospectus attached hereto and incorporated herein by reference.
THE REORGANIZATION
THE PROPOSAL
The Board of Trustees of Multi-State, on behalf of New York Series,
including the Independent Trustees, having reviewed the financial position of
New York Series and the prospects for achieving economies of scale through the
Reorganization and having determined that the Reorganization is in the best
interests of New York Series and its Shareholders and that the interests of
Shareholders will not be diluted as a result thereof, recommends approval of
the Reorganization by Shareholders of New York Series.
THE BOARD'S CONSIDERATION
At a meeting held on January 26, 2000, the Board, including all of the
Independent Trustees, unanimously approved the Reorganization Agreement and
determined to recommend that Shareholders approve the
9
<PAGE>
Reorganization Agreement. In reaching this decision, the Board made an
extensive inquiry into a number of factors, particularly the comparative
expenses currently incurred in the operations of New York Series and the Class
D shares of New York Tax-Free. The Board also considered other factors,
including, but not limited to: the small asset base of New York Series which
may affect the long-term economic viability of the fund because of higher costs
and disadvantageous economies of scale; the general compatibility of the
investment objectives, policies, restrictions and portfolios of New York Series
and New York Tax-Free; the terms and conditions of the Reorganization which
would affect the price of shares to be issued in the Reorganization; the
tax-free nature of the Reorganization; and any direct or indirect costs to be
incurred by New York Series and New York Tax-Free in connection with the
Reorganization.
In recommending the Reorganization to Shareholders, the Board of
Multi-State, on behalf of New York Series, considered that the Reorganization
would have the following benefits to Shareholders:
1. Once the Reorganization is consummated, the expenses which would be
borne by Class D shareholders of the "combined fund" will be significantly
lower on a percentage basis than the expenses per share of New York Series
although the investment management fee of New York Tax-Free is higher than the
investment management fee of New York Series. The combined fund's expenses
would be lower in part because Class D shares of New York Tax-Free bear no
12b-1 fees, whereas New York Series is subject to a 12b-1 fee of up to 0.15% of
its average net assets. Furthermore, the estimated current rate of other
expenses to be paid by Class D of the surviving New York Tax-Free (0.17% of
average daily net assets) would be lower than the rate of other expenses
currently paid by New York Series (0.43% of average daily net assets). In
addition, to the extent that the Reorganization would result in Shareholders
becoming shareholders of a combined larger fund, further economies of scale
could be achieved since various fixed expenses (e.g., auditing and legal) can
be spread over a larger number of shares. The Board noted that the expense
ratio for New York Series was higher ( 0.93% for its fiscal year ended November
30, 1999) than the expense ratio for Class D shares of New York Tax-Free (0.73%
for its fiscal year ended December 31, 1999).
2. Shareholders will be able to participate in an expanded diversified
portfolio of New York municipal issuers through investment in New York
Tax-Free.
3. Shareholders would have the ability to exchange their Class D shares of
New York Tax-Free acquired as a result of the Reorganization into Class D
shares of any Morgan Stanley Dean Witter Multi-Class Fund. Currently,
Shareholders may only exchange into Class A shares of any Morgan Stanley Dean
Witter Multi-Class Fund. Class D shares bear lower expenses than Class A
shares.
4. The Reorganization is intended to qualify as a tax-free reorganization
for Federal income tax purposes, pursuant to which no gain or loss will be
recognized by New York Series or its Shareholders for Federal income tax
purposes as a result of transactions included in the Reorganization.
5. The Board also took into consideration that absent the Reorganization,
New York Tax-Free will continue to compete for investor funds with New York
Series and that it appeared unlikely that New York Series would experience a
material growth in assets in the future. The Reorganization should allow for
more concentrated selling efforts to the benefit of both New York Series and
New York Tax-Free shareholders and avoid the inefficiencies associated with the
operation and distribution of two similar funds through the same sales
organization.
The Board of Trustees of New York Tax-Free, including a majority of the
Independent Trustees of New York Tax-Free, also have determined that the
Reorganization is in the best interests of New York Tax-Free and its
shareholders and that the interests of existing shareholders of New York
Tax-Free will not be diluted as a result thereof. The transaction will enable
New York Tax-Free to acquire investment securities which are
10
<PAGE>
consistent with New York Tax-Free's investment objective, without the costs
attendant to the purchase of such securities in the market. Also, the addition
of assets to New York Tax-Free's portfolio could, in the future, help New York
Tax-Free to reach a lower breakpoint rate reduction in the investment
management fee. Furthermore, like the Shareholders of New York Series, the
shareholders of New York Tax-Free may also realize an intangible benefit in
having the Morgan Stanley Dean Witter sales organization concentrate its
selling efforts on one rather than two similar funds, which may result in
further economies of scale. Finally, the Board considered that even if the
benefits enumerated above are not realized, the costs to the Fund are
sufficiently minor to warrant taking the opportunity to realize those benefits.
THE REORGANIZATION AGREEMENT
The terms and conditions under which the Reorganization would be
consummated, as summarized below, are set forth in the Reorganization
Agreement. This summary is qualified in its entirety by reference to the
Reorganization Agreement, a copy of which is attached as Exhibit A to this
Proxy Statement and Prospectus.
The Reorganization Agreement provides that (i) New York Series will
transfer all of its assets, including portfolio securities, cash (other than
cash amounts retained by New York Series as a "Cash Reserve" in the amount
sufficient to discharge its liabilities not discharged prior to the Valuation
Date (as defined below) and for expenses of the dissolution), cash equivalents
and receivables to New York Tax-Free on the Closing Date in exchange for the
assumption by New York Tax-Free of stated liabilities of New York Series,
including all expenses, costs, charges and reserves, as reflected on an
unaudited statement of assets and liabilities of New York Series prepared by
the Treasurer of Multi-State, on behalf of New York Series, as of the Valuation
Date (as defined below) in accordance with generally accepted accounting
principles consistently applied from the prior audited period, and the delivery
of the New York Tax-Free Shares; (ii) such New York Tax-Free Shares would be
distributed to Shareholders on the Closing Date or as soon as practicable
thereafter; (iii) New York Series would be dissolved; and (iv) the outstanding
shares of New York Series would be canceled.
The number of New York Tax-Free Shares to be delivered to New York Series
will be determined by dividing the aggregate net asset value of the shares of
New York Series acquired by New York Tax-Free by the net asset value per share
of the Class D shares of New York Tax-Free; these values will be calculated as
of the close of business of the New York Stock Exchange on the third business
day following the receipt of the requisite approval by Shareholders of the
Reorganization Agreement or at such other time as New York Series and New York
Tax-Free may agree (the "Valuation Date"). As an illustration, assume that on
the Valuation Date, the shares of New York Series had an aggregate net asset
value (not including any Cash Reserve of New York Series) of $100,000. If the
net asset value per Class D share of New York Tax-Free were $10 per share at
the close of business on the Valuation Date, the number of Class D shares of
New York Tax-Free to be issued would be 10,000 ($100,000 (divided by) $10).
These 10,000 Class D shares of of New York Tax-Free would be distributed to the
former shareholders of New York Series. This example is given for illustration
purposes only and does not bear any relationship to the dollar amounts or
shares expected to be involved in the Reorganization.
On the Closing Date or as soon as practicable thereafter, New York Series
will distribute pro rata to its Shareholders of record as of the close of
business on the Valuation Date, the New York Tax-Free Shares it receives. Each
Shareholder will receive Class D shares of New York Tax-Free that corresponds
to the shares of New York Series currently held by that Shareholder. New York
Tax-Free will cause its transfer agent to credit and confirm an appropriate
number of New York Tax-Free Shares to each Shareholder. Certificates for New
York Tax-Free Shares will be issued only upon written request of a Shareholder
and only for whole shares, with fractional shares credited to the name of the
Shareholder on the books of New York Tax-Free. Shareholders who wish to receive
certificates representing their New York Tax-Free Shares must, after receipt of
their confirmations, make a written request to New York Tax-Free's transfer
agent Morgan Stanley Dean Witter
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<PAGE>
Trust FSB, Harborside Financial Center, Jersey City, New Jersey 07311.
Shareholders of New York Series holding their shares in certificate form will
be asked to surrender such certificates in connection with the Reorganization.
Shareholders who do not surrender their certificates prior to the Closing Date
will still receive their shares of New York Tax-Free; however, such
Shareholders will not be able to redeem, transfer or exchange the New York
Tax-Free Shares received until the old certificates have been surrendered.
The Closing Date will be the next business day following the Valuation
Date. The consummation of the Reorganization is contingent upon the approval of
the Reorganization by the Shareholders and the receipt of the other opinions
and certificates set forth in Sections 6, 7 and 8 of the Reorganization
Agreement and the occurrence of the events described in those Sections, certain
of which may be waived by New York Series or New York Tax-Free. The
Reorganization Agreement may be amended in any mutually agreeable manner. All
expenses of this solicitation, including the cost of preparing and mailing this
Proxy Statement and Prospectus, will be borne, as set forth in this Proxy
Statement and Prospectus, by New York Series and MSDW Advisors, which expenses
are expected to approximate $50,000. New York Series and New York Tax-Free will
bear all of their respective other expenses associated with the Reorganization.
The Reorganization Agreement may be terminated and the Reorganization
abandoned at any time, before or after approval by Shareholders or by mutual
consent of Multi-State, on behalf of New York Series, and New York Tax-Free. In
addition, either party may terminate the Reorganization Agreement upon the
occurrence of a material breach of the Reorganization Agreement by the other
party or if, by September 30, 2000, any condition set forth in the
Reorganization Agreement has not been fulfilled or waived by the party entitled
to its benefits.
Under the Reorganization Agreement, within one year after the Closing
Date, Multi-State, on behalf of New York Series, shall: either pay or make
provision for all of its liabilities and distribute any remaining amount of the
Cash Reserve (after paying or making provision for such liabilities and the
estimated cost of making the distribution) to former Shareholders of New York
Series that received New York Tax-Free Shares. New York Series shall be
dissolved as a portfolio of Multi-State under Massachusetts law promptly
following the distributions of shares of New York Tax-Free to Shareholders of
record of New York Series.
The effect of the Reorganization is that Shareholders who vote their
shares in favor of the Reorganization Agreement are electing to sell their
shares of New York Series (at net asset value on the Valuation Date calculated
after subtracting any Cash Reserve) and reinvest the proceeds in New York
Tax-Free Shares at net asset value and without recognition of taxable gain or
loss for Federal income tax purposes. See "Tax Aspects of the Reorganization"
below. As noted in "Tax Aspects of the Reorganization" below, if New York
Series recognizes net gain from the sale of securities prior to the Closing
Date, such gain, to the extent not offset by capital loss carryforwards, will
be distributed to Shareholders prior to the Closing Date and will be taxable to
Shareholders as capital gain.
Shareholders will continue to be able to redeem their shares of New York
Series at net asset value next determined after receipt of the redemption
request until the close of business on the business day next preceding the
Closing Date. Redemption requests received by Multi-State, on behalf of New
York Series, thereafter will be treated as requests for redemption of shares of
New York Tax-Free.
TAX ASPECTS OF THE REORGANIZATION
At least one but not more than 20 business days prior to the Valuation
Date, New York Series will declare and pay a dividend or dividends which,
together with all previous such dividends, will have the effect of distributing
to Shareholders all of New York Series' investment company taxable income for
all periods since the inception of New York Series through and including the
Valuation Date (computed without regard to any dividends paid deduction), and
all of New York Series' net capital gain, if any, realized in such periods
(after reduction for any capital loss carryforward).
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<PAGE>
The Reorganization is intended to qualify for Federal income tax purposes
as a tax-free reorganization under Section 368(a)(1)(C) of the Internal Revenue
Code of 1986, as amended (the "Code").
As a condition to the Reorganization, Multi-State, on behalf of New York
Series, and New York Tax-Free will receive an opinion of Mayer, Brown & Platt
to the effect that, based on certain assumptions, facts, the terms of the
Reorganization Agreement and representations set forth in the Reorganization
Agreement or otherwise provided by Multi-State, on behalf of New York Series,
and New York Tax-Free (including a representation to the effect that New York
Tax-Free has no plan or intention to sell or otherwise dispose of more than
fifty percent of the assets of New York Series acquired in the Reorganization
except for dispositions made in the ordinary course of business):
1. The transfer of New York Series' assets in exchange for the New York
Tax-Free Shares and the assumption by New York Tax-Free of certain stated
liabilities of New York Series followed by the distribution by New York Series
of the New York Tax-Free Shares to Shareholders in exchange for their New York
Series shares pursuant to and in accordance with the terms of the
Reorganization Agreement will constitute a "reorganization" within the meaning
of Section 368(a)(1)(C) of the Code, and New York Series and New York Tax-Free
will each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code;
2. No gain or loss will be recognized by New York Tax-Free upon the
receipt of the assets of New York Series solely in exchange for the New York
Tax-Free Shares and the assumption by New York Tax-Free of the stated
liabilities of New York Series;
3. No gain or loss will be recognized by New York Series upon the transfer
of the assets of New York Series to New York Tax-Free in exchange for the New
York Tax-Free Shares and the assumption by New York Tax-Free of the stated
liabilities or upon the distribution of New York Tax-Free Shares to
Shareholders in exchange for their New York Series shares;
4. No gain or loss will be recognized by Shareholders upon the exchange of
the shares of New York Series for the New York Tax-Free Shares;
5. The aggregate tax basis for the New York Tax-Free Shares received by
each of the Shareholders pursuant to the Reorganization will be the same as the
aggregate tax basis of the shares in New York Series held by each such
Shareholder immediately prior to the Reorganization;
6. The holding period of the New York Tax-Free Shares to be received by
each Shareholder will include the period during which the shares in New York
Series surrendered in exchange therefor were held (provided such shares in New
York Series were held as capital assets on the date of the Reorganization);
7. The tax basis of the assets of New York Series acquired by New York
Tax-Free will be the same as the tax basis of such assets of New York Series
immediately prior to the Reorganization; and
8. The holding period of the assets of New York Series in the hands of New
York Tax-Free will include the period during which those assets were held by
New York Series.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE EFFECT, IF
ANY, OF THE PROPOSED TRANSACTION IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
BECAUSE THE FOREGOING DISCUSSION ONLY RELATES TO THE FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED TRANSACTION, SHAREHOLDERS SHOULD ALSO CONSULT
THEIR TAX ADVISORS AS TO STATE AND LOCAL TAX CONSEQUENCES, IF ANY, OF THE
PROPOSED TRANSACTION.
DESCRIPTION OF SHARES
Class D shares of New York Tax-Free to be issued pursuant to the
Reorganization Agreement will, when issued, be fully paid and non-assessable by
New York Tax-Free and transferable without restrictions and will have no
preemptive rights. As stated above, Class D shares of New York Tax-Free are not
subject to any sales charge on purchase or redemption or any 12b-1 fee.
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<PAGE>
CAPITALIZATION TABLE (UNAUDITED)
The following table sets forth the capitalization of New York Tax-Free and
New York Series as of January 31, 2000 and on a pro forma combined basis as if
the Reorganization had occurred on that date:
<TABLE>
<CAPTION>
NET ASSET
SHARES VALUE
NET ASSETS OUTSTANDING PER SHARE
-------------- ------------- ----------
<S> <C> <C> <C>
New York Series ........................................ $ 10,586,266 1,055,511 $ 10.03
New York Tax-Exempt:
(Class A) ............................................. $ 402,776 37,567 $ 10.72
(Class B) ............................................. $120,727,732 11,235,460 $ 10.75
(Class C) ............................................. $ 804,628 75,030 $ 10.72
(Class D) ............................................. $ 114,883 10,703 $ 10.73
Total New York Tax-Exempt (Class A -- D) ............... $122,050,019 -- --
---------- -------
Combined Fund (pro forma) (New York Tax-Free
after the Reorganization) ..............................
(Class A) ............................................. $ 402,776 37,567 $ 10.72
(Class B) ............................................. $120,727,732 11,235,460 $ 10.75
(Class C) ............................................. $ 804,628 75,030 $ 10.72
(Class D) ............................................. $ 10,701,149 997,307 $ 10.73
Total Combined Fund (pro forma) (Class A -- D) ......... $132,636,285 -- --
---------- -------
</TABLE>
APPRAISAL RIGHTS
Shareholders will have no appraisal rights in connection with the
Reorganization.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES AND POLICIES
New York Series and New York Tax-Free have similar investment objectives
and policies. New York Series seeks to provide a high level of current income
exempt from both federal and New York state income taxes, consistent with
preservation of capital. New York Tax-Free seeks to provide a high level of
current income exempt from federal, New York state and New York City income tax
or other local taxes, consistent with preservation of capital.
Both New York Series and New York Tax-Free invest at least 80% of their
assets in securities that pay interest exempt from federal and New York income
tax in accordance with their respective investment objectives set forth above.
Both New York Series and New York Tax-Free invest in investment grade municipal
obligations (municipal bonds, notes or commercial paper), however, municipal
bonds must be rated within the four highest grades by Moody's Investors Service
("Moody's") or Standard & Poor's Corporation ("S&P") or Fitch Investors
Service, LP ("Fitch"), municipal notes within the two highest grades by
Moody's, S&P or Fitch and municipal commercial paper within the highest grade
by Moody's, S&P and Fitch. Unrated securities may only be purchased if such
securities are judged by the Investment Manager to be of comparable quality to
the rated securities described above.
Both New York Series and New York Tax-Free may invest up to 10% of their
respective assets in inverse floating rate municipal obligations. The interest
rates on these obligations generally move in the reverse direction of market
interest rates. If market interest rates fall, the interest rate on the
obligations will increase and if market interest rates increase, the interest
rate on the obligations will fall.
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<PAGE>
Both New York Series and New York Tax-Free may invest up to 20% of their
respective assets in taxable money market instruments and tax-exempt securities
of other states and municipalities.
New York Series may invest any amount of its assets in securities that pay
interest subject to the "alternative minimum tax" ("AMT") with the result that
some taxpayers may have to pay tax on income distributions from the New York
Series. New York Tax-Free may only invest up to 20% of its assets in securities
subject to the AMT unless the fund has adopted a temporary defensive posture as
set forth below.
Both New York Series and New York Tax-Free may take temporary "defensive"
positions that are inconsistent with each fund's principal investment
strategies in attempting to respond to adverse market conditions in which any
amount of their respective assets may be invested in taxable money market
securities or in tax-exempt municipal obligations issued by states other than
New York where interest on such obligations would normally be exempt from
federal income tax but not from New York income tax. In addition, during such a
defensive posture, New York Tax-Free may also invest any amount of its assets
in tax-exempt securities subject to the AMT.
Both New York Series and New York Tax-Free may (i) purchase securities on
a when-issued or delayed delivery basis, (ii) purchase or sell securities on a
forward commitment basis, (iii) purchase variable and floating rate municipal
obligations, (iv) enter into repurchase agreements subject to certain
procedures designed to minimize risks associated with such agreements, (v)
purchase industrial revenue bonds, including lease obligations, and private
activity bonds, (vi) invest in zero coupon securities, (vii) lend their
portfolio securities and (viii) enter into options and futures transactions.
The investment policies of both New York Series and New York Tax-Free are
not fundamental and may be changed by their respective Boards. However, the
policy of New York Series and New York Tax-Free of investing at least 80% of
their respective assets in New York tax-exempt securities is fundamental and
may not be changed without the approval of each fund's respective shareholders.
The foregoing discussion is a summary of the principal differences and
similarities between the investment policies of the funds. For a more complete
discussion of each fund's policies, see "Principal Investment Strategies" and
"Additional Investment Strategy Information" in New York Tax-Free's Prospectus
and "Principal Investment Strategy" and "Additional Investment Strategy
Information" in Multi-State's Prospectus; and "Description of the Fund and Its
Investments and Risks" in New York Tax-Free's Statement of Additional
Information and "Description of the Fund and the Investments and Risks of the
Series" in New York Series' Statement of Additional Information.
INVESTMENT RESTRICTIONS
The investment restrictions adopted by New York Series and New York
Tax-Free as fundamental policies are substantially similar and are summarized
under the caption "Description of the Fund and Its Investments and Risks --
Fund Policies/Investment Restrictions" in their respective Statements of
Additional Information. A fundamental investment restriction cannot be changed
without the vote of the majority of the outstanding voting securities of a
fund, as defined in the 1940 Act. The material differences are as follows: (a)
New York Tax-Free may not, as to 75% of its total assets, invest more than 5%
of the value of its total assets in the securities of any one issuer (other
than U.S. Government securities); New York Series, because it is a
non-diversified fund, has no such investment restriction but limits its
investments of 5% or more in the securities of any one issuer as to 50% of its
total assets in order to qualify as a regulated investment company under
Subchapter M of the Code; and (b) New York Tax-Free may not purchase more than
10% of all outstanding taxable debt securities of any one issuer (other than
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or by the State of New York or its political subdivisions);
New York Series has no such investment restriction.
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ADDITIONAL INFORMATION ABOUT NEW YORK SERIES
AND NEW YORK TAX-FREE
GENERAL
For a discussion of the organization and operation of New York Tax-Free
and New York Series, see " Fund Management," and "Investment Objective" in
their respective Prospectuses.
FINANCIAL INFORMATION
For certain financial information about New York Tax-Free and New York
Series, see "Financial Highlights" and "Past Performance" in their respective
Prospectuses.
MANAGEMENT
For information about the respective Board of Trustees, Investment
Manager, and the Distributor of New York Tax-Free and New York Series, see
"Fund Management" in their respective Prospectuses.
DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES
For a description of the nature and most significant attributes of shares
of New York Series and New York Tax-Free, and information regarding shareholder
inquiries, see "Capital Stock and Other Securities" in their respective
Statements of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
For a discussion of New York Tax-Free's and New York Series' policies with
respect to dividends, distributions and taxes, see "Distributions" and "Tax
Consequences" in their respective Prospectuses as well as the discussion herein
under "Synopsis -- Purchases, Exchanges and Redemptions."
PURCHASES, REPURCHASES AND REDEMPTIONS
For a discussion of how New York Tax-Free's and New York Series' shares
may be purchased, repurchased and redeemed, see "How to Buy Shares," "How to
Exchange Shares" and "How to Sell Shares" in their respective Prospectuses.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For a discussion of New York Tax-Free's performance, see management's
letter to shareholders in its Annual Report for its fiscal year ended December
31, 1999 accompanying this Proxy Statement and Prospectus. For a discussion of
the performance of New York Series, see Multi-State's Annual Report for its
fiscal year ended November 30, 1999.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of New York Tax-Free, for the year ended December
31, 1999, and New York Series, for the year ended November 30, 1999 that are
incorporated by reference in the Statement of Additional Information relating
to the Registration Statement on Form N-14 of which this Proxy Statement and
Prospectus forms a part, have been audited by PricewaterhouseCoopers LLP,
independent accountants. The financial statements have been incorporated by
reference in reliance upon such reports given upon the authority of
PricewaterhouseCoopers LLP as experts in accounting and auditing.
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LEGAL MATTERS
Certain legal matters concerning the issuance of shares of New York
Tax-Free will be passed upon by Mayer, Brown & Platt, New York, New York. Such
firm will rely on Massachusetts counsel as to matters of Massachusetts law.
AVAILABLE INFORMATION
Additional information about New York Series and New York Tax-Free is
available, as applicable, in the following documents which are incorporated
herein by reference: (i) New York Tax-Free's Prospectus dated February 22,
2000, attached to this Proxy Statement and Prospectus, which Prospectus forms a
part of Post-Effective Amendment No. 18 to New York Tax-Free's Registration
Statement on Form N-1A (File Nos. 2-95664; 811-4222); (ii) New York Tax-Free's
Annual Report for its fiscal year ended December 31, 1999, accompanying this
Proxy Statement and Prospectus; (iii) Multi-State's Prospectus dated February
25, 2000, which Prospectus forms a part of Post-Effective Amendment No. 12 to
Multi-State's Registration Statement on Form N-1A (File Nos. 33-37562;
811-6208); and (iv) Multi-State's Annual Report for its fiscal year ended
November 30, 1999. The foregoing documents may be obtained without charge by
calling (800) 869-NEWS (toll-free).
New York Series and New York Tax-Free are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith, file reports and other information with the Commission.
Proxy material, reports and other information about New York Series and New
York Tax-Free which are of public record can be inspected and copied at public
reference facilities maintained by the Commission at Room 1204, Judiciary
Plaza, 450 Fifth Street, NW, Washington, D.C. 20549 and certain of its regional
offices, and copies of such materials can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, D.C. 20549.
OTHER BUSINESS
Management of New York Series knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not known
at the time of the solicitation may come before the Meeting, the proxy as
solicited confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the intention of the persons named as attorneys-in-fact in
the proxy to vote this proxy in accordance with their judgment on such matters.
By Order of the Board of Trustees
Barry Fink,
Secretary
March 31, 2000
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
26th day of January, 2000, by and between MORGAN STANLEY DEAN WITTER NEW YORK
TAX-FREE INCOME FUND, a Massachusetts business trust ("New York Tax-Free") and
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST, a Massachusetts
business trust ("Multi-State"), on behalf of its series, NEW YORK SERIES ("New
York Series"). (Where appropriate, references to New York Series mean
Multi-State, on behalf of New York Series.)
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treas. Reg. 1.368-2(g), for a
reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization ("Reorganization") will consist of the
transfer to New York Tax-Free of substantially all of the assets of New York
Series in exchange for the assumption by New York Tax-Free of all stated
liabilities of New York Series and the issuance by New York Tax-Free of Class D
shares of beneficial interest, par value $0.01 per share (the "New York
Tax-Free Shares"), to be distributed, after the Closing Date hereinafter
referred to, to the shareholders of New York Series in liquidation of New York
Series as provided herein, all upon the terms and conditions hereinafter set
forth in this Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF NEW YORK SERIES
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, New York Series agrees
to assign, deliver and otherwise transfer the New York Series Assets (as
defined in paragraph 1.2) to New York Tax-Free and New York Tax-Free agrees in
exchange therefor to assume all of New York Series stated liabilities on the
Closing Date as set forth in paragraph 1.3(a) and to deliver to New York Series
the number of New York Tax-Free Shares, including fractional New York Tax-Free
Shares, determined in the manner set forth in paragraph 2.3. Such transactions
shall take place at the closing provided for in paragraph 3.1 ("Closing").
1.2 (a) The "New York Series Assets" shall consist of all property,
including without limitation, all cash (other than the "Cash Reserve" (as
defined in paragraph 1.3(b)), cash equivalents, securities and dividend and
interest receivables owned by New York Series, and any deferred or prepaid
expenses shown as an asset on New York Series' books on the Valuation Date.
(b) On or prior to the Valuation Date, Multi-State will provide New York
Tax-Free with a list of all of New York Series assets to be assigned, delivered
and otherwise transferred to New York Tax-Free and of the stated liabilities to
be assumed by New York Tax-Free pursuant to this Agreement. New York Series
reserves the right to sell any of the securities on such list but will not,
without the prior approval of New York Tax-Free, acquire any additional
securities other than securities of the type in which New York Tax-Free is
permitted to invest and in amounts agreed to in writing by New York Tax-Free.
New York Tax-Free will, within a reasonable time prior to the Valuation Date,
furnish New York Series with a statement of New York Tax-Free's investment
objectives, policies and restrictions and a list of the securities, if any, on
the list referred to in the first sentence of this paragraph that do not
conform to New York Tax-Free's investment objective, policies and restrictions.
In the event that New York Series holds any investments that New York Tax-Free
is not permitted to hold, New York Series will dispose of such securities on or
prior to the Valuation Date. In addition, if it is determined that the
portfolios of New York Series and New York Tax-Free, when aggregated, would
contain investments
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exceeding certain percentage limitations imposed upon New York Tax-Free with
respect to such investments, New York Series if requested by New York Tax-Free
will, on or prior to the Valuation Date, dispose of and/or reinvest a
sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Closing Date (as defined in paragraph 3.1).
1.3 (a) New York Series will endeavor to discharge all of its liabilities
and obligations on or prior to the Valuation Date. New York Tax-Free will
assume all stated liabilities, which includes, without limitation, all
expenses, costs, charges and reserves reflected on an unaudited Statement of
Assets and Liabilities of New York Series prepared by the Treasurer of
Multi-State, on behalf of New York Series, as of the Valuation Date in
accordance with generally accepted accounting principles consistently applied
from the prior audited period.
(b) On the Valuation Date, New York Series may establish a cash reserve,
which shall not exceed 5% of New York Series' net assets as of the close of
business on the Valuation Date ("Cash Reserve") to be retained by New York
Series and used for the payment of its liabilities not discharged prior to the
Valuation Date and for the expenses of dissolution.
1.4 In order for New York Series to comply with Section 852(a)(1) of the
Code and to avoid having any investment company taxable income or net capital
gain (as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively)
in the short taxable year ending with its dissolution, New York Series will on
or before the Valuation Date (a) declare a dividend in an amount large enough
so that it will have declared dividends of all of its investment company
taxable income and net capital gain, if any, for such taxable year (determined
without regard to any deduction for dividends paid) and (b) distribute such
dividend.
1.5 On the Closing Date or as soon as practicable thereafter, New York
Series will distribute New York Tax-Free Shares received by New York Series
pursuant to paragraph 1.1 pro rata to its shareholders of record determined as
of the close of business on the Valuation Date ("New York Series
Shareholders"). Each New York Series Shareholder will receive Class D shares of
New York Tax-Free. Such distribution will be accomplished by an instruction,
signed by the Secretary of Multi-State, to transfer New York Tax-Free Shares
then credited to New York Series' account on the books of New York Tax-Free to
open accounts on the books of New York Tax-Free in the names of the New York
Series Shareholders and representing the respective pro rata number of New York
Tax-Free Shares due such New York Series Shareholders. All issued and
outstanding shares of New York Series simultaneously will be canceled on New
York Series' books; however, share certificates representing interests in New
York Series will represent a number of New York Tax-Free Shares after the
Closing Date as determined in accordance with paragraph 2.3. New York Tax-Free
will issue certificates representing New York Tax-Free Shares in connection
with such exchange only upon the written request of a New York Series
Shareholder.
1.6 Ownership of New York Tax-Free Shares will be shown on the books of
New York Tax-Free's transfer agent. New York Tax-Free Shares will be issued in
the manner described in New York Tax-Free's current Prospectus and Statement of
Additional Information.
1.7 Any transfer taxes payable upon issuance of New York Tax-Free Shares
in a name other than the registered holder of New York Tax-Free Shares on New
York Series' books as of the close of business on the Valuation Date shall, as
a condition of such issuance and transfer, be paid by the person to whom New
York Tax-Free Shares are to be issued and transferred.
1.8 Any reporting responsibility of Multi-State, on behalf of New York
Series, is and shall remain the responsibility of Multi-State up to and
including the date on which New York Series is dissolved pursuant to paragraph
1.9.
1.9 Within one year after the Closing Date, New York Series shall pay or
make provision for the payment of all its liabilities and taxes, and distribute
to the shareholders of New York Series as of the close of business
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on the Valuation Date any remaining amount of the Cash Reserve (as reduced by
the estimated cost of distributing it to shareholders). If and to the extent
that any trust, escrow account, or other similar entity continues after the
close of such one-year period in connection either with making provision for
payment of liabilities or taxes or with distributions to shareholders of New
York Series, such entity shall either (i) qualify as a liquidating trust under
Section 7701 of the Code (and applicable Treasury Regulations thereunder) or
other entity which does not constitute a continuation of New York Series for
federal income tax purposes, or (ii) be subject to a waiver under Section
368(a)(2)(G)(ii) of the complete distribution requirement of Section
368(a)(2)(G)(i) of the Code. New York Series shall be dissolved as a portfolio
of Multi-State under Massachusetts law, promptly following the making of all
distributions pursuant to paragraph 1.5 (and, in any event, within one year
after the Closing Date).
1.10 Copies of all books and records maintained on behalf of New York
Series in connection with its obligations under the Investment Company Act of
1940, as amended (the "1940 Act"), the Code, state blue sky laws or otherwise
in connection with this Agreement will promptly after the Closing be delivered
to officers of New York Tax-Free or their designee and New York Tax-Free or its
designee shall comply with applicable record retention requirements to which
New York Series is subject under the 1940 Act.
2. VALUATION
2.1 The value of the New York Series Assets shall be the value of such
assets computed as of 4:00 p.m. on the New York Stock Exchange on the third
business day following the receipt of the requisite approval by shareholders of
New York Series of this Agreement or at such time on such earlier or later date
after such approval as may be mutually agreed upon in writing (such time and
date being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in New York Tax-Free's then current Prospectus and
Statement of Additional Information.
2.2 The net asset value of a New York Tax-Free Share shall be the net
asset value per share computed on the Valuation Date, using the valuation
procedures set forth in New York Tax-Free's then current Prospectus and
Statement of Additional Information.
2.3 The number of New York Tax-Free Shares (including fractional shares,
if any) to be issued hereunder shall be determined, with respect to each class,
by dividing the aggregate net asset value of each class of New York Series
shares (determined in accordance with paragraph 2.1) by the net asset value per
share of the Class D shares of New York Tax-Free (determined in accordance with
paragraph 2.2). For purposes of this paragraph, the aggregate net asset value
of the shares of New York Series shall not include the amount of the Cash
Reserve.
2.4 All computations of value shall be made by Morgan Stanley Dean Witter
Services Company Inc. ("MSDW Services") in accordance with its regular practice
in pricing New York Tax-Free. New York Tax-Free shall cause MSDW Services to
deliver a copy of its valuation report at the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing shall take place on the next business day following the
Valuation Date (the "Closing Date"). The Closing shall be held as of 9:00 a.m.
Eastern time, or at such other time as the parties may agree. The Closing shall
be held in a location mutually agreeable to the parties hereto. All acts taking
place at the Closing shall be deemed to take place simultaneously as of 9:00
a.m. Eastern time on the Closing Date unless otherwise provided.
3.2 Portfolio securities held by New York Series and represented by a
certificate or other written instrument shall be presented by it or on its
behalf to The Bank of New York (the "Custodian"), as custodian
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for New York Tax-Free, for examination no later than five business days
preceding the Valuation Date. Such portfolio securities (together with any cash
or other assets) shall be delivered by New York Series to the Custodian for the
account of New York Tax-Free on or before the Closing Date in conformity with
applicable custody provisions under the 1940 Act and duly endorsed in proper
form for transfer in such condition as to constitute good delivery thereof in
accordance with the custom of brokers. The portfolio securities shall be
accompanied by all necessary Federal and state stock transfer stamps or a check
for the appropriate purchase price of such stamps. Portfolio securities and
instruments deposited with a securities depository (as defined in Rule 17f-4
under the 1940 Act) shall be delivered on or before the Closing Date by
book-entry in accordance with customary practices of such depository and the
Custodian. The cash delivered shall be in the form of a Federal Funds wire,
payable to the order of "The Bank of New York, Custodian for Morgan Stanley
Dean Witter New York Tax-Free Income Fund."
3.3 In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall be
disrupted so that, in the judgment of both New York Tax-Free and New York
Series, accurate appraisal of the value of the net assets of New York Tax-Free
or the New York Series Assets is impracticable, the Valuation Date shall be
postponed until the first business day after the day when trading shall have
been fully resumed without restriction or disruption and reporting shall have
been restored.
3.4 If requested, Multi-State shall deliver to New York Tax-Free or its
designee (a) at the Closing, a list, certified by its Secretary, of the names,
addresses and taxpayer identification numbers of the New York Series
Shareholders and the number and percentage ownership of outstanding New York
Series shares owned by each such New York Series Shareholder, all as of the
Valuation Date, and (b) as soon as practicable after the Closing, all original
documentation (including Internal Revenue Service forms, certificates,
certifications and correspondence) relating to the New York Series
Shareholders' taxpayer identification numbers and their liability for or
exemption from back-up withholding. New York Tax-Free shall issue and deliver
to such Secretary a confirmation evidencing delivery of New York Tax-Free
Shares to be credited on the Closing Date to New York Series or provide
evidence satisfactory to New York Series that such New York Tax-Free Shares
have been credited to New York Series' account on the books of New York
Tax-Free. At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4. COVENANTS OF NEW YORK TAX-FREE AND NEW YORK SERIES
4.1 Except as otherwise expressly provided herein with respect to New York
Series, New York Tax-Free and New York Series each will operate its business in
the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and other distributions.
4.2 New York Tax-Free will prepare and file with the Securities and
Exchange Commission ("Commission") a registration statement on Form N-14 under
the Securities Act of 1933, as amended ("1933 Act"), relating to New York
Tax-Free Shares ("Registration Statement"). Multi-State will provide New York
Tax-Free with the Proxy Materials as described in paragraph 4.3 below, for
inclusion in the Registration Statement. Multi-State will further provide New
York Tax-Free with such other information and documents relating to New York
Series as are reasonably necessary for the preparation of the Registration
Statement.
4.3 Multi-State will call a meeting of the New York Series shareholders to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein. Multi-State will
prepare the notice of meeting, form of proxy and proxy statement (collectively,
"Proxy Materials") to be used in connection with such meeting; provided that
New York Tax-Free will furnish
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Multi-State with its currently effective prospectus for inclusion in the Proxy
Materials and with such other information relating to New York Tax-Free as is
reasonably necessary for the preparation of the Proxy Materials.
4.4 Multi-State will assist New York Tax-Free in obtaining such
information as New York Tax-Free reasonably requests concerning the beneficial
ownership of New York Series shares.
4.5 Subject to the provisions of this Agreement, New York Tax-Free and
Multi-State will each take, or cause to be taken, all action, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
4.6 Multi-State shall furnish or cause to be furnished to New York
Tax-Free within 30 days after the Closing Date a statement of New York Series'
assets and liabilities as of the Closing Date, which statement shall be
certified by Multi-State's Treasurer and shall be in accordance with generally
accepted accounting principles consistently applied. As promptly as
practicable, but in any case within 60 days after the Closing Date, New York
Series shall furnish New York Tax-Free, in such form as is reasonably
satisfactory to New York Tax-Free, a statement certified by Multi-State's
Treasurer of earnings and profits of New York Series for Federal income tax
purposes that will be carried over to New York Tax-Free pursuant to Section 381
of the Code.
4.7 As soon after the Closing Date as is reasonably practicable,
Multi-State (a) shall prepare and file all Federal and other tax returns and
reports of New York Series required by law to be filed with respect to all
periods ending on or before the Closing Date but not theretofore filed and (b)
shall pay all Federal and other taxes shown as due thereon and/or all Federal
and other taxes that were unpaid as of the Closing Date, including without
limitation, all taxes for which the provision for payment was made as of the
Closing Date (as represented in paragraph 5.2(k)).
4.8 New York Tax-Free agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act and the 1940 Act and to
make such filings required by the state Blue Sky and securities laws as it may
deem appropriate in order to continue its operations after the Closing Date.
5. REPRESENTATIONS AND WARRANTIES
5.1 New York Tax-Free represents and warrants to Multi-State, on behalf of
New York Series, as follows:
(a) New York Tax-Free is a validly existing Massachusetts business trust
with full power to carry on its business as presently conducted;
(b) New York Tax-Free is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of New York Tax-Free have
been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities
laws. Shares of New York Tax-Free are registered in all jurisdictions in
which they are required to be registered under state securities laws and
other laws, and said registrations, including any periodic reports or
supplemental filings, are complete and current, all fees required to be
paid have been paid, and New York Tax-Free is not subject to any stop order
and is fully qualified to sell its shares in each state in which its shares
have been registered;
(d) The current Prospectus and Statement of Additional Information of New
York Tax-Free conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any
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material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(e) New York Tax-Free is not in, and the execution, delivery and
performance of this Agreement will not result in a, material violation of
any provision of New York Tax-Free's Declaration of Trust or By-Laws or of
any agreement, indenture, instrument, contract, lease or other undertaking
to which New York Tax-Free is a party or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against New York Tax-Free or any of its properties or
assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and New York
Tax-Free knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects, or is reasonably likely to materially and
adversely effect, its business or its ability to consummate the
transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights for the year
ended December 31, 1999, of New York Tax-Free audited by
PricewaterhouseCoopers LLP (copies of which have been furnished to New York
Series), fairly present, in all material respects, New York Tax-Free's
financial condition as of such date in accordance with generally accepted
accounting principles, and its results of such operations, changes in its
net assets and financial highlights for such period, and as of such date
there were no known liabilities of New York Tax-Free (contingent or
otherwise) not disclosed therein that would be required in accordance with
generally accepted accounting principles to be disclosed therein;
(h) All issued and outstanding New York Tax-Free Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the ownership
thereof, except as set forth under the caption "Additional Information" in
New York Tax-Free's current Prospectus incorporated by reference in the
Registration Statement. New York Tax-Free does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of its
shares;
(i) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of New York Tax-Free,
and this Agreement constitutes a valid and binding obligation of New York
Tax-Free enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general equity
principles. No other consents, authorizations or approvals are necessary in
connection with New York Tax-Free's performance of this Agreement;
(j) New York Tax-Free Shares to be issued and delivered to New York
Series, for the account of the New York Series Shareholders, pursuant to
the terms of this Agreement will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and validly
issued New York Tax-Free Shares, and will be fully paid and non-assessable
with no personal liability attaching to the ownership thereof, except as
set forth under the caption "Capital Stock and Other Securities" in New
York Tax-Free's current Statement of Additional Information incorporated by
reference in the Statement of Additional Information to this Registration
Statement;
(k) All material Federal and other tax returns and reports of New York
Tax-Free required by law to be filed on or before the Closing Date have
been filed and are correct, and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports have been paid or
provision has been made for the payment thereof, and to the best of New
York Tax-Free's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any such return;
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(l) For each taxable year since its inception, New York Tax-Free has met
the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of New York Tax-Free to continue to
meet the requirements of Subchapter M of the Code;
(m) Since December 31, 1999 there has been no change by New York Tax-Free
in accounting methods, principles, or practices, including those required
by generally accepted accounting principles;
(n) The information furnished or to be furnished by New York Tax-Free for
use in registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated hereby
shall be accurate and complete in all material respects and shall comply in
all material respects with Federal securities and other laws and
regulations applicable thereto; and
(o) The Proxy Materials to be included in the Registration Statement
(only insofar as they relate to New York Tax-Free) will, on the effective
date of the Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
materially misleading.
5.2 Multi-State, on behalf of New York Series, represents and warrants to
New York Tax-Free as follows:
(a) Multi-State is a series of a validly existing Massachusetts business
trust with full power to carry on its business as presently conducted;
(b) Multi-State is a duly registered, open-end, management investment
company, and its registration with the Commission as an investment company
under the 1940 Act and the registration of its shares under the 1933 Act
are in full force and effect;
(c) All of the issued and outstanding shares of beneficial interest of
New York Series have been offered and sold in compliance in all material
respects with applicable requirements of the 1933 Act and state securities
laws. Shares of New York Series are registered in all jurisdictions in
which they are required to be registered and said registrations, including
any periodic reports or supplemental filings, are complete and current, all
fees required to be paid have been paid, and Multi-State is not subject to
any stop order and is fully qualified to sell its shares in each state in
which its shares have been registered;
(d) The current Prospectus and Statement of Additional Information of
Multi-State conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the regulations thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(e) Multi-State is not, and the execution, delivery and performance of
this Agreement will not result, in a material violation of any provision of
Multi-State's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which
Multi-State is a party or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against New York Series or any of its properties or
assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and
Multi-State knows of no facts that might form the basis for
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<PAGE>
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to
materially and adversely effect, its business or its ability to consummate
the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights of Multi-State
for the year ended November 30, 1999, audited by PricewaterhouseCoopers LLP
(copies of which have been or will be furnished to New York Tax-Free)
fairly present, in all material respects, New York Series' financial
condition as of such date, and its results of operations, changes in its
net assets and financial highlights for such period in accordance with
generally accepted accounting principles, and as of such date there were no
known liabilities of New York Series (contingent or otherwise) not
disclosed therein that would be required in accordance with generally
accepted accounting principles to be disclosed therein;
(h) Multi-State has no material contracts or other commitments (other
than this Agreement) that will be terminated with liability to it prior to
the Closing Date;
(i) All issued and outstanding shares of New York Series are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the ownership
thereof, except as set forth under the caption "Capital Stock and Other
Securities" in Multi-State's current Statement of Additional Information
incorporated by reference in the Statement of Additional Information to
this Registration Statement. New York Series does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of its
shares, nor is there outstanding any security convertible to any of its
shares. All such shares will, at the time of Closing, be held by the
persons and in the amounts set forth in the list of shareholders submitted
to New York Tax-Free pursuant to paragraph 3.4;
(j) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on
the part of Multi-State, and subject to the approval of New York Series'
shareholders, this Agreement constitutes a valid and binding obligation of
Multi-State, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors rights and to general equity
principles. No other consents, authorizations or approvals are necessary in
connection with Multi-State's performance of this Agreement;
(k) All material Federal and other tax returns and reports of New York
Series required by law to be filed on or before the Closing Date shall have
been filed and are correct and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports have been paid or
provision has been made for the payment thereof, and to the best of New
York Series' knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any such return;
(l) For each taxable year since its inception, New York Series, has met
all the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of New York Series to continue to
meet the requirements of Subchapter M of the Code;
(m) At the Closing Date, Multi-State will have good and valid title to
the New York Series Assets, subject to no liens (other than the obligation,
if any, to pay the purchase price of portfolio securities purchased by New
York Series which have not settled prior to the Closing Date), security
interests or other
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<PAGE>
encumbrances, and full right, power and authority to assign, deliver and
otherwise transfer such assets hereunder, and upon delivery and payment for
such assets, New York Tax-Free will acquire good and marketable title
thereto, subject to no restrictions on the full transfer thereof, including
any restrictions as might arise under the 1933 Act;
(n) On the effective date of the Registration Statement, at the time of
the meeting of New York Series' shareholders and on the Closing Date, the
Proxy Materials (exclusive of the currently effective New York Tax-Free
Prospectus contained therein) will (i) comply in all material respects with
the provisions of the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 Act") and the 1940 Act and the regulations thereunder and
(ii) not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. Any other information furnished by
Multi-State for use in the Registration Statement or in any other manner
that may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete and shall comply in all material
respects with applicable Federal securities and other laws and regulations
thereunder;
(o) New York Series will, on or prior to the Valuation Date, declare one
or more dividends or other distributions to shareholders that, together
with all previous dividends and other distributions to shareholders, shall
have the effect of distributing to the shareholders all of its investment
company taxable income and net capital gain, if any, through the Valuation
Date (computed without regard to any deduction for dividends paid);
(p) Multi-State has maintained or has caused to be maintained on its
behalf all books
and accounts as required of a registered investment company in compliance
with the requirements of Section 31 of the 1940 Act and the Rules
thereunder; and
(q) New York Series is not acquiring New York Tax-Free Shares to be
issued hereunder for the purpose of making any distribution thereof other
than in accordance with the terms of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF NEW YORK SERIES
The obligations of Multi-State to consummate the transactions provided for
herein shall be subject, at its election, to the performance by New York
Tax-Free of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of New York Tax-Free contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2 New York Tax-Free shall have delivered to New York Series, a
certificate of its President and Treasurer, in a form reasonably satisfactory
to Multi-State and dated as of the Closing Date, to the effect that the
representations and warranties of New York Tax-Free made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other
matters as Multi-State shall reasonably request;
6.3 Multi-State, on behalf of New York Series, shall have received a
favorable opinion from Mayer, Brown & Platt, counsel to New York Tax-Free,
dated as of the Closing Date, to the effect that:
(a) New York Tax-Free is a validly existing Massachusetts business trust,
and has the power to own all of its properties and assets and to carry on
its business as presently conducted (Massachusetts counsel may be relied
upon in delivering such opinion); (b) New York Tax-Free is a duly
registered, open-end,
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<PAGE>
management investment company, and its registration with the Commission as
an investment company under the 1940 Act is in full force and effect; (c)
this Agreement has been duly authorized, executed and delivered by New York
Tax-Free and, assuming that the Registration Statement complies with the
1933 Act, the 1934 Act and the 1940 Act and regulations thereunder and
assuming due authorization, execution and delivery of this Agreement by New
York Series, is a valid and binding obligation of New York Tax-Free
enforceable against New York Tax-Free in accordance with its terms, subject
as to enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors rights and to general
equity principles; (d) New York Tax-Free Shares to be issued to New York
Series Shareholders as provided by this Agreement are duly authorized and
upon such delivery will be validly issued, fully paid and non-assessable
(except as set forth under the caption "Capital Stock and Other Securities"
in New York Tax-Free's Statement of Additional Information), and no
shareholder of New York Tax-Free has any preemptive rights to subscription
or purchase in respect thereof (Massachusetts counsel may be relied upon in
delivering such opinion); (e) the execution and delivery of this Agreement
did not, and the consummation of the transactions contemplated hereby will
not, violate New York Tax-Free's Declaration of Trust or By-Laws
(Massachusetts counsel may be relied upon in delivering such opinion); and
(f) to the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States or any
state is required for the consummation by New York Tax-Free of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required
under state securities laws; and
6.4 As of the Closing Date, there shall have been no material change in
the investment objective, policies and restrictions nor any increase in the
investment management fees from those described in New York Tax-Free's
Prospectus dated February 22, 2000 and Statement of Additional Information
dated February 22, 2000.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF NEW YORK TAX-FREE
The obligations of New York Tax-Free to complete the transactions provided
for herein shall be subject, at its election, to the performance by
Multi-State, on behalf of New York Series, of all the obligations to be
performed by it hereunder on or before the Closing Date and, in addition
thereto, the following conditions:
7.1 All representations and warranties of Multi-State contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date;
7.2 Multi-State shall have delivered to New York Tax-Free at the Closing a
certificate of its President and its Treasurer, in form and substance
satisfactory to New York Tax-Free and dated as of the Closing Date, to the
effect that the representations and warranties of Multi-State made in this
Agreement are true and correct at and as of the Closing Date, except as they
may be affected by the transactions contemplated by this Agreement, and as to
such other matters as New York Tax-Free shall reasonably request;
7.3 Multi-State shall have delivered to New York Tax-Free a statement of
the New York Series Assets and its liabilities, together with a list of New
York Series' portfolio securities and other assets showing the respective
adjusted bases and holding periods thereof for income tax purposes, as of the
Closing Date, certified by the Treasurer of Multi-State;
7.4 Multi-State shall have delivered to New York Tax-Free within three
business days after the Closing a letter from PricewaterhouseCoopers LLP dated
as of the Closing Date stating that (a) such firm has performed a limited
review of the Federal and state income tax returns of Multi-State for each of
the last three
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taxable years and, based on such limited review, nothing came to their
attention that caused them to believe that such returns did not properly
reflect, in all material respects, the Federal and state income tax liabilities
of New York Series for the periods covered thereby, (b) for the period from
November 30, 1999 to and including the Closing Date, such firm has performed a
limited review (based on unaudited financial data) to ascertain the amount of
applicable Federal, state and local taxes and has determined that same either
have been paid or reserves have been established for payment of such taxes,
and, based on such limited review, nothing came to their attention that caused
them to believe that the taxes paid or reserves set aside for payment of such
taxes were not adequate in all material respects for the satisfaction of all
Federal, state and local tax liabilities for the period from November 30, 1999
to and including the Closing Date and (c) based on such limited reviews,
nothing came to their attention that caused them to believe that New York
Series would not qualify as a regulated investment company for Federal income
tax purposes for any such year or period;
7.5 New York Tax-Free shall have received at the Closing a favorable
opinion from Mayer, Brown & Platt, counsel to Multi-State, dated as of the
Closing Date to the effect that:
(a) Multi-State is a validly existing Massachusetts business trust and
has the power to own all of its properties and assets and to carry on its
business as presently conducted (Massachusetts counsel may be relied upon
in delivering such opinion); (b) Multi-State is a duly registered,
open-end, management investment company under the 1940 Act, and its
registration with the Commission as an investment company under the 1940
Act is in full force and effect; (c) this Agreement has been duly
authorized, executed and delivered by Multi-State and, assuming that the
Registration Statement complies with the 1933 Act, the 1934 Act and the
1940 Act and the regulations thereunder and assuming due authorization,
execution and delivery of this Agreement by New York Tax-Free, is a valid
and binding obligation of Multi-State enforceable against Multi-State in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors rights and to general equity principles; (d) the
execution and delivery of this Agreement did not, and the consummation of
the transactions contemplated hereby will not, violate Multi-State's
Declaration of Trust or By-Laws (Massachusetts counsel may be relied upon
in delivering such opinion); and (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental
authority of the United States or any state is required for the
consummation by Multi-State of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act and the 1940
Act and such as may be required under state securities laws; and
7.6 On the Closing Date, the New York Series Assets shall include no
assets that New York Tax-Free, by reason of limitations of the fund's
Declaration of Trust or otherwise, may not properly acquire.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF NEW YORK TAX-FREE
AND NEW YORK SERIES
The obligations of Multi-State, on behalf of New York Series, and New York
Tax-Free hereunder are each subject to the further conditions that on or before
the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
New York Series in accordance with the provisions of Multi-State's Declaration
of Trust, and certified copies of the resolutions evidencing such approval
shall have been delivered to New York Tax-Free;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
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<PAGE>
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including
"no-action" positions of and exemptive orders from such Federal and state
authorities) deemed necessary by New York Tax-Free or Multi-State to permit
consummation, in all material respects, of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such consent,
order or permit would not involve risk of a material adverse effect on the
assets or properties of New York Tax-Free or New York Series;
8.4 The Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act;
8.5 New York Series shall have declared and paid a dividend or dividends
and/or other distribution or distributions that, together with all previous
such dividends or distributions, shall have the effect of distributing to the
New York Series Shareholders all of New York Series' investment company taxable
income (computed without regard to any deduction for dividends paid) and all of
its net capital gain (after reduction for any capital loss carry-forward and
computed without regard to any deduction for dividends paid) for all taxable
years ending on or before the Closing Date; and
8.6 The parties shall have received the opinion of the law firm of Mayer,
Brown & Platt (based on such representations as such law firm shall reasonably
request), addressed to New York Tax-Free and Multi-State, on behalf of New York
Series, which opinion may be relied upon by the shareholders of New York
Series, substantially to the effect that, for Federal income tax purposes:
(a) The transfer of New York Series' assets in exchange for New York
Tax-Free Shares and the assumption by New York Tax-Free of certain stated
liabilities of New York Series followed by the distribution by New York
Series of New York Tax-Free Shares to the New York Series Shareholders in
exchange for their New York Series shares pursuant to and in accordance
with the terms of the Reorganization Agreement will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code,
and New York Series and New York Tax-Free will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by New York Tax-Free upon the
receipt of the assets of New York Series solely in exchange for New York
Tax-Free Shares and the assumption by New York Tax-Free of the stated
liabilities of New York Series;
(c) No gain or loss will be recognized by New York Series upon the
transfer of the assets of New York Series to New York Tax-Free in exchange
for New York Tax-Free Shares and the assumption by New York Tax-Free of the
stated liabilities or upon the distribution of New York Tax-Free Shares to
the New York Series Shareholders in exchange for their New York Series
shares;
(d) No gain or loss will be recognized by the New York Series
Shareholders upon the exchange of the New York Series shares for New York
Tax-Free Shares;
(e) The aggregate tax basis for New York Tax-Free Shares received by each
New York Series Shareholder pursuant to the reorganization will be the same
as the aggregate tax basis of the New York Series Shares held by each such
New York Series Shareholder immediately prior to the Reorganization;
(f) The holding period of New York Tax-Free Shares to be received by each
New York Series Shareholder will include the period during which the New
York Series Shares surrendered in exchange therefor were held (provided
such New York Series Shares were held as capital assets on the date of the
Reorganization);
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<PAGE>
(g) The tax basis of the assets of New York Series acquired by New York
Tax-Free will be the same as the tax basis of such assets to New York
Series immediately prior to the Reorganization; and
(h) The holding period of the assets of New York Series in the hands of
New York Tax-Free will include the period during which those assets were
held by New York Series.
Notwithstanding anything herein to the contrary, neither New York Tax-Free
nor New York Series may waive the conditions set forth in this paragraph 8.6.
9. FEES AND EXPENSES
9.1 (a) New York Tax-Free shall bear its expenses incurred in connection
with the entering into, and carrying out of, the provisions of this Agreement,
including legal, accounting, Commission registration fees and Blue Sky expenses.
New York Series and Morgan Stanley Dean Witter Advisors Inc. shall bear, as set
forth in the Proxy Statement and Prospectus contained in the Registration
Statement, certain expenses incurred in connection with the entering into and
carrying out of the provisions of this Agreement, including legal and accounting
fees, printing, filing and proxy solicitation expenses incurred in connection
with the consummation of the transactions contemplated herein. New York Series
shall bear any other expenses in connection with the provisions of this
Agreement including certain other legal and accounting fees and portfolio
transfer taxes (if any) incurred with the consummation of the transactions
contemplated therein.
(b) In the event the transactions contemplated herein are not consummated
by reason of New York Series being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure of any condition to New
York Series' obligations specified in this Agreement), New York Series' only
obligation hereunder shall be to reimburse New York Tax-Free for all reasonable
out-of-pocket fees and expenses incurred by New York Tax-Free in connection with
those transactions.
(c) In the event the transactions contemplated herein are not consummated
by reason of New York Tax-Free being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure of any condition to New
York Tax-Free's obligations specified in this Agreement), New York Tax-Free's
only obligation hereunder shall be to reimburse New York Series for all
reasonable out-of-pocket fees and expenses incurred by New York Series in
connection with those transactions.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 This Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
herein, except that the representations, warranties and covenants of
Multi-State hereunder shall not survive the dissolution and complete
liquidation of New York Series in accordance with Section 1.9.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Multi-State, on behalf of New York
Series, and New York Tax-Free;
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<PAGE>
(b) by either New York Tax-Free or Multi-State, on behalf of New York
Series, by notice to the other, without liability to the terminating party
on account of such termination (providing the terminating party is not
otherwise in material default or breach of this Agreement) if the Closing
shall not have occurred on or before September 30, 2000; or
(c) by either New York Tax-Free or Multi-State, on behalf of New York
Series, in writing without liability to the terminating party on account of
such termination (provided the terminating party is not otherwise in
material default or breach of this Agreement), if (i) the other party shall
fail to perform in any material respect its agreements contained herein
required to be performed on or prior to the Closing Date, (ii) the other
party materially breaches any of its representations, warranties or
covenants contained herein, (iii) the New York Series shareholders fail to
approve this Agreement at any meeting called for such purpose at which a
quorum was present or (iv) any other condition herein expressed to be
precedent to the obligations of the terminating party has not been met and
it reasonably appears that it will not or cannot be met.
11.2 (a) Termination of this Agreement pursuant to paragraphs 11.1 (a) or
(b) shall terminate all obligations of the parties hereunder and there shall be
no liability for damages on the part of New York Tax-Free or Multi-State, or
the trustees or officers of New York Tax-Free or Multi-State, to any other
party or its trustees or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1 (c) shall
terminate all obligations of the parties hereunder and there shall be no
liability for damages on the part of New York Tax-Free or Multi-State, or
the trustees or officers of New York Tax-Free or Multi-State, except that
any party in breach of this Agreement shall, upon demand, reimburse the
non-breaching party for all reasonable out-of-pocket fees and expenses
incurred in connection with the transactions contemplated by this
Agreement, including legal, accounting and filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties.
13. MISCELLANEOUS
13.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
13.5 The obligations and liabilities of New York Tax-Free hereunder are
solely those of New York Tax-Free. It is expressly agreed that no shareholder,
nominee, trustee, officer, agent, or employee of New York
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<PAGE>
Tax-Free shall be personally liable hereunder. The execution and delivery of
this Agreement have been authorized by the trustees of New York Tax-Free and
signed by authorized officers of New York Tax-Free acting as such, and neither
such authorization by such trustees nor such execution and delivery by such
officers shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally.
13.6 The obligations and liabilities of Multi-State hereunder are solely
those of Multi-State. It is expressly agreed that no shareholder, nominee,
trustee, officer, agent, or employee of New York Series shall be personally
liable hereunder. The execution and delivery of this Agreement have been
authorized by the trustees of Multi-State and signed by authorized officers of
Multi-State acting as such, and neither such authorization by such trustees nor
such execution and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by a duly authorized officer.
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
ON BEHALF OF NEW YORK SERIES
By: /s/ CHARLES A. FIUMEFREDDO
----------------------------------------------
Name: Charles A. Fiumefreddo
Title: Chairman
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
By: /s/ BARRY FINK
----------------------------------------------
Name: Barry Fink
Title: Vice President
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<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Exhibit B
PROSPECTUS - FEBRUARY 22, 2000
Morgan Stanley Dean Witter
NEW YORK TAX-FREE INCOME FUND
[COVER PHOTO]
A MUTUAL FUND THAT SEEKS TO PROVIDE A HIGH LEVEL OF
CURRENT INCOME EXEMPT FROM FEDERAL, NEW YORK STATE
AND NEW YORK CITY INCOME TAX OR OTHER LOCAL INCOME
TAXES, 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.............................. 7
Shareholder Information Pricing Fund Shares.......................... 8
How to Buy Shares............................ 8
How to Exchange Shares....................... 10
How to Sell Shares........................... 11
Distributions................................ 13
Tax Consequences............................. 13
Share Class Arrangements..................... 15
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>
<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 New York Tax-Free Income Fund seeks to
provide a high level of current income exempt from federal, New York
state and New York city income tax or other local income taxes,
consistent with the preservation of capital.
[ICON] PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund will normally invest at least 80% of its assets in
securities that pay interest exempt from federal, New York state and
New York city income tax or other local income taxes. The Fund's
"Investment Manager" Morgan Stanley Dean Witter Advisors Inc.,
generally invests the Fund's assets in investment grade, New York
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:
o 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");
o 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
o 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 10% of its assets in inverse floating rate
municipal obligations. The interest rates on these obligations
generally move in the reverse direction of market interest rates. If
market interest rates fall, the interest rate on the obligations will
increase and if market interest rates increase, the interest rate on
the obligations will fall.
The Fund may invest up to 20% of its assets in taxable money market
instruments, tax-exempt securities of other states and municipalities
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.
1
<PAGE>
Municipal bonds, notes and commercial paper are commonly classified
as either "general obligation" or "revenue." General obligation
bonds, notes, and commercial paper are secured by the issuer's faith
and credit, including its taxing power, for payment of principal and
interest. Revenue bonds, notes and commercial paper, however, are
generally payable from a specific source of income. They are issued
to finance a wide variety of municipal projects which may include:
educational facilities, electric utility, hospitals/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 accrue interest,
but make no interest payments until maturity.
In pursuing the Fund's investment objective, the Investment Manager
has considerable leeway in deciding which investments it buys, holds
or sells on a day-to-day basis -- and which investment strategies it
uses. For example, the Investment Manager in its discretion may
determine to use some permitted investment strategies while not using
others.
[ICON] PRINCIPAL RISKS
- --------------------------------------------------------------------------------
There is no assurance that the Fund will achieve its investment
objective. The Fund's share price and yield will fluctuate with
changes in the market value of the Fund's portfolio securities. When
you sell Fund shares, they may be worth less than what you paid for
them and, accordingly, you can lose money investing in this Fund.
CREDIT AND INTEREST RATE RISKS. Principal risks of investing in the
Fund are associated with its municipal investment, 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 projects, 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 current interest. A general illustration of the
relationship between fixed-income securities and interest rates, the
following table shows how interest rates affect bond prices.
HOW INTEREST RATES AFFECT BOND PRICES
<TABLE>
<CAPTION>
PRICE PER $1,000 OF A MUNICIPAL BOND
IF INTEREST RATES:
-------------------------------------
INCREASE* DECREASE**
YEARS TO ------------ ----------------
MATURITY BOND MATURITY COUPON 1% 2% 1% 2%
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
1 2000 3.95% $990 $981 $1,010 $1,020
-----------------------------------------------------------------------------------------------------------------
5 2004 4.70% $957 $916 $1,045 $1,093
-----------------------------------------------------------------------------------------------------------------
10 2009 5.05% $926 $858 $1,082 $1,171
-----------------------------------------------------------------------------------------------------------------
20 2019 5.80% $892 $799 $1,128 $1,278
-----------------------------------------------------------------------------------------------------------------
30 2029 5.95% $875 $773 $1,155 $1,350
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Source: MUNICIPAL MARKET DATA (a division of Thomson Financial
Municipal Group): "Aaa" yield curve as of 12/31/99. The table is not
representative of price changes for inverse floating rate municipal
obligations, which typically respond to changes in interest rates to
a greater extent than comparable obligations.
* 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, the Fund may invest in
securities with the lowest investment grade rating. These securities
may have speculative characteristics.
INVERSE FLOATING RATE MUNICIPAL OBLIGATIONS. The inverse floating
rate municipal obligations in which the Fund may invest are typically
created through a division of a fixed rate municipal obligation into
two separate instruments, a short-term obligation and a long-term
obligation. The interest rate on the short-term obligation is set at
periodic auctions. The interest rate on the long-term obligation is
the rate the issuer would have paid on the fixed-income obligation:
(i) PLUS the difference between such fixed rate and the rate on the
short-term obligation, if the short-term rate is lower than the fixed
rate; or (ii) MINUS such difference if the interest rate on the
short-term obligation is higher than the fixed rate. Inverse floating
rate municipal obligations offer the potential for higher income than
is available from fixed rate obligations of comparable maturity and
credit rating. They also carry greater risks. In particular, the
prices of inverse floating rate municipal obligations are more
volatile, I.E., they increase and decrease in response to changes in
interest rates to a greater extent than comparable fixed rate
obligations.
OTHER RISKS. The performance of the Fund also will depend on whether
the Investment Manager is successful in pursuing the Fund's
investment strategy. The Fund is also subject to other risks from its
permissible investments including the risks associated with its lease
obligations investments. For more information about these risks, see
the "Additional Risk Information" section.
Shares of the Fund are not bank deposits and are not guaranteed or
insured by the FDIC or any other government agency.
3
<PAGE>
[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.
[End Sidebar]
[Sidebar]
AVERAGE ANNUAL
TOTAL RETURNS
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL RETURNS WITH THOSE OF A BROAD
MEASURE OF MARKET PERFORMANCE OVER TIME. THE FUND'S RETURNS INCLUDE THE MAXIMUM
APPLICABLE SALES CHARGE FOR EACH CLASS AND ASSUME YOU SOLD YOUR SHARES AT THE
END OF EACH PERIOD.
[End Sidebar]
[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>
1990 4.01%
'91 12.94%
'92 8.70%
'93 11.72%
'94 -7.74%
'95 16.59%
'96 2.82%
'97 8.43%
'98 5.32%
'99 -4.58%
</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 6.99% (quarter ended March 31, 1995) and the
lowest return for a calendar quarter was -6.07% (quarter ended March
31, 1994).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
----------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
----------------------------------------------------------------------------------
Class A(1) -8.11% -- --
----------------------------------------------------------------------------------
Class B -9.16% 5.16% 5.57%
----------------------------------------------------------------------------------
Class C(1) -5.51% -- --
----------------------------------------------------------------------------------
Class D(1) -3.87% -- --
----------------------------------------------------------------------------------
Lehman Brothers
Municipal Bond Index(2) -2.06% 6.91% 6.89%
----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
1 Classes A, C and D commenced operations on July 28, 1997.
2 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, Inc. or Standard &
Poor's Corp. The Index does not include any expenses, fees
or charges. The Index is unmanaged and should not be
considered an investment.
</TABLE>
4
<PAGE>
[Sidebar]
SHAREHOLDER FEES
THESE FEES ARE PAID DIRECTLY FROM YOUR INVESTMENT.
[End Sidebar]
[Sidebar]
ANNUAL FUND
OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE FUND'S ASSETS AND ARE BASED ON EXPENSES
PAID FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999.
[End Sidebar]
[ICON] FEES AND EXPENSES
- --------------------------------------------------------------------------------
The table below briefly describes the fees and expenses that you may
pay if you buy and hold shares of the Fund. The Fund offers four
Classes of shares: Classes A, B, C and D. Each Class has a different
combination of fees, expenses and other features. The Fund does not
charge account or exchange fees. See the "Share Class Arrangements"
section for further fee and expense information.
<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 0.55% 0.55% 0.55% 0.55%
-----------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.16% 0.75% 0.75% None
-----------------------------------------------------------------------------------
Other expenses 0.18% 0.18% 0.18% 0.18%
-----------------------------------------------------------------------------------
Total annual Fund operating expenses 0.89% 1.48% 1.48% 0.73%
-----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the
time of purchase are subject to a contingent deferred sales
charge ("CDSC") of 1.00% that will be imposed if you sell
your shares within one year after purchase, except for
certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year,
reaching zero thereafter. See "Share Class Arrangements" for
a complete discussion of the CDSC.
4 Only applicable if you sell your shares within one year
after purchase.
</TABLE>
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 $512 $697 $ 897 $1,474 $512 $697 $897 $1,474
---------------------------------------------------------------------- -----------------------------------------
CLASS B $651 $768 $1,008 $1,768 $151 $468 $808 $1,768
---------------------------------------------------------------------- -----------------------------------------
CLASS C $251 $468 $ 808 $1,768 $151 $468 $808 $1,768
---------------------------------------------------------------------- -----------------------------------------
CLASS D $ 75 $233 $ 406 $ 906 $ 75 $233 $406 $ 906
---------------------------------------------------------------------- -----------------------------------------
</TABLE>
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of
the maximum front-end sales charges permitted by the NASD.
5
<PAGE>
[ICON] ADDITIONAL INVESTMENT STRATEGY INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to 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 New York state income taxes, except for "defensive" investing
discussed below, is fundamental. This fundamental policy may not be
changed without shareholder approval. The percentage limitations
relating to the composition of the Fund's portfolio apply at the time
the Fund acquires an investment and refer to the Fund's net assets,
unless otherwise noted. Subsequent percentage changes that result
from market fluctuations will not require the Fund to sell any
portfolio security. The Fund may change its principal investment
strategies without shareholder approval; however, you would be
notified of any changes.
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.
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-New York 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 New York
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 New
York tax-exempt income. When the Fund takes a defensive position, it
may not achieve its investment objective.
[ICON] ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the
principal risks of investing in the Fund.
BOND INSURANCE RISK. Many of the municipal obligations the Fund
invests in will be covered by insurance at the time of issuance or at
a later date. Such insurance covers the remaining term of the
security. Insured municipal obligations would generally be assigned a
lower rating if the rating were based primarily on the credit quality
of the issuer without regard to the insurance feature. If the
claims-paying ability of the insurer were downgraded, the ratings on
the municipal obligations it insures may also be downgraded.
6
<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, HAD
APPROXIMATELY $145 BILLION IN ASSETS UNDER MANAGEMENT AS OF JANUARY 31, 2000.
[End Sidebar]
LEASE OBLIGATIONS. Lease obligations may have risks not normally
associated with general obligation or other revenue bonds. Leases and
installment purchase or conditional sale contracts (which may provide
for title to the leased asset to pass eventually to the issuer) have
developed in part, as a means for governmental issuers to acquire
property and equipment without the necessity of complying
with the constitutional and statutory requirements generally
applicable for the issuance of debt. Certain lease obligations
contain "non-appropriation" clauses that provide that the
governmental issuer has no obligation to make future payments under
the lease or contract unless money is appropriated for that purpose
by the appropriate legislative body on an annual or other periodic
basis. Consequently, continued lease payments on those lease
obligations containing "non-appropriation" clauses are dependent on
future legislative actions. If these legislative actions do not
occur, the holders of the lease obligation may experience difficulty
in exercising their rights, including disposition of the property.
[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,
NY 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 and Director of the Tax-Exempt Fixed- Income Group
of the Investment Manager, has been a primary portfolio manager of
the Fund since its inception. Joseph R. Arcieri, a Senior Vice
President of the Investment Manager, has been a primary portfolio
manager of the Fund since February 1997. Messrs. Willison and Arcieri
have been portfolio managers with the Investment Manager for over
five years.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund,
and for Fund expenses assumed by the Investment Manager. The fee is
based on the Fund's average daily net assets. For the fiscal year
ended December 31, 1999, the Fund accrued total compensation to the
Investment Manager amounting to 0.55% of the Fund's average daily net
assets.
7
<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 (877) 937-MSDW (TOLL-FREE) FOR THE
TELEPHONE NUMBER OF THE MORGAN STANLEY DEAN WITTER OFFICE NEAREST YOU. YOU MAY
ALSO ACCESS OUR OFFICE LOCATOR ON OUR INTERNET SITE AT:
WWW.MSDW.COM/INDIVIDUAL/FUNDS
[End Sidebar]
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 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.
8
<PAGE>
[Sidebar]
EASYINVEST(SM)
A PURCHASE PLAN THAT ALLOWS
YOU TO TRANSFER MONEY AUTOMATICALLY FROM YOUR CHECKING OR SAVINGS ACCOUNT OR
FROM A MONEY MARKET FUND ON A SEMI-MONTHLY, MONTHLY OR QUARTERLY BASIS. CONTACT
YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR FOR FURTHER INFORMATION ABOUT
THIS SERVICE.
[End Sidebar]
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 purchase order. Your payment is due on the third
business day after you place your purchase order. We reserve the
right to reject any order for the purchase of Fund shares.
<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.
SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to
buying additional Fund shares for an existing account by contacting
your Morgan Stanley Dean Witter Financial Advisor, you may send a
check directly to the Fund. To buy additional shares in this manner:
o Write a "letter of instruction" to the Fund specifying the name(s)
on the account, the account number, the social security or tax
identification number, the Class of shares you wish to purchase and
the investment amount (which would include any applicable front-end
sales charge). The letter must be signed by the account owner(s).
o Make out a check for the total amount payable to: Morgan Stanley
Dean Witter New York Tax-Free Income Fund.
o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 1040, Jersey City, NJ 07303.
9
<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, a Money Market
Fund, North American Government Income Trust or Short-Term U.S.
Treasury Trust, without the imposition of an exchange fee. See the
inside back cover of this PROSPECTUS for each Morgan Stanley Dean
Witter Fund's designation as a Multi-Class Fund, No-Load Fund or
Money Market Fund. If a Morgan Stanley Dean Witter Fund is not
listed, consult the inside back cover of that fund's prospectus for
its designation. For purposes of exchanges, shares of FSC Funds
(subject to a front-end sales charge) are treated as Class A shares
of a Multi-Class Fund.
Exchanges may be made after shares of the Fund acquired by purchase
have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
The current prospectus for each fund describes its investment
objective(s), policies and investment minimums and should be read
before investment. Since exchanges are available only into
continuously offered Morgan Stanley Dean Witter Funds, exchanges are
not available into any new Morgan Stanley Dean Witter Fund during its
initial offering period, or when shares of a particular Morgan
Stanley Dean Witter Fund are not being offered for purchase.
EXCHANGE PROCEDURES. You can process an exchange by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative. Otherwise, you must forward an exchange
privilege authorization form to the Fund's transfer agent - Morgan
Stanley Dean Witter Trust FSB - and then write the transfer agent or
call (800) 869-NEWS to place an exchange order. You can obtain an
exchange privilege authorization form by contacting your Financial
Advisor or other authorized financial representative, or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money
Market Fund) is made on the basis of the next calculated net asset
values of the funds involved after the exchange instructions are
accepted. When exchanging into a Money Market Fund, the Fund's shares
are sold at their next calculated net asset value and the Money
Market Fund's shares are purchased at their net asset value on the
following business day.
The Fund may terminate or revise the exchange privilege upon required
notice. The check writing privilege, is not available for Money
Market Fund shares you acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley
Dean Witter Trust FSB, we will employ reasonable procedures to
confirm that exchange instructions communicated over the telephone
are genuine. These procedures may include 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.
10
<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.
LIMITATIONS ON EXCHANGES. Certain patterns of exchanges may result in
the Fund limiting or prohibiting, at its discretion, additional
purchases and/or exchanges. Determinations in this regard may be made
based on the frequency or dollar amount of previous exchanges. The
Fund will notify you in advance of limiting your exchange privileges.
CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements"
section of this PROSPECTUS for a 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 o your account number;
o the dollar amount or the number of shares you wish to
sell;
o the Class of shares you wish to sell; and
o the signature of each owner as it appears on the account.
------------------------------------------------------------
If you are requesting payment to anyone other than the
registered owner(s) or that payment be sent to any address
other than the address of the registered owner(s) or pre-
designated bank account, you will need a signature
guarantee. You can obtain a signature guarantee from an
eligible guarantor acceptable to Morgan Stanley Dean Witter
Trust FSB. (You should contact Morgan Stanley Dean Witter
Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.)
A notary public CANNOT provide a signature guarantee.
Additional documentation may be required for shares held by
a corporation, partnership, trustee or executor.
------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
-------------------------------------------------------------------------------------
<S> <C>
By Letter, Mail the letter to Morgan Stanley Dean Witter Trust FSB at
continued 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
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, your sale will not be effected until it
has been verified that the check has been honored.
REINSTATEMENT PRIVILEGE. If you sell Fund shares and have not
previously exercised the reinstatement privilege, you may, within 35
days after the date of sale, invest any portion of the proceeds in
the same Class of Fund shares at their net asset value and receive a
pro rata credit for any CDSC paid in connection with the sale.
INVOLUNTARY SALES. The Fund reserves the right, on sixty days'
notice, to sell the shares of any shareholder (other than shares held
in an IRA or 403(b) Custodial Account) whose shares, due to sales by
the shareholder, have a value below $100, or in the case of an
account opened through EASYINVEST (SM), if after 12 months the
shareholder has invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we will
notify you and allow you sixty days to make an additional investment
in an amount that will increase the value of your account to at least
the required amount before the sale is processed. No CDSC will be
imposed on any involuntary sale.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin
account, contact your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative regarding restrictions on
the sale of such shares.
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]
[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. Capital Gains, if any, are
usually distributed in June and December. The Fund, however, may
retain and reinvest any long-term capital gains. The Fund may at
times make payments from sources other than income or capital gains
that represent a return of a portion of your investment.
Distributions are reinvested automatically in additional shares of
the same Class and automatically credited to your account, unless you
request in writing that all distributions be paid in cash. If you
elect the cash option, processing of your dividend checks begins
immediately following the monthly payment date, and the Fund will
mail a monthly dividend check to you normally during the first seven
days of the following month. No interest will accrue on uncashed
checks. If you wish to change how your distributions are paid, your
request should be received by the Fund's transfer agent, Morgan
Stanley Dean Witter Trust FSB, at least five business days prior to
the record date of the distributions.
[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:
o The Fund makes distributions; and
o You sell Fund shares, including an exchange to another Morgan
Stanley Dean Witter Fund.
13
<PAGE>
TAXES ON DISTRIBUTIONS. Your income dividend distributions are
normally exempt from federal and New York personal income taxes -- to
the extent they are derived from New York'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.
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.
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 New York 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.
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 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.
14
<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
for the distribution financing of shares of that Class.
The chart below compares the sales charge and maximum annual 12b-1
fee applicable to each Class:
<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1 FEE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------
A Maximum 4.25% initial sales charge reduced for 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.
15
<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]
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 NET AMOUNT INVESTED
<S> <C> <C>
-------------------------------------------------------------------------------
Less than $25,000 4.25% 4.44%
-------------------------------------------------------------------------------
$25,000 but less than $50,000 4.00% 4.17%
-------------------------------------------------------------------------------
$50,000 but less than
$100,000 3.50% 3.63%
-------------------------------------------------------------------------------
$100,000 but less than
$250,000 2.75% 2.83%
-------------------------------------------------------------------------------
$250,000 but less than
$1 million 1.75% 1.78%
-------------------------------------------------------------------------------
$1 million and over 0 0
-------------------------------------------------------------------------------
</TABLE>
The reduced sales charge schedule is applicable to purchases of Class
A shares in a single transaction by:
o A single account (including an individual, trust or fiduciary
account).
o Family member accounts (limited to husband, wife and children
under the age of 21).
o Pension, profit sharing or other employee benefit plans of
companies and their affiliates.
o Tax-exempt organizations.
o Groups organized for a purpose other than to buy mutual fund
shares.
COMBINED PURCHASE PRIVILEGE. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares of the
Fund in a single transaction with purchases of Class A shares of
other Multi-Class Funds and shares of FSC Funds.
RIGHT OF ACCUMULATION. You also may benefit from a reduction of sales
charges if the cumulative net asset value of Class A shares of the
Fund purchased in a single transaction, together with shares of other
Funds you currently own which were previously purchased at a price
including a front-end sales charge (including shares acquired through
reinvestment of distributions), amounts to $25,000 or more. Also, if
you have a cumulative net asset value of all your Class A and
Class D shares equal to at least $5 million, 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
16
<PAGE>
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 of Class A of the Fund or other Multi-Class Funds or shares of
FSC Funds within a thirteen-month period. The initial purchase under
a letter of intent must be at least 5% of the stated investment goal.
To determine the applicable sales charge reduction, you may also
include: (1) the cost of shares of other Morgan Stanley Dean Witter
Funds which were previously purchased at a price including a
front-end sales charge during the 90-day period prior to the
distributor receiving the letter of intent, and (2) the cost of
shares of other Funds you currently own acquired in exchange for
shares of Funds purchased during that period at a price including a
front-end sales charge. You can obtain a letter of intent by
contacting your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative, or by calling (800) 869-NEWS. If
you do not achieve the stated investment goal within the thirteen-
month period, you are required to pay the difference between the
sales charges otherwise applicable and sales charges actually paid,
which may be deducted from your investment.
OTHER SALES CHARGE WAIVERS. In addition to investments of $1 million
or more, your purchase of Class A shares is not subject to a
front-end sales charge (or a CDSC upon sale) if your account
qualifies under one of the following categories:
o A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.
o Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including termination fees,
mandatory sale or transfer restrictions on termination) approved by
the Fund's distributor pursuant to which they pay an asset-based
fee for investment advisory, administrative and/or brokerage
services.
o A client of a Morgan Stanley Dean Witter Financial Advisor who
joined us from another investment firm within six months prior to
the date of purchase of Fund shares, and 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.
17
<PAGE>
[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]
o Current or retired Directors/Trustees of the Morgan Stanley Dean
Witter Funds, such persons' spouses and children under the age of
21, and trust accounts for which any of such persons is a
beneficiary.
o Current or retired directors, officers and employees of Morgan
Stanley Dean Witter & Co. and any of its subsidiaries, such
persons' spouses and children under the age of 21, and trust
accounts for which any of such persons is a beneficiary.
CLASS B SHARES Class B shares are offered at net asset value with no
initial sales charge but are subject to a contingent deferred sales
charge, or CDSC, as set forth in the table below. For the purpose of
calculating the CDSC, shares are deemed to have been purchased on the
last day of the month during which they were purchased.
<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:
o Sales of shares held at the time you die or become disabled (within
the definition in Section 72(m)(7) of the Internal Revenue Code
which relates to the ability to engage in gainful employment), if
the shares are: (i) registered either in your name (not a trust) or
in the names of you and your spouse as joint tenants with right of
survivorship; or (ii) held in a qualified corporate or
self-employed retirement plan, IRA or 403(b) Custodial Account,
provided in either case that the sale is requested within one year
of your death or initial determination of disability.
o Sales in connection with the following retirement plan
"distributions:" (i) lump-sum or other distributions from a
qualified corporate or self-employed retirement plan following
retirement (or, in the case of a "key employee" of a "top heavy"
plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age 59
1/2; or (iii) a tax-free return of an excess IRA contribution (a
"distribution" does not include a direct transfer of IRA, 403(b)
Custodial Account or retirement plan assets to a successor
custodian or trustee).
18
<PAGE>
o Sales of shares in connection with the Systematic Withdrawal Plan
of up to 12% annually of the value of each Fund from which plan
sales are made. The percentage is determined on the date you
establish the Systematic Withdrawal Plan and based on the next
calculated share price. You may have this CDSC waiver applied in
amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12%
annually. Shares with no CDSC will be sold first, followed by those
with the lowest CDSC. As such, the waiver benefit will be reduced
by the amount of your shares that are not subject to a CDSC. If you
suspend your participation in the plan, you may later resume plan
payments without requiring a new determination of the account value
for the 12% CDSC waiver.
o Sales of shares if you simultaneously invest the proceeds in the
Investment Manager's mutual fund asset allocation program, pursuant
to which investors pay an asset-based fee. Any shares you acquire
in connection with the Investment Manager's mutual fund asset
allocation program are subject to all of the terms and conditions
of that program, including termination fees, mandatory sale or
transfer restrictions on termination.
All waivers will be granted only following the Fund's distributor
receiving confirmation of your entitlement. If you believe you are
eligible for a CDSC waiver, please contact your Financial Advisor or
call (800) 869-NEWS.
DISTRIBUTION FEE. Class B shares are also subject to an annual
distribution (12b-1) fee of 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.)
Currently, the Class B share conversion is not a taxable event; the
conversion feature may be cancelled if it is deemed a taxable event
in the future by the Internal Revenue Service.
If you exchange your Class B shares for shares of a Money Market
Fund, a No-Load Fund, North American Government Income Trust or
Short-Term U.S. Treasury Trust,
19
<PAGE>
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 up to 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:
o Investors participating in the Investment Manager's mutual fund
asset allocation program (subject to all of its terms and
conditions, including termination fees, mandatory sale or transfer
restrictions on termination) pursuant to which they pay an
asset-based fee.
o Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including termination fees,
mandatory sale or transfer restrictions on termination) approved by
the Fund's distributor pursuant to which they pay an asset-based
fee for investment advisory, administrative and/or brokerage
services.
o Certain unit investment trusts sponsored by Dean Witter Reynolds.
o Certain other open-end investment companies whose shares are
distributed by the Fund's distributor.
o Investors who were shareholders of the Dean Witter Retirement
Series on September 11, 1998 for additional purchases for their
former Dean Witter Retirement Series accounts.
MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million initial
investment to qualify to purchase Class D shares you may combine: (1)
purchases in a single transaction of Class D shares of the Fund and
other Morgan Stanley Dean Witter Multi-Class Funds and/or
(2) previous purchases of Class A and Class D shares of Multi-
Class Funds and shares of FSC Funds you currently own, along with
shares of Morgan Stanley Dean Witter Funds you currently own that you
acquired in exchange for those shares.
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a
cash payment representing an income dividend or capital gain and you
reinvest that amount in the applicable Class of shares by returning
the check within 30 days of the payment date, the purchased shares
would not be subject to an initial sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment
Company Act of 1940 with respect to the distribution of Class A,
Class B and Class C shares. The Plan allows the Fund to pay
distribution fees for the sale and distribution of these shares. It
also allows the Fund to pay for services to shareholders of Class A,
Class B and Class C shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase
the cost of your investment in these Classes and may cost you more
than paying other types of sales charges.
21
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 fiscal years of the Fund. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost on
an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------ FOR THE PERIOD JULY 28, 1997*
1999 1998 THROUGH DECEMBER 31, 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $11.90 $12.16 $12.02
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.53 0.55 0.24
Net realized and unrealized gain (1.00) 0.13 0.14
------ ------ ------
Total income from investment
operations (0.47) 0.68 0.38
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income (0.52) (0.55) (0.24)
Net realized gain (0.02) (0.39) --
------ ------ ------
Total dividends and
distributions (0.54) (0.94) (0.24)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.89 $11.90 $12.16
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN+ (4.03)% 5.68% 3.24%(1)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses 0.89%(4) 0.93%(3)(4) 0.92%(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.58%(4) 4.50%(4) 4.78%(2)
- ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $408 $393 $94
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 24% 10%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
22
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31 1999 1998 1997* 1996 1995
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.92 $12.16 $11.71 $11.96 $10.83
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 0.46 0.49 0.51 0.53 0.55
Net realized and unrealized gain (loss) (0.99) 0.15 0.45 (0.21) 1.20
-------- -------- -------- --------- ---------
Total income (loss) from investment operations (0.53) 0.64 0.96 0.32 1.75
- --------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.46) (0.49) (0.51) (0.53) (0.54)
Net realized gain (0.02) (0.39) -- (0.04) (0.08)
-------- -------- -------- --------- ---------
Total dividends and distributions (0.48) (0.88) (0.51) (0.57) (0.62)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.91 $11.92 $12.16 $11.71 $11.96
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ (4.58)% 5.32% 8.43% 2.82% 16.59%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- --------------------------------------------------------------------------------------------------------------------------
Expenses 1.48%(2) 1.44%(1)(2) 1.43%(1) 1.40%(1) 1.42%(1)
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 3.99%(2) 3.99%(2) 4.33% 4.54% 4.70%
- --------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $124,774 $162,659 $169,868 $192,192 $216,618
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 24% 10% 16% 17%
- --------------------------------------------------------------------------------------------------------------------------
</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 expense offset of 0.01%.
(2) Reflects overall Fund ratios for investment income and non-class specific
expenses.
23
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------ FOR THE PERIOD JULY 28, 1997*
1999 1998 THROUGH DECEMBER 31, 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $11.90 $12.14 $12.02
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.46 0.48 0.22
Net realized and unrealized gain (0.99) 0.15 0.12
------ ------ ------
Total income from investment
operations (0.53) 0.63 0.34
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTION
FROM:
Net investment income (0.46) (0.48) (0.22)
Net realized gain (0.02) (0.39) --
------ ------ ------
Total dividends and distributions (0.48) (0.87) (0.22)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.89 $11.90 $12.14
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN+ (4.60)% 5.30% 2.83%(1)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses 1.48%(4) 1.44%(3)(4) 1.40%(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 3.99%(4) 3.99%(4) 4.12%(2)
- ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $840 $765 $108
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 24% 10%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
24
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------ FOR THE PERIOD JULY 28, 1997*
1999 1998 THROUGH DECEMBER 31, 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS D SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $11.91 $12.15 $12.02
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.55 0.58 0.26
Net realized and unrealized gain (1.00) 0.15 0.13
------ ------ ------
Total income from investment
operations (0.45) 0.73 0.39
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTION
FROM:
Net investment income (0.54) (0.58) (0.26)
Net realized gain (0.02) (0.39) --
------ ------ ------
Total dividends and distributions (0.56) (0.97) (0.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.90 $11.91 $12.15
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:+ (3.87)% 6.12% 3.27%(1)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses 0.73%(4) 0.69%(3)(4) 0.66%(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.74%(4) 4.74%(4) 5.04%(2)
- ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $116 $82 $32
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 24% 10%
- ---------------------------------------------------------------------------------------------------------------------------------
</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) Does not reflect the effect of expense offset of 0.01%.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
25
<PAGE>
NOTES
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----------------------------------------------------------
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----------------------------------------------------------
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----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
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26
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers investors a wide range of
investment choices. Come on in and meet the family!
- --------------------------------------------------------------------------------
GROWTH FUNDS
- ---------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
Next Generation Trust
Small Cap Growth Fund
Special Value Fund
21st Century Trend Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas"
Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH & INCOME FUNDS
- ---------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Equity Fund
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Market Index Fund
Total Return Trust
Value Fund
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
Global Utilities Fund
- --------------------------------------------------------------------------------
INCOME FUNDS
- ---------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust (FSC)
Limited Term Municipal Trust (NL)
Multi-State Municipal Series Trust (FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
- ---------------------------------
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund (MM)
U.S. Government Money Market Trust (MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust (MM)
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 back cover of a new fund's prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of funds are: NL - No-Load (Mutual) Fund; MM - Money
Market Fund; FSC - A mutual fund sold with a front-end sales charge and a
distribution (12b-1) fee.
<PAGE>
PROSPECTUS - FEBRUARY 22, 2000
Additional information about the Fund's investments is available in the Fund's
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. In the Fund's ANNUAL REPORT, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's Statement of Additional Information also provides additional information
about the Fund. The Statement of Additional Information is incorporated herein
by reference (legally is part of this PROSPECTUS). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
WWW.MSDW.COM/INDIVIDUAL/FUNDS
Information about the Fund (including the STATEMENT OF ADDITIONAL INFORMATION)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (202) 942-8090.
Reports and other information about the Fund are available on the EDGAR database
on the SEC's Internet site (www.sec.gov), and copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the following
e-mail address: [email protected], or by writing the Public Reference Section
of the SEC, Washington, DC 20549-0102.
TICKER SYMBOLS:
<TABLE>
<S> <C>
CLASS A: NYFAX CLASS C: NYFCX
- --------------------- ---------------------
CLASS B: NYFBX CLASS D: NYFDX
- --------------------- ---------------------
</TABLE>
Morgan Stanley Dean Witter
NEW YORK TAX-FREE
INCOME FUND
[BACK COVER PHOTO]
A MUTUAL FUND THAT SEEKS TO
PROVIDE A HIGH LEVEL OF CURRENT
INCOME EXEMPT FROM FEDERAL,
NEW YORK STATE AND NEW YORK
CITY INCOME TAX OR OTHER LOCAL
INCOME TAXES, CONSISTENT WITH
THE PRESERVATION OF CAPITAL
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-4222)
<PAGE>
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
NEW YORK SERIES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 2000
The undersigned shareholder of New York Series ("New York Series"), a
portfolio of Morgan Stanley Dean Witter Multi-State Municipal Series Trust,
does hereby appoint Barry Fink, Ronald E. Robison and Joseph J. McAlinden and
each of them, as attorneys-in-fact and proxies of the undersigned, each with
the full power of substitution, to attend the Special Meeting of Shareholders
of New York Series to be held on June 22, 2000, in Conference Room A,
Forty-Fourth Floor, Two World Trade Center, New York, New York at 10:00 A.M.,
New York time, and at all adjournments thereof and to vote the shares held in
the name of the undersigned on the record date for said meeting for the
Proposal specified on the reverse side hereof. Said attorneys-in-fact shall
vote in accordance with their best judgment as to any other matter.
(Continued on reverse side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE PROPOSAL SET FORTH ON THE REVERSE HEREOF AND AS RECOMMENDED BY THE
BOARD OF TRUSTEES.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
<PAGE>
- --------------------------------------------------------------------------------
PLEASE MARK VOTES AS
TO VOTE BY MAIL, PLEASE COMPLETE AND RETURN THIS CARD IN THE EXAMPLE
YOU ALSO MAY VOTE A PROXY BY TOUCH-TONE PHONE OR BY USING BLACK OR BLUE
INTERNET INK [X]
(SEE ENCLOSED VOTING INFORMATION CARD FOR FURTHER
INSTRUCTIONS)
TO VOTE A PROXY BY PHONE, call Toll-Free: 1-800-690-6903
TO VOTE A PROXY BY INTERNET, visit our Website(s): WWW/MSDWT.COM or
WWW.PROXYVOTE.COM
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The Proposal:
Approval of the Agreement and Plan of Reorganization, dated as of January 26,
2000, pursuant to which substantially all of the assets of New York Series would
be combined with those of Morgan Stanley Dean Witter New York Tax-Free Income
Fund and shareholders of New York Series would become shareholders of Morgan
Stanley Dean Witter New York Tax-Free Income Fund receiving Class D shares in
Morgan Stanley Dean Witter New York Tax-Free Income Fund with a value equal to
the value of their holdings in New York Series.
Please sign personally. If the shares are registered in more than one name,
each joint owner or each fiduciary should sign personally. Only authorized
officers should sign for corporations.
Please make sure to sign and date this Proxy using black or blue ink.
Date-----------------------------------------
[ ]
Shareholder sign in the box above
[ ]
Co-Owner (if any) sign in the box above
- - PLEASE FOLD AND DETACH AT PERFORATION ALONG DOTTED LINES - --
MORGAN STANLEY DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
NEW YORK SERIES
IMPORTANT
USE ONE OF THE THREE EASY WAYS TO VOTE YOUR PROXY
1. BY MAIL. PLEASE DATE, SIGN AND RETURN THE ABOVE PROXY CARD IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
2. BY INTERNET. HAVE YOUR PROXY CARD AT HAND. GO TO THE "VOTE YOUR PROXY HERE"
LINK ON THE WEBSITE WWW.MSDWT.COM OR WWW.PROXYVOTE.COM. ENTER YOUR 12
DIGIT CONTROL NUMBER LOCATED ON THE PROXY CARD AND FOLLOW THE SIMPLE
INSTRUCTIONS.
3. BY TELEPHONE. HAVE YOUR PROXY CARD AT HAND. CALL 1-800-690-6903 ON A
TOUCH-TONE PHONE. ENTER YOUR 12-DIGIT CONTROL NUMBER LOCATED ON THE PROXY
CARD AND FOLLOW THE SIMPLE RECORDED INSTRUCTIONS.
00027
<PAGE>
- -------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER FUNDS
- -------------------------------------------------------------------------------
OFFERS TWO NEW WAYS TO VOTE YOUR PROXY
24 HOURS A DAY, 7 DAYS A WEEK
You can now vote your proxy in a matter of minutes with the ease and
convenience of the Internet or the telephone. You may still vote by mail.
But remember, if you are voting by Internet or telephone, do not mail the
proxy.
TO VOTE BY INTERNET:
1. Read the enclosed Proxy Statement and have your Proxy Card available.
2. Go to the "Proxy Voting" link on www.msdwt.com or to website
www.proxyvote.com.
3. Enter the 12-digit Control Number found on your Proxy Card.
4. Follow the simple instructions.
TO VOTE BY TELEPHONE:
1. Read the enclosed Proxy Statement and have your Proxy Card available.
2. Call toll-free 1-800-690-6903.
3. Enter the 12-digit Control Number found on your Proxy Card.
4. Follow the simple recorded instructions.
Your Proxy Vote is Important!
Thank You for Submitting Your Proxy.
- -------------------------------------------------------------------------------
