<PAGE>
MORGAN STANLEY DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(800) 869-NEWS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 24, 1999
TO THE SHAREHOLDERS OF MORGAN STANLEY DEAN WITTER GLOBAL SHORT-TERM INCOME FUND
INC.:
Notice is hereby given of a Special Meeting of the Shareholders of Morgan
Stanley Dean Witter Global Short-Term Income Fund Inc. ("Global Short-Term") to
be held at Conference Room A, 44th Floor, Two World Trade Center, New York, New
York 10048, at 9:00 A.M., New York time, on February 24, 1999, and any
adjournments thereof (the "Meeting"), for the following purposes:
1. To consider and vote upon an Agreement and Plan of Reorganization, dated
October 28, 1998 (the "Reorganization Agreement"), between Global
Short-Term and Morgan Stanley Dean Witter World Wide Income Trust ("World
Wide"), pursuant to which substantially all of the assets of Global
Short-Term would be combined with those of World Wide and shareholders of
Global Short-Term would become shareholders of World Wide receiving Class
A shares of World Wide with a value equal to the value of their holdings
in Global Short-Term (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
November 30, 1998 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. The Board of
Directors of Global Short-Term 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 Directors,
Barry Fink,
SECRETARY
December 21, 1998
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.
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
TWO WORLD TRADE CENTER,
NEW YORK, NEW YORK 10048
(800) 869-NEWS
ACQUISITION OF THE ASSETS OF
MORGAN STANLEY DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
BY AND IN EXCHANGE FOR SHARES OF
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
This Proxy Statement and Prospectus is being furnished to shareholders of
Morgan Stanley Dean Witter Global Short-Term Income Fund Inc. ("Global
Short-Term") in connection with an Agreement and Plan of Reorganization, dated
October 28, 1998 (the "Reorganization Agreement"), pursuant to which
substantially all the assets of Global Short-Term will be combined with those of
Morgan Stanley Dean Witter World Wide Income Trust ("World Wide") in exchange
for shares of World Wide (the "Reorganization"). As a result of this
transaction, shareholders of Global Short-Term will become shareholders of World
Wide and will receive Class A shares of World Wide with a value equal to the
value of their holdings in Global Short-Term. The terms and conditions of this
transaction are more fully described in this Proxy Statement and Prospectus and
in the Reorganization Agreement between Global Short-Term and World Wide,
attached hereto as EXHIBIT A. The address of Global Short-Term is that of World
Wide set forth above. This Proxy Statement also constitutes a Prospectus of
World Wide, which is dated December 21, 1998, filed by World Wide with the
Securities and Exchange Commission (the "Commission") as part of its
Registration Statement on Form N-14 (the "Registration Statement").
World Wide is an open-end non-diversified management investment company
whose primary investment objective is to provide a high level of current income.
As a secondary objective, the fund seeks appreciation in the value of its
assets. World Wide seeks to achieve its objectives by investing primarily in
fixed-income securities issued by foreign or U.S. companies, or issued or
guaranteed by foreign governments, government agencies or government
subdivisions, supranational organizations (or any subdivision thereof), or the
U.S. Government, its agencies or instrumentalities.
This Proxy Statement and Prospectus sets forth concisely information about
World Wide that shareholders of Global Short-Term should know before voting on
the Reorganization Agreement. A copy of the Prospectus for World Wide dated
February 6, 1998, is attached as EXHIBIT B and incorporated herein by reference.
Also enclosed and incorporated herein by reference is World Wide's Annual Report
for the fiscal year ended October 31, 1998. A Statement of Additional
Information relating to the Reorganization, described in this Proxy Statement
and Prospectus (the "Additional Statement"), dated December 21, 1998, has been
filed with the Commission and is also incorporated herein by reference. Also
incorporated herein by reference are Global Short-Term's Prospectus, dated
February 10, 1998, and Annual Report for its fiscal year ended October 31, 1998.
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 DECEMBER 21, 1998.
i
<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.................................................................. 3
The Reorganization...................................................... 3
Fee Table............................................................... 4
Tax Consequences of the Reorganization.................................. 6
Comparison of Global Short-Term and World Wide.......................... 6
PRINCIPAL RISK FACTORS.................................................... 9
THE REORGANIZATION........................................................ 10
The Proposal............................................................ 10
The Board's Consideration............................................... 10
The Reorganization Agreement............................................ 11
Tax Aspects of the Reorganization....................................... 13
Description of Shares................................................... 14
Capitalization Table (unaudited)........................................ 15
Appraisal Rights........................................................ 15
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............ 15
Investment Objectives and Policies...................................... 15
Investment Restrictions................................................. 16
ADDITIONAL INFORMATION ABOUT GLOBAL SHORT-TERM AND WORLD WIDE............. 17
General................................................................. 17
Financial Information................................................... 17
Management.............................................................. 17
Description of Securities and Shareholder Inquiries..................... 17
Dividends, Distributions and Taxes...................................... 17
Purchases, Repurchases and Redemptions.................................. 17
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE............................... 17
FINANCIAL STATEMENTS AND EXPERTS.......................................... 17
LEGAL MATTERS............................................................. 18
AVAILABLE INFORMATION..................................................... 18
OTHER BUSINESS............................................................ 18
EXHIBIT A -- Agreement and Plan of Reorganization, dated October 28, 1998,
by and between Global Short-Term and World Wide......................... A-1
EXHIBIT B -- Prospectus of World Wide, dated February 6, 1998............. B-1
</TABLE>
ii
<PAGE>
MORGAN STANLEY DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(800) 869-NEWS
------------------------
PROXY STATEMENT AND PROSPECTUS
------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 24, 1999
INTRODUCTION
GENERAL
This Proxy Statement and Prospectus is being furnished to the shareholders
of Morgan Stanley Dean Witter Global Short-Term Income Fund Inc. ("Global
Short-Term"), an open-end non-diversified management investment company, in
connection with the solicitation by the Board of Directors of Global Short-Term
(the "Board") of proxies to be used at the Special Meeting of Shareholders of
Global Short-Term to be held at Conference Room A, 44th Floor, Two World Trade
Center, New York, New York 10048 at 9:00 A.M., New York time, on February 24,
1999, and any adjournments thereof (the "Meeting"). It is expected that the
mailing of this Proxy Statement and Prospectus will be made on or about December
21, 1998.
At the Meeting, Global Short-Term shareholders ("Shareholders") will
consider and vote upon an Agreement and Plan of Reorganization, dated October
28, 1998 (the "Reorganization Agreement"), between Global Short-Term and Morgan
Stanley Dean Witter World Wide Income Trust ("World Wide") pursuant to which
substantially all of the assets of Global Short-Term will be combined with those
of World Wide in exchange for shares of World Wide. As a result of this
transaction, Shareholders will become shareholders of World Wide and will
receive shares of World Wide equal to the value of their holdings in Global
Short-Term on the date of such transaction (the "Reorganization"). Pursuant to
the Reorganization, each Shareholder of Global Short-Term will receive Class A
shares of World Wide. The Class A shares to be issued by World Wide pursuant to
the Reorganization (the "World Wide Shares") will be issued at net asset value
without an initial sales charge. Further information relating to World Wide is
set forth herein and in World Wide's current Prospectus, dated February 6, 1998
("World Wide's Prospectus"), attached as EXHIBIT B to this Proxy Statement and
Prospectus and incorporated herein by reference.
The information concerning Global Short-Term contained herein has been
supplied by Global Short-Term and the information concerning World Wide
contained herein has been supplied by World Wide.
RECORD DATE; SHARE INFORMATION
The Board has fixed the close of business on November 30, 1998 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
5,036,935.252 shares of Global Short-Term 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.
To the knowledge of the Board, as of the Record Date, no person owned of
record or beneficially 5% or more of the outstanding shares of Global
Short-Term. As of the Record Date, the directors and officers of Global
Short-Term, as a group, owned less than 1% of the outstanding shares of Global
Short-Term.
<PAGE>
The following persons were known to own of record or beneficially 5% or more
of the outstanding shares of a Class of World Wide as of the Record Date: Class
A -- Morgan Stanley Dean Witter Trust FSB ("MSDW Trust"), Trustee for the
benefit of Alban Charitable Remainder Unitrust, P.O. Box 503, Jersey City NJ
07311 (53,759.820 shares) (40.364%); MSDW Trust, Trustee for Crowne Investment
Inc. 401 K Plan, P.O. Box 957, Jersey City, NJ 07303-0957 (29,372.108 shares);
Dean Witter Reynolds, Custodian for Peter J. Seeley IRA rollover, dated 9/15/94,
194 Hemlock Lane, Kinnelon, NJ 07405-2430 (8,664.366 shares); MSDW Trust,
Trustee for Rainbow Technology Corp., Retirement Plan, P.O. Box 957, Jersey
City, NJ 07303-0957; Mitteldorf Family Trust U/A 10/31/91, Harriet Mittledorf,
Trustee, 33 Beverly Avenue, Lansdowne, PA 19050-2705 (8,278.146 shares). Class C
- -- Dean Witter Reynolds, Custodian for David S. Brodnan, IRA Rollover dated
7/2/97, 3950 R.F.D., Long Grove, IL 60047 (10,244.004 shares) (31.321%); Nancy
J. Rawleigh and Steven D. Rawleigh, Joint Tenants, 12001 NE 14th Avenue, Apt.
708, Hallandale, FL 33009-2768 (2,876.870 shares); Dean Witter Reynolds,
Custodian for Joyce F. Gerspach, IRA STD/Rollover, dated 4/21/98, 4736 W.
Armitage Avenue, Chicago, IL 60639-3304 (2,768.718 shares); Jerome R. Leither
and Judith L. Leither, Joint Tenants, 6091 Mirada Court, Highland, CA 92346-2012
(2,199.738 shares). Class D -- MSDW Trust, Agent for American Baptist Homes
Foundation of the West Inc., Trustee for the benefit of Perkins, P.O. Box 503,
Jersey City, NJ 07311 (9,922.732 shares). As of the Record Date, the trustees
and officers of World Wide, as a group, owned less than 1% of the outstanding
shares of World Wide.
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 Global
Short-Term at Two World Trade Center, New York, New York 10048; (ii) attending
the Meeting and voting in person; or (iii) signing and returning a new proxy (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
Global Short-Term present in person or by proxy at 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.
2
<PAGE>
EXPENSES OF SOLICITATION
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement and Prospectus, will be borne by Global Short-Term,
which expenses are not expected to exceed $150,000. In addition to the
solicitation of proxies by mail, proxies may be solicited by officers of Global
Short-Term, and officers and regular employees of Morgan Stanley Dean Witter
Advisors Inc. ("MSDW Advisors" or the "Investment Manager") and MSDW Trust,
personally or by mail, telephone, telegraph or otherwise, without special
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.
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.
Global Short-Term has been advised by counsel that these procedures are
consistent with the requirements of applicable law. Shareholders voting by
telephone 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 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.
VOTE REQUIRED
Approval of the Reorganization Agreement by the Shareholders requires the
affirmative vote of a majority (I.E., more than 50%) of the outstanding shares
of Global Short-Term 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, Global Short-Term will continue in
existence and the Board will consider alternative actions.
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 THE REORGANIZATION AGREEMENT IN
THEIR ENTIRETY AND, IN PARTICULAR, WORLD WIDE'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 Global Short-Term, subject to stated liabilities, to World Wide in
exchange for the World Wide Shares. The aggregate net asset value of the World
Wide Shares issued in the exchange will equal the aggregate value of the net
assets of Global Short-Term received by World Wide. On or after the closing date
scheduled for the Reorganization (the "Closing Date"), Global Short-Term will
distribute the World Wide Shares received by Global Short-Term to Shareholders
3
<PAGE>
as of the Valuation Date (as defined below under "The Reorganization Agreement")
in complete liquidation of Global Short-Term and Global Short-Term will
thereafter be dissolved and deregistered under the Investment Company Act of
1940, as amended (the "1940 Act"). As a result of the Reorganization, each
Shareholder will receive that number of full and fractional World Wide Shares
equal in value to such Shareholder's pro rata interest in the net assets of
Global Short-Term transferred to World Wide. Pursuant to the Reorganization,
each Shareholder will receive Class A shares of World Wide and will receive such
shares in certificate form. Shareholders holding their shares 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 World Wide; however, such
Shareholders will not be able to redeem, transfer or exchange the World Wide
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 DIRECTORS WHO ARE NOT "INTERESTED
PERSONS" OF GLOBAL SHORT-TERM ("INDEPENDENT DIRECTORS"), AS THAT TERM IS DEFINED
IN THE 1940 ACT, HAS CONCLUDED THAT THE REORGANIZATION IS IN THE BEST INTERESTS
OF GLOBAL SHORT-TERM AND ITS SHAREHOLDERS AND RECOMMENDS APPROVAL OF THE
REORGANIZATION AGREEMENT.
FEE TABLE
Global Short-Term and World Wide 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. The following table
illustrates expenses and fees that shares of Global Short-Term incurred during
the fund's fiscal year ended October 31, 1998. As discussed above, pursuant to
the Reorganization, Shareholders will receive Class A shares of World Wide.
Accordingly, with respect to World Wide, the table sets forth expenses and fees
of the fund's Class A shares for the fund's October 31, 1998 fiscal year end.
The table also sets forth pro forma fees for the surviving combined fund (Class
A shares of World Wide) reflecting what the fee schedule would have been on
October 31, 1998, if the Reorganization had been consummated twelve (12) months
prior to that date. The fees and expenses for both funds that are set forth in
the table below are set forth in the funds' respective Annual Reports for their
fiscal year ended October 31, 1998, which Reports are accompanied herewith and
are incorporated herein by reference. Such expenses are not set forth in the
funds' current Prospectuses, which Prospectuses relate to the funds' fiscal year
ended October 31, 1997.
4
<PAGE>
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
PRO FORMA
GLOBAL WORLD WIDE COMBINED
SHORT-TERM (CLASS A) (CLASS A)
---------- ---------- ---------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price)................................ none 4.25%(1) 4.25%(1)
Maximum Contingent Deferred Sales
Charges (as a percentage of the lesser
of original purchase or redemption
proceeds)............................. 3.00(2) none(3) none(3)
</TABLE>
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS
<TABLE>
<CAPTION>
PRO FORMA
GLOBAL WORLD WIDE COMBINED
SHORT-TERM (CLASS A) (CLASS A)
---------- ---------- ---------
<S> <C> <C> <C>
Management Fees................................................................ 0.55% 0.75% 0.75%
12b-1 Fees(4).................................................................. 0.75% 0.23% 0.23%
Other Expenses................................................................. 0.54% 0.47% 0.41%
Total Fund Operating Expenses.................................................. 1.84% 1.45% 1.39%
</TABLE>
- ------------------------
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund Shares --
Initial Sales Charge Alternative -- Class A Shares" in each fund's
Prospectus). In addition, Shareholders will not pay any sales charge
relating to the World Wide Shares received pursuant to the Reorganization.
(2) The CDSC is scaled down to 1.00% during the third year, reaching zero
thereafter.
(3) Investments that are not subject to any sales charge at the time of purchase
are subject to a Contingent Deferred Sales Charge ("CDSC") of 1.00% that
will be imposed on redemptions made within one year after purchase, except
for certain specific circumstances (see "Purchases, Exchanges and
Redemptions" below and "Purchase of Fund Shares" in each fund's Prospectus).
(4) The 12b-1 fee is accrued daily and payable monthly. With respect to World
Wide, the entire 12b-1 fee payable by Class A and, with respect to Global
Short-Term, a portion of the 12b-1 fee payable by it equal to 0.25% of its
average daily net assets, are currently 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. The remainder of the 12b-1 fee, if any,
is an asset-based sales charge, and is a distribution fee paid to Morgan
Stanley Dean Witter Distributors Inc. (the "Distributor") to compensate it
for the services provided and the expenses borne by the Distributor and
others in the distribution of each fund's shares (see "Description of
Shares" below and "Purchase of Fund Shares -- Plan of Distribution" in each
fund's Prospectus).
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in the funds will
bear directly or indirectly. See "Synopsis -- Investment Management and
Distribution Plan Fees, Other Significant Fees."
5
<PAGE>
HYPOTHETICAL EXPENSES
To attempt to show the effect of these expenses on an investment over time,
the hypotheticals shown below have been created. Assuming that an investor makes
a $1,000 investment in either Global Short-Term or World Wide or the new
combined fund (World Wide), that the annual return is 5% and that the operating
expenses for each fund are the ones shown in the chart above; if the investment
was redeemed at the end of each period shown below, the investor would incur the
following expenses by the end of each period shown:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Global Short-Term.............................................. $ 49 $ 68 $ 100 $ 216
World Wide (Class A)........................................... $ 57 $ 86 $ 118 $ 209
Pro Forma Combined (Class A)................................... $ 56 $ 85 $ 115 $ 202
</TABLE>
If such investment was not redeemed, the investor would incur the following
expenses:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Global Short-Term.............................................. $ 19 $ 58 $ 100 $ 216
World Wide (Class A)........................................... $ 57 $ 86 $ 118 $ 209
Pro Forma Combined (Class A)................................... $ 56 $ 85 $ 115 $ 202
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL OPERATING EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN. LONG-TERM SHAREHOLDERS OF GLOBAL SHORT-TERM AND WORLD WIDE MAY
PAY MORE IN SALES CHARGES INCLUDING DISTRIBUTION FEES THAN THE ECONOMIC
EQUIVALENT OF THE MAXIMUM FRONT-END SALES CHARGES PERMITTED BY THE NASD.
TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to the Reorganization, Global Short-Term will receive an
opinion of Gordon Altman Butowsky Weitzen Shalov & Wein 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 Global Short-Term or
the shareholders of Global Short-Term 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 GLOBAL SHORT-TERM AND WORLD WIDE
INVESTMENT OBJECTIVES AND POLICIES. Global Short-Term and World Wide have
similar investment objectives and policies. The investment objective of Global
Short-Term is to achieve as high a level of current income as is consistent with
prudent investment risk. Similarly, the primary investment objective of World
Wide is to provide a high level of current income and, as a secondary objective,
the fund seeks appreciation in the value of its assets. Both funds seek to
achieve their respective objectives by investing primarily in fixed income
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, issued or guaranteed by foreign governments or supra-national
organizations, or issued by foreign or U.S. companies. Global Short-Term invests
primarily in fixed income securities with remaining maturities of not more than
three years and with the two highest credit ratings issued by Standard & Poor's
Corporation ("S&P") (AAA or AA) and/or by Moody's Investors Services, Inc.
("Moody's") (Aaa or Aa) or if unrated, the securities are determined to be of
6
<PAGE>
comparable quality. World Wide, however, invests in securities within the four
highest rating categories issued by S&P (AAA, AA, A or BBB) and/or Moody's (Aaa,
Aa, A or Baa) or if unrated, the securities are determined to be of comparable
quality. In addition, World Wide does not have a stated policy as to the
remaining maturities of its fixed income investments.
Both funds' assets are comprised of investments in the securities of issuers
located in at least three different countries (including the U.S.).
Additionally, Global Short-Term will invest at least 25% of its total assets in
U.S. securities; whereas, World Wide does not have a policy of concentrating
more than 25% of its total assets in any one country.
Global Short-Term has a fundamental policy of investing, under normal
circumstances, at least 25% its total assets in debt instruments issued by U.S.
and foreign companies engaged in the banking industry (the "Bank Concentration
Policy"); whereas, World Wide does not have any such policy.
The principal differences between both funds' investment policies are more
fully described under "Comparison of Investment Objectives, Policies and
Restrictions" below.
Other than Global Short-Term's Bank Concentration Policy, the investment
policies of both Global Short-Term and World Wide are not fundamental and may be
changed by their respective Boards of Directors/ Trustees.
INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. Global Short-Term obtains
management services from MSDW Advisors. As compensation for such services,
Global Short-Term pays MSDW Advisors monthly compensation calculated daily by
applying the annual rate of 0.55% to the first $500 million of the fund's
average net assets and 0.50% to the fund's average net assets exceeding $500
million. World Wide also obtains investment management services from MSDW
Advisors. As compensation for such services, World Wide pays MSDW Advisors
monthly compensation calculated daily by applying the annual rate of 0.75% to
the fund's average net assets not exceeding $250 million; 0.60% to the portion
of the daily net assets exceeding $250 million, but not exceeding $500 million;
0.50% to the portion of the daily net assets exceeding $500 million, but not
exceeding $750 million; 0.40% to the portion of the daily net assets exceeding
$750 million, but not exceeding $1 billion; and 0.30% to the portion of the
daily net assets exceeding $1 billion.
Both Global Short-Term and World Wide have adopted distribution plans
("Plans") pursuant to Rule 12b-1 under the 1940 Act. In the case of World Wide's
Class A shares, the fund's Plan provides that the fund will reimburse the
Distributor and others for the expenses of certain activities and services
incurred by them in connection with the distribution of the Class A shares of
the fund. Reimbursement for these expenses is made in monthly payments by the
fund to the Distributor which will in no event exceed amounts equal to payments
at the annual rate of 0.25% of the average daily net assets of the Class A
shares. In the case of Global Short-Term, the fund's Plan provides that the fund
will pay the Distributor a fee, which is accrued daily and paid monthly, at the
annual rate of 0.75% of the lesser of: (i) the fund's average daily aggregate
net sales or (ii) the fund's average daily net assets. The fee is paid for the
services provided and the expenses borne by the Distributor and others in
connection with the distribution of Global Short-Term's shares. For information
relating to the 12b-1 fees applicable to each of the other classes of World
Wide's shares and further information on the fund's Class A shares, see the
section entitled "Purchase of Fund Shares" in World Wide's Prospectus attached
hereto. The Distributor also receives the proceeds of any contingent deferred
sales charge ("CDSC") paid by the funds' shareholders at the time of redemption.
See "Purchases, Exchanges and Redemptions" below.
7
<PAGE>
OTHER SIGNIFICANT FEES. Both Global Short-Term and World Wide pay
additional fees in connection with their operations, including legal, auditing,
transfer agent, directors/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. World Wide's 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 certain purchases. Investments of $1 million or more
(and investment by certain other limited categories of investors) are not
subject to any sales charges at the time of purchase, but are subject to a CDSC
of 1.0% on redemptions made within one year after purchase (except for certain
specific circumstances fully described in the fund's Prospectus).
Global Short-Term's shares are offered at net asset value with no initial
sales charge, but are subject to the CDSC schedule set forth below.
<TABLE>
<CAPTION>
YEAR SINCE GLOBAL SHORT-TERM SHARES
PURCHASE PAYMENT MADE CDSC SCHEDULE
- ------------------------------------------------ -------------------------
<S> <C>
First........................................... 3.0%
Second.......................................... 2.0%
Third........................................... 1.0%
Fourth and thereafter........................... none
</TABLE>
Shareholders receiving the World Wide Shares pursuant to the Reorganization
will not be subject to any CDSC or front-end sales charge upon receipt of such
shares. In addition, Shareholders will not be subject to a CDSC upon redemption
of the World Wide Shares or upon redemption of shares of any other fund for
which the World Wide Shares are exchanged. The CDSC charge is paid to the
Distributor. Shares of World Wide and Global Short-Term are distributed by the
Distributor and offered by Dean Witter Reynolds Inc. and other dealers who have
entered into selected dealer agreements with the Distributor. For further
information relating to the CDSC schedules applicable to World Wide's Class A
shares and any of the fund's other classes, see the section entitled "Purchase
of Fund Shares" in World Wide's Prospectus.
Class A shares of World Wide may be exchanged for Class A shares of any
other Morgan Stanley Dean Witter Fund that offers its shares in more than one
class ("Morgan Stanley Dean Witter Multi-Class Funds"), without the imposition
of an exchange fee. Class A shares of World Wide may also be exchanged for
shares of Morgan Stanley Dean Witter Multi-State Municipal Series Trust and
Morgan Stanley Dean Witter Hawaii Municipal Trust without the imposition of an
exchange fee. Shares of Global Short-Term may be exchanged for Class B shares of
any Morgan Stanley Dean Witter Multi-Class Fund. Additionally, shares of both
funds may be exchanged for shares of Morgan Stanley Dean Witter Short-Term U.S.
Treasury Trust, Morgan Stanley Dean Witter Limited Term Municipal Trust and
Morgan Stanley Dean Witter Short-Term Bond Fund and the five Morgan Stanley Dean
Witter Funds that are money market funds (the foregoing eight funds are
collectively referred to as the "Exchange Funds"), without the imposition of an
exchange fee.
With respect to both funds, no CDSC is imposed at the time of any exchange,
although any applicable CDSC will be imposed upon ultimate redemption. As noted
above, no CDSC will be imposed on the World Wide Shares acquired in connection
with the Reorganization. During the period of time a World Wide and Global
Short-Term shareholder remains in an Exchange Fund, the holding period (for
purposes of determining the CDSC rate) is frozen. Both Global Short-Term and
World Wide provide telephone exchange privileges to their shareholders. For
greater details relating to exchange privileges applicable to World Wide, see
the section entitled "Shareholder Services" in World Wide's Prospectus.
8
<PAGE>
Shareholders of Global Short-Term and World Wide may redeem their shares for
cash at any time at the net asset value per share next determined; however, such
redemption proceeds may be reduced by the amount of any applicable CDSC. Both
Global Short-Term and World Wide offer a reinstatement privilege whereby a
shareholder who has not previously exercised such privilege whose shares have
been redeemed or repurchased may, with respect to World Wide, within thirty-five
days, and with respect to Global Short-Term, within thirty 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 and receive a pro rata credit for any CDSC paid in connection with
such redemption or repurchase. Global Short-Term and World Wide may redeem
involuntarily, at net asset value, most accounts valued at less than $100.
DIVIDENDS. World Wide declares dividends separately for each of its classes
and declares and pays monthly dividends from the anticipated net investment
income of the fund. Global Short-Term declares dividends on each day the New
York Stock Exchange is open for business and pays them monthly. Both funds
distribute net short-term and long-term capital gains, if any, at least
annually. Each fund, 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 each fund, dividends and capital gains distributions are
automatically reinvested in additional shares of the fund (and of the same
class, with respect to World Wide) at net asset value unless the shareholder
elects to receive cash.
FORM OF ORGANIZATION. Global Short-Term is organized under the laws of
Maryland; whereas, World Wide is organized under the laws of the Commonwealth of
Massachusetts. Both types of organization allow the Board of Directors/Trustees
to take certain action without obtaining shareholder approval. In addition,
routine annual shareholder meetings are not required for either structure. Under
Massachusetts law, shareholders of a business trust may, under certain limited
circumstances, be held personally liable as partners for obligations of the
fund. In the opinion of Massachusetts counsel to World Wide, however, the risk
to fund shareholders of personal liability is remote. For additional information
about World Wide's form of organization, see the section entitled "Additional
Information" in World Wide's Prospectus.
Effective June 22, 1998, World Wide's name was changed from Dean Witter
World Wide Income Trust to Morgan Stanley Dean Witter World Wide Income Trust.
On that date, Global Short-Term's name was changed from Dean Witter Global
Short-Term Income Fund Inc. to Morgan Stanley Dean Witter Global Short-Term
Income Fund Inc.
PRINCIPAL RISK FACTORS
The net asset values of World Wide and Global Short-Term 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 movements in
interest rates, which cannot be predicted. The funds' respective yields will
also vary based on the yield of each fund's portfolio securities. Both funds
invest a primary portion of their portfolio securities in fixed income
securities which are subject to credit risk and interest rate risk. Credit risk
relates to the ability of the issuer to meet interest and/or principal payments
as they become due. Interest rate risk refers to fluctuations in the net asset
value of a portfolio of fixed income securities resulting from changes in
interest rates. World Wide may invest 65% of its total assets in securities
rated BBB by S&P or Baa by Moody's (or if unrated, the securities are determined
to be of comparable quality); whereas, Global Short-Term invests in higher rated
securities (I.E., securities which have the two highest ratings issued by S&P
(AAA or AA) and/or Moody's (Aaa or Aa)) (or if unrated, the securities are
determined to be of comparable quality). Securities with ratings as low as BBB
by S&P or Baa by Moody's
9
<PAGE>
may be considered to have a greater degree of credit risk than securities with
higher ratings. Such securities are also considered to have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than in the case of securities with higher ratings.
Global Short-Term has a policy of investing in fixed income securities which
have a remaining maturity (at the time of purchase) of not more than three
years. World Wide does not have any stated policy on the maturities of its
portfolio securities and, accordingly, may invest significantly in longer-term
fixed income securities which may be subject to greater credit risk and price
fluctuations than similar shorter-term securities.
Both funds are subject to certain special risks relating to investments in
foreign securities including, fluctuations in currency exchange rates (i.e., if
a substantial portion of the funds' assets are denominated in foreign currencies
which decrease in value with respect to the U.S. dollar, the value of the
investor's shares and the distributions made thereon will decrease in value),
foreign securities exchange controls and foreign tax rates. The foreign
securities and markets in which the funds invest pose greater risks than those
customarily associated with domestic securities and their markets. Both funds
also are subject to the special risks relating to forward foreign currency
contracts and options and futures contracts.
Additionally, Global Short-Term is subject to the risks associated with its
Bank Concentration Policy, such as adverse changes in economic and regulatory
developments affecting the banking industry. By contrast, World Wide does not
concentrate its investments in a particular industry. Global Short-Term invests
in mortgage-and asset-backed securities which are subject to special risks
including prepayments or refinancings of the assets underlying such securities,
which may have an impact on the dividends paid and the net asset value of the
fund's shares. World Wide does not invest in such securities.
Both funds may enter into repurchase agreements and reverse repurchase
agreements, and may purchase securities on a when-issued and delayed delivery
basis, all of which involve certain special risks.
The foregoing discussion is a summary of the principal risk factors. For a
more complete discussion of the risks of each fund, see "Investment Objective
and Policies -- Risk Considerations" in the Prospectus of Global Short-Term and
"Investment Objectives and Policies -- Risk Considerations" in World Wide's
Prospectus attached hereto and incorporated herein by reference.
THE REORGANIZATION
THE PROPOSAL
The Board of Directors of Global Short-Term, including the Independent
Directors, having reviewed the financial position of Global Short-Term and the
prospects for achieving economies of scale through the Reorganization and having
determined that the Reorganization is in the best interests of Global Short-Term
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 Global Short-Term.
THE BOARD'S CONSIDERATION
At a meeting held on October 28, 1998, the Board, including all of the
Independent Directors, unanimously approved the Reorganization Agreement and
determined to recommend that Shareholders approve the 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 Global Short-Term and
10
<PAGE>
Class A of World Wide. The Board also considered other factors, including, but
not limited to: the compatibility of the investment objectives, policies,
restrictions and portfolios of Global Short-Term and World Wide; 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 Global Short-Term and World Wide in
connection with the Reorganization.
In recommending the Reorganization to Shareholders, the Board of Global
Short-Term 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 A shares of the "combined fund" should be lower on a percentage
basis than the actual expenses per share of Global Short-Term. The Board noted
that notwithstanding Global Short-Term's lower management fees, Global
Short-Term's total expense ratio was higher for its fiscal year ended October
31, 1997 than the expense ratio for Class A shares of World Wide for the same
period. This is primarily due to the significantly lower Rule 12b-1 fees
incurred by Class A shares of World Wide (0.25% of average daily net assets)
compared to the 12b-1 fees paid by Global Short-Term (0.75% of average daily net
assets). Furthermore, 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 further noted
that the combined fund is expected to have a lower expense ratio than the
current ratio of World Wide.
2. Shareholders would have a continued participation in a portfolio of
fixed income securities of issuers throughout the world through investment in
World Wide.
3. The Reorganization will constitute a tax-free reorganization for
Federal income tax purposes, and no gain or loss will be recognized by Global
Short-Term or its Shareholders for Federal income tax purposes as a result of
transactions included in the Reorganization.
4. The Board also took into consideration that absent the Reorganization,
World Wide will continue to compete for investor funds with Global Short-Term.
The Reorganization should allow for more concentrated selling efforts to the
benefit of both Global Short-Term and World Wide shareholders and avoid the
inefficiencies associated with the operation and distribution of two similar
funds.
The Board of Trustees of World Wide, including a majority of Independent
Trustees, has determined that the Reorganization is in the best interests of
World Wide and its shareholders and that the interests of existing shareholders
of World Wide will not be diluted as a result thereof. The transaction will
enable World Wide to acquire investment securities which are consistent with
World Wide's investment objective, without the brokerage costs attendant to the
purchase of such securities in the market. Furthermore, the addition of assets
to World Wide's portfolio may result in some of the economies of scale described
above.
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) Global Short-Term will
transfer all of its assets, including portfolio securities, cash (other than
cash amounts retained by Global Short-Term as a "Cash Reserve" in the amount
sufficient to discharge its liabilities not discharged prior to the Valuation
Date (as defined below) and
11
<PAGE>
for expenses of the dissolution), cash equivalents and receivables to World Wide
on the Closing Date in exchange for the assumption by World Wide of stated
liabilities of Global Short-Term, including all expenses, costs, charges and
reserves, as reflected on an unaudited statement of assets and liabilities of
Global Short-Term prepared by the Treasurer of Global Short-Term 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 World Wide Shares; (ii) such World Wide Shares would be
distributed to Shareholders on the Closing Date or as soon as practicable
thereafter; (iii) Global Short-Term would be dissolved; and (iv) the outstanding
shares of Global Short-Term would be canceled.
The number of World Wide Shares to be delivered to Global Short-Term will be
determined by dividing the aggregate net asset value of shares of Global
Short-Term acquired by World Wide by the net asset value per share of Class A
shares of World Wide; 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 Global Short-Term and World Wide may agree
(the "Valuation Date"). As an illustration, assume that on the Valuation Date,
shares of Global Short-Term had an aggregate net asset value (not including any
Cash Reserve of Global Short-Term) of $100,000. If the net asset value per Class
A share of World Wide were $10 per share at the close of business on the
Valuation Date, the number of World Wide Shares to be issued would be 10,000
($100,000 divided by $10). These 10,000 Class A shares of World Wide would be
distributed to the former shareholders of Global Short-Term. 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, Global Short-Term
will distribute pro rata to its Shareholders of record as of the close of
business on the Valuation Date, the World Wide Shares it receives. Each
Shareholder will receive Class A of shares of World Wide. World Wide will cause
its transfer agent to credit and confirm an appropriate number of World Wide
Shares to each Shareholder. Certificates for World Wide Shares will be issued
upon written request of a Shareholder but only for whole shares, with fractional
shares credited to the name of the Shareholder on the books of World Wide.
Shareholders who wish to receive certificates representing their World Wide
Shares must, after receipt of their confirmations, make a written request to
World Wide's transfer agent, MSDW Trust, Harborside Financial Center, Jersey
City, New Jersey 07311. Shareholders 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 World Wide; however, such
Shareholders will not be able to redeem, transfer or exchange the World Wide
Shares received until the old certificates have been surrendered.
The Closing Date will be 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 Global
Short-Term or World Wide. The Reorganization Agreement may be amended in any
mutually agreeable manner, except that no amendment may be made subsequent to
the Meeting which would detrimentally affect the value of the shares of World
Wide to be distributed. All expenses of this solicitation, including the cost of
preparing and mailing the Proxy Statement and Prospectus, will be borne by
Global Short-Term which expenses are not expected to exceed $150,000.
The Reorganization Agreement may be terminated and the Reorganization
abandoned at any time, before or after approval by Shareholders or by mutual
consent of Global Short-Term and World Wide. In addition, either party may
terminate the Reorganization Agreement upon the occurrence of a material breach
of the
12
<PAGE>
Reorganization Agreement by the other party or if, by July 30, 1999, 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,
Global Short-Term 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 Global Short-Term that received World
Wide Shares. Global Short-Term shall be dissolved and deregistered as an
investment company promptly following the distribution of shares of World Wide
to Shareholders of record of Global Short-Term.
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
Global Short-Term (at net asset value on the Valuation Date calculated after
subtracting any Cash Reserve) and reinvest the proceeds in World Wide 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 Global Short-Term 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 Global
Short-Term at net asset value next determined after receipt of the redemption
request (subject to any applicable CDSC) until the close of business on the
Closing Date. Redemption requests received by Global Short-Term thereafter will
be treated as requests for redemption of shares of World Wide.
TAX ASPECTS OF THE REORGANIZATION
At least one but not more than 20 business days prior to the Valuation Date,
Global Short-Term 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 Global Short-Term's investment company taxable income for
all periods since the inception of Global Short-Term through and including the
Valuation Date (computed without regard to any dividends paid deduction), and
all of Global Short-Term's net capital gain, if any, realized in such periods
(after reduction for any capital loss carryforward).
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"). Global Short-Term and World Wide have
represented that, to their best knowledge, there is no plan or intention by
Shareholders to redeem, sell, exchange or otherwise dispose of a number of World
Wide Shares received in the transaction that would reduce Shareholders'
ownership of World Wide Shares to a number of shares having a value, as of the
Closing Date, of less than 50% of the value of all of the formerly outstanding
Global Short-Term shares as of the same date. Global Short-Term and World Wide
have each further represented that, as of the Closing Date, Global Short-Term
and World Wide will qualify as regulated investment companies.
As a condition to the Reorganization, Global Short-Term and World Wide will
receive an opinion of Gordon Altman Butowsky Weitzen Shalov & Wein that, based
on certain assumptions, facts, the terms of the Reorganization Agreement and
additional representations set forth in the Reorganization Agreement or provided
by Global Short-Term and World Wide:
1. The transfer of substantially all of Global Short-Term's assets in
exchange for the World Wide Shares and the assumption by World Wide of certain
stated liabilities of Global Short-Term followed by the distribution
13
<PAGE>
by Global Short-Term of the World Wide Shares to Shareholders in exchange for
their Global Short-Term shares will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code, and Global Short-Term and World
Wide 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 World Wide upon the receipt of
the assets of Global Short-Term solely in exchange for the World Wide Shares and
the assumption by World Wide of the stated liabilities of Global Short-Term;
3. No gain or loss will be recognized by Global Short-Term upon the
transfer of the assets of Global Short-Term to World Wide in exchange for the
World Wide Shares and the assumption by World Wide of the stated liabilities or
upon the distribution of World Wide Shares to Shareholders in exchange for their
Global Short-Term shares;
4. No gain or loss will be recognized by Shareholders upon the exchange of
the shares of Global Short-Term for the World Wide;
5. The aggregate tax basis for the World Wide Shares received by each of
the Shareholders pursuant to the Reorganization will be the same as the
aggregate tax basis of the shares in Global Short-Term held by each such
Shareholder immediately prior to the Reorganization;
6. The holding period of the World Wide Shares to be received by each
Shareholder will include the period during which the shares in Global Short-Term
surrendered in exchange therefor were held (provided such shares in Global
Short-Term were held as capital assets on the date of the Reorganization);
7. The tax basis of the assets of Global Short-Term acquired by World Wide
will be the same as the tax basis of such assets to Global Short-Term
immediately prior to the Reorganization; and
8. The holding period of the assets of Global Short-Term in the hands of
World Wide will include the period during which those assets were held by Global
Short-Term.
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
World Wide Shares to be issued pursuant to the Reorganization Agreement
will, when issued, be fully paid and non-assessable by World Wide and
transferable without restrictions and will have no preemptive rights. For
greater details regarding shares of World Wide, see "Purchase of Fund Shares" in
the fund's Prospectus.
14
<PAGE>
CAPITALIZATION TABLE (UNAUDITED)
The following table sets forth the capitalization of World Wide and Global
Short-Term as of October 31, 1998 and on a pro forma combined basis as if the
Reorganization had occurred on that date:
<TABLE>
<CAPTION>
SHARES NET ASSET VALUE
NET ASSETS OUTSTANDING PER SHARE
-------------- ----------- -----------------
<S> <C> <C> <C>
Global Short-Term........................................................ $ 46,206,195 5,158,582 $ 8.96
World Wide
Class A................................................................ $ 1,227,088 134,755 $ 9.11
Class B................................................................ $ 81,610,993 8,949,878 $ 9.12
Class C................................................................ $ 234,143 25,697 $ 9.11
Class D................................................................ $ 1,005,959 110,347 $ 9.12
Total World Wide (Class A-D)............................................. $ 84,078,183 -- --
Combined Fund (pro forma)
Class A................................................................ $ 47,433,283 5,206,785 $ 9.11
Class B................................................................ $ 81,610,993 8,949,878 $ 9.12
Class C................................................................ $ 234,143 25,697 $ 9.11
Class D................................................................ $ 1,005,959 110,347 $ 9.12
Total Combined Fund (pro forma) (Class A-D).............................. $ 130,284,378 -- --
</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
Global Short-Term and World Wide have similar investment objectives and
policies. The investment objective of Global Short-Term is to achieve as high a
level of current income as is consistent with prudent investment risk.
Similarly, the investment objective of World Wide is to provide a high level of
current income and, as a secondary objective, the fund will seek appreciation in
the value of its assets. Both funds seek to achieve their respective objectives
by investing primarily in fixed income securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or by foreign governments,
or issued by foreign or U.S. companies. Global Short-Term invests primarily in
fixed income securities with remaining maturities of not more than three years
and with the two highest credit ratings issued by S&P (AAA or AA) and/or Moody's
(Aaa or Aa) or if unrated, the securities are determined to be of comparable
quality. World Wide, however, invests in securities within the four highest
categories issued by S&P (AAA, AA, A or BBB) and/or Moody's (Aaa, Aa, A or Baa)
or if unrated, the securities are determined to be of comparable quality. In
addition, World Wide does not have a stated policy as to the remaining
maturities of its fixed income investments.
Both funds' assets are comprised of investments in the securities of issuers
located in at least three different countries (including the U.S.).
Additionally, Global Short-Term will invest at least 25% of its total assets in
U.S. securities; whereas, World Wide does not have policy of concentrating more
than 25% of its total assets in any country.
15
<PAGE>
Global Short-Term has a policy of investing, under normal market conditions,
in securities denominated in at least three different currencies, including the
U.S. dollar and, the fund will not invest more than 25% of its total assets in
securities denominated in a single currency (with the exception of the U.S.
dollar). World Wide has no such policies limiting investments in securities
denominated in particular currencies.
In addition, Global Short-Term has the Bank Concentration Policy (which is
fundamental); whereas, World Wide does not have a policy of concentrating its
investments in any industry.
Additionally, Global Short-Term may invest in bonds or notes backed by pools
of mortgages, or credit card, automobile or other types of receivables. World
Wide does not invest in such securities.
World Wide may invest in securities convertible into common stock; whereas,
Global Short-Term may not invest in such securities.
Except as noted above, the investment policies of both Global Short-Term and
World Wide are not fundamental and may be changed by their respective Boards.
The foregoing discussion is a summary of the principal differences between the
investment policies of the funds. For a more complete discussion of each fund's
policies, see "Investment Objective and Policies" in Global Short-Term's
Prospectus and see "Investment Objectives and Policies" in World Wide's
Prospectus and "Investment Practices and Policies" in each fund's Statement of
Additional Information.
INVESTMENT RESTRICTIONS
The investment restrictions adopted by Global Short-Term and World Wide as
fundamental policies are similar and are summarized under the caption
"Investment Restrictions" in their respective Prospectuses and 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) both
funds are prohibited from investing 25% or more of the value of their total
assets in securities of issuers in any one industry, except that Global
Short-Term concentrates in the banking industry; (b) both funds are prohibited
from borrowing money except that each may borrow from a bank for temporary or
emergency purposes in amounts not exceeding 5% of its total assets, however,
Global Short-Term has an additional fundamental limitation prohibiting it from
purchasing portfolio securities while any borrowings, including reverse
repurchase agreements, of the fund are outstanding; (c) World Wide has a
fundamental restriction that it may not make short sales of securities; Global
Short-Term has no such limitation; (d) World Wide has a fundamental restriction
that it may not invest in securities of any issuer if, to the knowledge of the
fund, any officer or trustee of the fund or any officer or director of the
Investment Manager owns more than 1/2 of 1% of the outstanding securities of
such issuer, and such officers, trustees and directors who own more than 1/2 of
1% own in the aggregate more than 5% of the outstanding securities of such
issuers; Global Short-Term has no such limitation; and (e) Global Short-Term may
not invest more than 5% of its net assets in warrants, including not more than
2% of such assets in warrants not listed on the New York or American Stock
Exchange; World Wide has no such limitation.
In addition, notwithstanding any other investment policy or restriction,
World Wide may seek to achieve its investment objectives by investing all or
substantially all of its assets in another investment company having
substantially the same investment objectives and policies as the fund. Global
Short-Term does not have this investment flexibility.
16
<PAGE>
ADDITIONAL INFORMATION ABOUT GLOBAL SHORT-TERM AND WORLD WIDE
GENERAL
For a discussion of the organization and operation of World Wide and Global
Short-Term, see "The Fund and its Management," "Investment Objective and
Policies," "Investment Restrictions" and "Prospectus Summary" in, and the cover
page of, their respective Prospectuses.
FINANCIAL INFORMATION
For certain financial information about World Wide and Global Short-Term,
see "Financial Highlights" and "Performance Information" in their respective
Prospectuses.
MANAGEMENT
For information about the respective Board of Trustees/Directors, investment
manager and the Distributor of World Wide and Global Short-Term, see "The Fund
and its Management" and "Investment Objective and Policies" in, and on the back
cover of, their respective Prospectuses.
DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES
For a description of the nature and most significant attributes of shares of
Global Short-Term and World Wide, and information regarding shareholder
inquiries, see "Additional Information" in their respective Prospectuses.
DIVIDENDS, DISTRIBUTIONS AND TAXES
For a discussion of World Wide's and Global Short-Term's policies with
respect to dividends, distributions and taxes, see "Dividends, Distributions and
Taxes" 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 World Wide's and Global Short-Term's shares may be
purchased, repurchased and redeemed, see "Purchase of Fund Shares," "Shareholder
Services" and "Redemptions and Repurchases" in their respective Prospectuses.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For a discussion of World Wide's performance, see management's letter to
shareholders in its Annual Report for its fiscal year ended October 31, 1998
accompanying this Proxy Statement and Prospectus. For a discussion of the
performance of Global Short-Term, see its Annual Report for its fiscal year
ended October 31, 1998 previously sent to Shareholders.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of World Wide and Global Short-Term for their
fiscal year ended October 31, 1998 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
17
<PAGE>
reference in reliance upon such reports given upon the authority of
PricewaterhouseCoopers LLP as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of World Wide will
be passed upon by Gordon Altman Butowsky Weitzen Shalov & Wein, New York, New
York. Such firm will rely on Lane Altman & Owens as to matters of Massachusetts
law.
AVAILABLE INFORMATION
Additional information about Global Short-Term and World Wide is available,
as applicable, in the following documents which are incorporated herein by
reference: (i) World Wide's Prospectus dated February 6, 1998, accompanying this
Proxy Statement and Prospectus, which Prospectus forms a part of Post-Effective
Amendment No. 11 to World Wide's Registration Statement on Form N-1A (File Nos.
33-26375; 811-5744); (ii) World Wide's Annual Report for its fiscal year ended
October 31, 1998, accompanying this Proxy Statement and Prospectus; (iii) Global
Short-Term's Prospectus dated February 10, 1998, which Prospectus forms a part
of Post-Effective Amendment No. 8 to Global Short-Term's Registration Statement
on Form N-1A (File Nos. 33-36217; 811-6148); and (iv) Global Short-Term's Annual
Report for the fiscal year ended October 31, 1998. The foregoing documents may
be obtained without charge by calling (800) 869-NEWS.
Global Short-Term and World Wide 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 Global Short-Term and World
Wide 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 Global Short-Term 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 Directors,
Barry Fink,
SECRETARY
December 21, 1998
18
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
28th day of October 1998, by and between MORGAN STANLEY DEAN WITTER WORLD WIDE
INCOME TRUST, a Massachusetts business trust ("World Wide") and MORGAN STANLEY
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC., a Maryland corporation ("Global
Short-Term").
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 World Wide of substantially all of the assets of Global Short-Term
in exchange for the assumption by World Wide of all stated liabilities of Global
Short-Term and the issuance by World Wide of Class A shares of beneficial
interest (the "World Wide Shares"), to be distributed, after the Closing Date
hereinafter referred to, to the shareholders of Global Short-Term in liquidation
of Global Short-Term 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 GLOBAL SHORT-TERM
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, Global Short-Term agrees
to assign, deliver and otherwise transfer the Global Short-Term Assets (as
defined in paragraph 1.2) to World Wide and World Wide agrees in exchange
therefor to assume all of Global Short-Term's stated liabilities on the Closing
Date as set forth in paragraph 1.3(a) and to deliver to Global Short-Term the
number of World Wide Shares, including fractional World Wide Shares, determined
by dividing the value of the Global Short-Term Assets, net of such stated
liabilities, computed as of the Valuation Date (as defined in paragraph 2.1) in
the manner set forth in paragraph 2.1, by the net asset value of a World Wide
Share, computed at the time and date and in the manner set forth in paragraph
2.2. Such transactions shall take place at the closing provided for in paragraph
3.1 (the "Closing").
1.2 (a) The "Global Short-Term 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 Global Short-Term, and any deferred or prepaid
expenses shown as an asset on Global Short-Term's books on the Valuation Date.
(b) On or prior to the Valuation Date, Global Short-Term will provide
World Wide with a list of all of Global Short-Term's assets to be assigned,
delivered and otherwise transferred to World Wide and of the stated liabilities
to be assumed by World Wide pursuant to this Agreement. Global Short-Term
reserves the right to sell any of the securities on such list but will not,
without the prior approval of World Wide, acquire any additional securities
other than securities of the type in which World Wide is permitted to invest and
in amounts agreed to in writing by World Wide. World Wide will, within a
reasonable time prior to the Valuation Date, furnish Global Short-Term with a
statement of World Wide'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 World Wide's investment objective,
policies and restrictions. In the event that Global Short-Term holds any
investments that World Wide is not permitted to hold, Global Short-Term will
dispose of such securities on or
A-1
<PAGE>
prior to the Valuation Date. In addition, if it is determined that the
portfolios of Global Short-Term and World Wide, when aggregated, would contain
investments exceeding certain percentage limitations imposed upon World Wide
with respect to such investments, Global Short-Term, if requested by World Wide
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) Global Short-Term will endeavor to discharge all of its
liabilities and obligations on or prior to the Valuation Date. World Wide 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 Global Short-Term prepared by the Treasurer of Global Short-Term
as of the Valuation Date in accordance with generally accepted accounting
principles consistently applied from the prior audited period.
(b) On the Valuation Date, Global Short-Term may establish a cash
reserve, which shall not exceed 5% of Global Short-Term's net assets as of the
close of business on the Valuation Date ("Cash Reserve") to be retained by
Global Short-Term and used for the payment of its liabilities not discharged
prior to the Valuation Date and for the expenses of liquidation.
1.4 In order for Global Short-Term 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 liquidation, Global Short-Term 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, Global
Short-Term will distribute World Wide Shares received by Global Short-Term
pursuant to paragraph 1.1 pro rata to its shareholders of record determined as
of the close of business on the Valuation Date ("Global Short-Term
Shareholders"). Such distribution will be accomplished by an instruction, signed
by the Secretary of Global Short-Term, to transfer World Wide Shares then
credited to Global Short-Term's account on the books of World Wide to open
accounts on the books of World Wide in the names of the Global Short-Term
Shareholders and representing the respective pro rata number of World Wide
Shares due such Global Short-Term Shareholders. All issued and outstanding
shares of Global Short-Term simultaneously will be canceled on Global
Short-Term's books; however, share certificates representing interests in Global
Short-Term will represent a number of World Wide Shares after the Closing Date
as determined in accordance with paragraph 2.3. World Wide will issue
certificates representing World Wide Shares in connection with such exchange
only upon the written request of a Global Short-Term Shareholder.
1.6 Ownership of World Wide Shares will be shown on the books of World
Wide's transfer agent. World Wide Shares will be issued in the manner described
in World Wide's current Prospectus and Statement of Additional Information.
1.7 Any transfer taxes payable upon issuance of World Wide Shares in a name
other than the registered holder of World Wide Shares on Global Short-Term's
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 World Wide Shares are
to be issued and transferred.
1.8 Any reporting responsibility of Global Short-Term is and shall remain
the responsibility of Global Short-Term up to and including the date on which
Global Short-Term is dissolved and deregistered pursuant to paragraph 1.9.
A-2
<PAGE>
1.9 Within one year after the Closing Date, Global Short-Term shall pay or
make provision for the payment of all its liabilities and taxes, and distribute
to the shareholders of Global Short-Term as of the close of business on the
Valuation Date any remaining amount of the Cash Reserve (as reduced by the
estimated cost of distributing it to shareholders). Global Short-Term shall be
liquidated and dissolved as a Maryland corporation and deregistered as an
investment company under the Investment Company Act of 1940, as amended ("1940
Act"), promptly following the making of all distributions pursuant to paragraph
1.5 and the reorganization.
1.10 Copies of all books and records maintained on behalf of Global
Short-Term in connection with its obligations under 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 World Wide or their designee and
World Wide or its designee shall comply with applicable record retention
requirements to which Global Short-Term is subject under the 1940 Act.
2. VALUATION
2.1 The value of the Global Short-Term Assets shall be the value of such
assets computed as of 4:00 p.m. New York City time on the third day that the New
York Stock Exchange is open for business following the receipt of the requisite
approval by shareholders of Global Short-Term 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 World Wide's then current Prospectus
and Statement of Additional Information.
2.2 The net asset value of a World Wide Share shall be the net asset value
per share computed on the Valuation Date, using the valuation procedures set
forth in World Wide's then current Prospectus and Statement of Additional
Information.
2.3 The number of World Wide Shares (including fractional shares, if any)
to be issued hereunder shall be determined by dividing the value of the Global
Short-Term Assets, net of the liabilities of Global Short-Term assumed by World
Wide pursuant to paragraph 1.1, determined in accordance with paragraph 2.1, by
the net asset value of a World Wide Share determined in accordance with
paragraph 2.2.
2.4 All computations of value shall be made by Morgan Stanley Dean Witter
Services Company Inc. ("Services") in accordance with its regular practice in
pricing World Wide. World Wide shall cause 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 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 Global Short-Term and represented by a
certificate or other written instrument shall be presented by it or on its
behalf to The Chase Manhattan Bank (the "Custodian"), as custodian for World
Wide, 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 Global Short-Term to the Custodian for the account of World Wide
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
A-3
<PAGE>
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 Chase Manhattan Bank, Custodian for Morgan Stanley Dean Witter
World Wide Income Trust".
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 World Wide and Global Short-Term,
accurate appraisal of the value of the net assets of World Wide or the Global
Short-Term 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, Global Short-Term shall deliver to World Wide or its
designee (a) at the Closing, a list, certified by its Secretary, of the names,
addresses and taxpayer identification numbers of the Global Short-Term
Shareholders and the number and percentage ownership of outstanding Global
Short-Term shares owned by each such Global Short-Term 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 Global Short-Term
Shareholders' taxpayer identification numbers and their liability for or
exemption from back-up withholding. World Wide shall issue and deliver to such
Secretary a confirmation evidencing delivery of World Wide Shares to be credited
on the Closing Date to Global Short-Term or provide evidence satisfactory to
Global Short-Term that such World Wide Shares have been credited to Global
Short-Term's account on the books of World Wide. 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 WORLD WIDE AND GLOBAL SHORT-TERM
4.1 Except as otherwise expressly provided herein with respect to Global
Short-Term, World Wide and Global Short-Term 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 World Wide 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 World Wide Shares
("Registration Statement"). Global Short-Term will provide World Wide with the
Proxy Materials as described in paragraph 4.3 below, for inclusion in the
Registration Statement. Global Short-Term will further provide World Wide with
such other information and documents relating to Global Short-Term as are
reasonably necessary for the preparation of the Registration Statement.
4.3 Global Short-Term will call a meeting of the Global Short-Term
shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
Global Short-Term 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 World Wide will furnish Global Short-Term with World
Wide's currently effective prospectus for inclusion in the Proxy Materials and
with such other information relating to World Wide as is reasonably necessary
for the preparation of the Proxy Materials.
A-4
<PAGE>
4.4 Global Short-Term will assist World Wide in obtaining such information
as World Wide reasonably requests concerning the beneficial ownership of Global
Short-Term shares.
4.5 Subject to the provisions of this Agreement, World Wide and Global
Short-Term 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 Global Short-Term shall furnish or cause to be furnished to World Wide
within 30 days after the Closing Date a statement of Global Short-Term's assets
and liabilities as of the Closing Date, which statement shall be certified by
the Treasurer of Global Short-Term 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, Global Short-Term shall
furnish World Wide, in such form as is reasonably satisfactory to World Wide, a
statement certified by the Treasurer of Global Short-Term's earnings and profits
for federal income tax purposes that will be carried over to World Wide pursuant
to Section 381 of the Code.
4.7 As soon after the Closing Date as is reasonably practicable, Global
Short-Term (a) shall prepare and file all federal and other tax returns and
reports on behalf of Global Short-Term 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 World Wide 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 World Wide represents and warrants to Global Short-Term as follows:
(a) World Wide is a validly existing Massachusetts business trust with
full power to carry on its business as presently conducted;
(b) World Wide 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 World Wide 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
World Wide 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 World Wide 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
World Wide 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;
A-5
<PAGE>
(e) World Wide is not in, and the execution, delivery and performance
of this Agreement will not result in a, material violation of any provision of
World Wide's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which World Wide 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 World Wide 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 World Wide 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 affect, 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 as of October 31,
1998, and for the year then ended, of World Wide certified by
PricewaterhouseCoopers LLP (copies of which will be furnished to Global
Short-Term), will fairly present, in all materials respects, World Wide'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 would
be no known liabilities of World Wide (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 World Wide 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 World Wide's
current Prospectus incorporated by reference in the Registration Statement.
World Wide 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 World Wide, and this
Agreement constitutes a valid and binding obligation of World Wide 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 World Wide's
performance of this Agreement;
(j) World Wide Shares to be issued and delivered to Global Short-Term,
for the account of the Global Short-Term 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 World Wide 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 "Additional
Information" in World Wide's current Prospectus incorporated by reference in the
Registration Statement;
(k) All material Federal and other tax returns and reports of World
Wide 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 World Wide's knowledge, no such
return is currently under audit and no assessment has been asserted with respect
to any such return;
A-6
<PAGE>
(l) For each taxable year since its inception, World Wide 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 World Wide to continue to meet the requirements of Subchapter M of
the Code;
(m) Since October 31, 1997, there has been no change by World Wide in
accounting methods, principles, or practices, including those required by
generally accepted accounting principles and no such change is contemplated by
World Wide;
(n) The information furnished or to be furnished by World Wide 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 World Wide) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of 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 Global Short-Term represents and warrants to World Wide as follows:
(a) Global Short-Term is a validly existing Maryland corporation with
full power to carry on its business as presently conducted;
(b) Global Short-Term 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 common stock of Global
Short-Term have been offered and sold in compliance in all material respects
with applicable requirements of the 1933 Act and state securities laws. Shares
of Global Short-Term 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 Global Short-Term 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
Global Short-Term 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 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 they were made, not misleading;
(e) Global Short-Term is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of any
provision of the Articles of Incorporation or By-Laws of Global Short-Term or of
any agreement, indenture, instrument, contract, lease or other undertaking to
which Global Short-Term 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 Global Short-Term or any of its properties
A-7
<PAGE>
or assets which, if adversely determined, would materially and adversely affect
its financial condition or the conduct of its business; and Global Short-Term
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 affect,
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 Global Short-Term
as of October 31, 1998, and for the year then ended, certified by
PricewaterhouseCoopers LLP (copies of which will be furnished to World Wide)
will fairly present, in all material respects, Global Short-Term's 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 would be no known
liabilities of Global Short-Term (contingent or otherwise) not disclosed therein
that would be required in accordance with generally accepted accounting
principles to be disclosed therein;
(h) Global Short-Term 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 Global Short-Term 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.
Global Short-Term 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 World Wide 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 Global Short-Term, and subject to the approval of Global Short-Term's
shareholders, this Agreement constitutes a valid and binding obligation of
Global Short-Term, 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 the
performance of this Agreement by Global Short-Term;
(k) All material federal and other tax returns and reports of Global
Short-Term 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 Global
Short-Term's 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, Global Short-Term 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 Global Short-Term to continue to meet the
requirements of Subchapter M of the Code;
(m) At the Closing Date, Global Short-Term will have good and valid
title to the Global Short-Term Assets, subject to no liens (other than the
obligation, if any, to pay the purchase price of portfolio securities purchased
by Global Short-Term which have not settled prior to the Closing Date), security
interests or other encumbrances, and full right, power and authority to assign,
deliver and otherwise transfer such assets
A-8
<PAGE>
hereunder, and upon delivery and payment for such assets, World Wide 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 Global Short-Term's shareholders and on the Closing Date, the
Proxy Materials (exclusive of the currently effective World Wide's 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 (the "1934
Act") and the 1940 Act and the regulations thereunder and (ii) not contain any
untrue statement of 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 Global Short-Term 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) Global Short-Term 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) Global Short-Term 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) Global Short-Term is not acquiring World Wide 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 GLOBAL SHORT-TERM
The obligations of Global Short-Term to consummate the transactions provided
for herein shall be subject, at its election, to the performance by World Wide
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 World Wide 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 World Wide shall have delivered to Global Short-Term a certificate of
its President and Treasurer, in a form reasonably satisfactory to Global
Short-Term and dated as of the Closing Date, to the effect that the
representations and warranties of World Wide 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
Global Short-Term shall reasonably request;
6.3 Global Short-Term shall have received a favorable opinion from Gordon
Altman Butowsky Weitzen Shalov & Wein, counsel to World Wide, dated as of the
Closing Date, to the effect that:
(a) World Wide is a validly existing Massachusetts business trust, and
has the power to own all of its properties and assets to carry on its business
as presently conducted (Massachusetts counsel may be relied upon in delivering
such opinion); (b) World Wide is a duly registered, open-end, management
investment company,
A-9
<PAGE>
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 World Wide 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 Global Short-Term, is a valid and binding obligation of World
Wide enforceable against World Wide 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) World Wide Shares to be issued to Global Short-Term Shareholders
as provided by this Agreement are duly authorized and upon such delivery will be
validly issued and outstanding and fully paid and nonassessable (except as set
forth under the caption "Additional Information" in World Wide's Prospectus),
and no shareholder of World Wide 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 World Wide's Declaration of Trust or By-Laws; 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 World Wide 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 World Wide's Prospectus and
Statement of Additional Information dated February 6, 1998.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF WORLD WIDE
The obligations of World Wide to complete the transactions provided for
herein shall be subject, at its election, to the performance by Global
Short-Term 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 Global Short-Term 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 Global Short-Term shall have delivered to World Wide at the Closing a
certificate of its President and its Treasurer, in form and substance
satisfactory to World Wide and dated as of the Closing Date, to the effect that
the representations and warranties of Global Short-Term 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 World Wide shall reasonably request;
7.3 Global Short-Term shall have delivered to World Wide a statement of the
Global Short-Term Assets and its liabilities, together with a list of Global
Short-Term's 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 Global Short-Term;
7.4 Global Short-Term shall have delivered to World Wide 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 Global Short-Term for each of the
last three taxable years and, based on such limited review, nothing came to
their attention that caused them to believe that
A-10
<PAGE>
such returns did not properly reflect, in all material respects, the federal and
state income tax liabilities of Global Short-Term for the periods covered
thereby, (b) for the period from October 31, 1998 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 October 31, 1998 to and including the Closing Date and (c) based on such
limited reviews, nothing came to their attention that caused them to believe
that Global Short-Term would not qualify as a regulated investment company for
federal income tax purposes for any such year or period;
7.5 World Wide shall have received at the Closing a favorable opinion from
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Global Short-Term,
dated as of the Closing Date to the effect that:
(a) Global Short-Term is a validly existing Maryland corporation and
has the power to own all of its properties and assets and to carry on its
business as presently conducted (Maryland counsel may be relied upon in
delivering such opinion); (b) Global Short-Term 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
Global Short-Term 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 World
Wide, is a valid and binding obligation of Global Short-Term enforceable against
Global Short-Term 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 the Articles of Incorporation or By-Laws
of Global Short-Term; 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 Global Short-Term
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 Global Short-Term Assets shall include no
assets that World Wide, by reason of limitations of the World Wide's Declaration
of Trust or otherwise, may not properly acquire.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF WORLD WIDE AND GLOBAL
SHORT-TERM
The obligations of Global Short-Term and World Wide 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
Global Short-Term in accordance with the provisions of the Articles of
Incorporation of Global Short-Term, and certified copies of the resolutions
evidencing such approval shall have been delivered to World Wide;
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;
A-11
<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 World Wide or Global Short-Term 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 World Wide or Global Short-Term;
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 Global Short-Term 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 Global
Short-Term Shareholders all of Global Short-Term's 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 a favorable opinion of the law firm of
Gordon Altman Butowsky Weitzen Shalov & Wein (based on such representations as
such law firm shall reasonably request), addressed to World Wide and Global
Short-Term, which opinion may be relied upon by the shareholders of Global
Short-Term, substantially to the effect that, for federal income tax purposes:
(a) The transfer of substantially all of Global Short-Term's assets in
exchange for World Wide Shares and the assumption by World Wide of certain
stated liabilities of Global Short-Term followed by the distribution by Global
Short-Term of World Wide Shares to the Global Short-Term Shareholders in
exchange for their Global Short-Term shares will constitute a "reorganization"
within the meaning of Section 368(a)(1)(C) of the Code, and Global Short-Term
and World Wide 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 World Wide upon the receipt
of the assets of Global Short-Term solely in exchange for World Wide Shares and
the assumption by World Wide of the stated liabilities of Global Short-Term;
(c) No gain or loss will be recognized by Global Short-Term upon the
transfer of the assets of Global Short-Term to World Wide in exchange for World
Wide Shares and the assumption by World Wide of the stated liabilities or upon
the distribution of World Wide Shares to the Global Short-Term Shareholders in
exchange for their Global Short-Term shares;
(d) No gain or loss will be recognized by the Global Short-Term
Shareholders upon the exchange of the Global Short-Term shares for World Wide
Shares;
(e) The aggregate tax basis for World Wide Shares received by each
Global Short-Term Shareholder pursuant to the Reorganization will be the same as
the aggregate tax basis of the Global Short-Term Shares held by each such Global
Short-Term Shareholder immediately prior to the Reorganization;
A-12
<PAGE>
(f) The holding period of World Wide Shares to be received by each
Global Short-Term Shareholder will include the period during which the Global
Short-Term shares surrendered in exchange therefor were held (provided such
Global Short-Term Shares were held as capital assets on the date of the
Reorganization);
(g) The tax basis of the assets of Global Short-Term acquired by World
Wide will be the same as the tax basis of such assets to Global Short-Term
immediately prior to the Reorganization; and
(h) The holding period of the assets of Global Short-Term in the hands
of World Wide will include the period during which those assets were held by
Global Short-Term.
Notwithstanding anything herein to the contrary, neither World Wide nor
Global Short-Term may waive the conditions set forth in this paragraph 8.6.
9. FEES AND EXPENSES
9.1 (a) World Wide 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. Global
Short-Term shall bear its expenses 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 and portfolio
transfer taxes (if any) incurred in connection with the consummation of the
transactions contemplated herein.
(b) In the event the transactions contemplated herein are not
consummated by reason of Global Short-Term being either unwilling or unable to
go forward (other than by reason of the nonfulfillment or failure of any
condition to Global Short-Term's obligations specified in this Agreement),
Global Short-Term's only obligation hereunder shall be to reimburse World Wide
for all reasonable out-of-pocket fees and expenses incurred by World Wide in
connection with those transactions.
(c) In the event the transactions contemplated herein are not
consummated by reason of World Wide being either unwilling or unable to go
forward (other than by reason of the nonfulfillment or failure of any condition
to World Wide's obligations specified in this Agreement), World Wide's only
obligation hereunder shall be to reimburse Global Short-Term for all reasonable
out-of-pocket fees and expenses incurred by Global Short-Term 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 Global Short-Term
hereunder shall not survive the complete liquidation of Global Short-Term 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 Global Short-Term and World Wide;
A-13
<PAGE>
(b) by either World Wide or Global Short-Term by notice to the other,
without liability to the terminating party on account of such termination
(providing the termination party is not otherwise in material default or breach
of this Agreement) if the Closing shall not have occurred on or before June 30,
1999; or
(c) by either World Wide or Global Short-Term 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 Global
Short-Term 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 World Wide or Global Short-Term or the
directors/trustees or officers of World Wide or Global Short-Term, to any other
party or its directors/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 World Wide or Global Short-Term or the
directors/trustees or officers of World Wide or Global Short-Term, 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 World Wide hereunder are solely
those of World Wide. It is expressly agreed that no shareholder, nominee,
director, officer, agent, or employee of World Wide shall be personally liable
hereunder. The execution and delivery of this Agreement have been authorized by
the trustees of World
A-14
<PAGE>
Wide and signed by authorized officers of World Wide 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 Global Short-Term hereunder are
solely those of Global Short-Term. lt is expressly agreed that no shareholder,
nominee, director, officer, agent, or employee of Global Short-Term shall be
personally liable hereunder. The execution and delivery of this Agreement have
been authorized by the directors of Global Short-Term and signed by authorized
officers of Global Short-Term acting as such, and neither such authorization by
such directors 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
WORLD WIDE INCOME TRUST
By: /s/ CHARLES A. FIUMEFREDDO
-------------------------------------
Name: Charles A. Fiumefreddo
Title: Chairman
MORGAN STANLEY DEAN WITTER
GLOBAL SHORT-TERM INCOME FUND INC.
By: /s/ BARRY FINK
-------------------------------------
Name: Barry Fink
Title: Vice President
A-15
<PAGE>
Exhibit B
PROSPECTUS
FEBRUARY 6, 1998
Dean Witter World Wide Income Trust (the "Fund") is an open-end,
non-diversified management investment company, whose primary investment
objective is to provide a high level of current income. As a secondary
objective, the Fund will seek appreciation in the value of its assets. The Fund
seeks to achieve its investment objectives by investing primarily in
fixed-income securities issued or guaranteed by foreign governments, issued by
foreign or U.S. companies, or issued or guaranteed by the U.S. Government, its
agencies and instrumentalities. (See "Investment Objectives and Policies.")
The Fund offers four classes of shares (each, a "Class"), each
with a different combination of sales charges, ongoing fees and other features.
The different distribution arrangements permit an investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. (See "Purchase of Fund
Shares--Alternative Purchase Arrangements.")
This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated February 6, 1998, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/4
Financial Highlights/6
The Fund and Its Management/9
Investment Objectives and Policies/9
Risk Considerations/12
Investment Restrictions/20
Purchase of Fund Shares/21
Shareholder Services/33
Redemptions and Repurchases/36
Dividends, Distributions and Taxes/37
Performance Information/38
Additional Information/39
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
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 UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Dean Witter
World Wide Income Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an open-end,
Fund non-diversified management investment company. The Fund invests primarily in fixed-income securities issued or
guaranteed by foreign governments, issued by foreign or U.S. companies, or issued or guaranteed by the U.S.
Government, its agencies and instrumentalities.
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $0.01 par value (see page 39). The Fund offers four Classes of shares, each
with a different combination of sales charges, ongoing fees and other features (see pages 21-32).
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum The minimum initial investment for each Class is $1,000 ($100 if the account is opened through EasyInvest-SM-).
Purchase Class D shares are only available to persons investing $5 million ($25 million for certain qualified plans) or
more and to certain other limited categories of investors. For the purpose of meeting the minimum $5 million (or
$25 million) investment for Class D shares, and subject to the $1,000 minimum initial investment for each Class
of the Fund, an investor's existing holdings of Class A shares and shares of funds for which Dean Witter
InterCapital Inc. serves as investment manager ("Dean Witter Funds") that are sold with a front-end sales
charge, and concurrent investments in Class D shares of the Fund and other Dean Witter Funds that are multiple
class funds, will be aggregated. The minimum subsequent investment is $100 (see page 21).
- ------------------------------------------------------------------------------------------------------------------------------------
Investment The primary investment objective of the Fund is to provide a high level of current income. As a secondary
Objectives objective, the Fund will seek appreciation in the value of its assets (see page 9).
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly-owned
Manager subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory, management and
administrative capacities to 103 investment companies and other portfolios with assets of approximately $102.9
billion at December 31, 1997 (see page 9).
- ------------------------------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.75% of the Fund's daily net assets, scaled
Fee down at various asset levels to 0.30% of the Fund's daily net assets on assets in excess of $1 billion (see page
9).
- ------------------------------------------------------------------------------------------------------------------------------------
Distributor and Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution plan pursuant to Rule
Distribution Fee 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the distribution fees paid by the
Class A, Class B and Class C shares of the Fund to the Distributor. The entire 12b-1 fee payable by Class A and
a portion of the 12b-1 fee payable by each of Class B and Class C equal to 0.20% of the average daily net assets
of Class B and 0.25% of the average daily net assets of Class C are currently each characterized as a service
fee within the meaning of the National Association of Securities Dealers, Inc. guidelines. The remaining portion
of the 12b-1 fee, if any, is characterized as an asset-based sales charge (see pages 21 and 30).
- ------------------------------------------------------------------------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase
Arrangements - Class A shares are offered with a front-end sales charge, starting at 4.25% and reduced for larger purchases.
Investments of $1 million or more (and investments by certain other limited categories of investors) are not
subject to any sales charge at the time of purchase but a contingent deferred sales charge ("CDSC") of 1.0% may
be imposed on redemptions within one year of purchase. The Fund is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of the Fund's Class A shares and servicing shareholder
accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at
an annual rate of 0.25% of average daily net assets of the Class (see pages 21, 25 and 30).
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- Class B shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC
(scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be imposed on any
redemption of shares if after such redemption the aggregate current value of a Class B account with the Fund
falls below the aggregate amount of the investor's purchase payments made during the six years preceding the
redemption. A different CDSC schedule applies to investments by certain qualified plans. Class B shares are also
subject to a 12b-1 fee assessed at the annual rate of 0.85% of the lesser of: (a) the average daily net sales of
the Fund's Class B shares or (b) the average daily net assets of Class B. All shares of the Fund held prior to
July 28, 1997 have been designated Class B shares. Shares held before May 1, 1997 will convert to Class A shares
in May, 2007. In all other instances, Class B shares convert to Class A shares approximately ten years after the
date of the original purchase (see pages 21, 27 and 30).
- Class C shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC of
1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of the Fund's Class C shares and servicing shareholder
accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at
an annual rate of 0.85% of average daily net assets of the Class (see pages 21, 29 and 30).
- Class D shares are offered only to investors meeting an initial investment minimum of $5 million ($25 million
for certain qualified plans) and to certain other limited categories of investors. Class D shares are offered
without a front-end sales charge or CDSC and are not subject to any 12b-1 fee (see pages 21 and 30).
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income are declared and paid monthly. Capital gains, if any, are paid at least
Capital Gains annually. The Fund may, however, determine to retain all or part of any net long-term capital gains in any year
Distributions for reinvestment. Dividends and capital gains distributions paid on shares of a Class are automatically
reinvested in additional shares of the same Class at net asset value unless the shareholder elects to receive
cash. Shares acquired by dividend and distribution reinvestment will not be subject to any sales charge or CDSC
(see pages 33 and 37).
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A, Class B or
Class C shares. An account may be involuntarily redeemed if the total value of the account is less than $100 or,
if the account was opened through EasyInvest-SM-, if after twelve months the shareholder has invested less than
$1,000 in the account (see page 36).
- ------------------------------------------------------------------------------------------------------------------------------------
Special The net asset value of the Fund's shares will fluctuate with changes in the market value of its portfolio
Risk securities. The Fund is a non-diversified investment company and, as such, is not subject to the diversification
Considerations requirements of the Investment Company Act of 1940, as amended (see page 10). In addition, it should be
recognized that the foreign securities and markets in which the Fund will invest pose different and possibly
greater risks than those customarily associated with domestic securities and their markets. Moreover, investors
should consider other risks associated with a portfolio of international securities, including fluctuations in
foreign currency exchange rates (i.e., if a substantial portion of the Fund's assets are denominated in foreign
currencies which decrease in value with respect to the U.S. dollar, the value of the investor's shares and the
distributions made on those shares will, likewise, decrease in value), foreign securities exchange controls and
foreign tax rates, as well as investments in forward currency contracts, options and futures contracts (see
pages 12-19).
</TABLE>
- --------------------------------------------------------------------------------
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THE PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL
INFORMATION.
3
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are based on
the expenses and fees for the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
--------- ------- --------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)... 4.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments.................................. None None None None
Maximum Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds)................................................. None(2) 5.00%(3) 1.00%(4) None
Redemption Fees................................................................. None None None None
Exchange Fee.................................................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
Management Fees................................................................. 0.75% 0.75% 0.75% 0.75%
12b-1 Fees (5) (6).............................................................. 0.25% 0.85% 0.85% None
Other Expenses.................................................................. 0.42% 0.42% 0.42% 0.42%
Total Fund Operating Expenses (7)............................................... 1.42% 2.02% 2.02% 1.17%
</TABLE>
- ------------
(1) REDUCED FOR PURCHASES OF $25,000 AND OVER (SEE "PURCHASE OF FUND
SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES").
(2) INVESTMENTS THAT ARE NOT SUBJECT TO ANY SALES CHARGE AT THE TIME OF PURCHASE
ARE SUBJECT TO A CDSC OF 1.00% THAT WILL BE IMPOSED ON REDEMPTIONS MADE
WITHIN ONE YEAR AFTER PURCHASE, EXCEPT FOR CERTAIN SPECIFIC CIRCUMSTANCES
(SEE "PURCHASE OF FUND SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A
SHARES").
(3) THE CDSC IS SCALED DOWN TO 1.00% DURING THE SIXTH YEAR, REACHING ZERO
THEREAFTER.
(4) ONLY APPLICABLE TO REDEMPTIONS MADE WITHIN ONE YEAR AFTER PURCHASE (SEE
"PURCHASE OF FUND SHARES-- LEVEL LOAD ALTERNATIVE--CLASS C SHARES").
(5) THE 12b-1 FEE IS ACCRUED DAILY AND PAYABLE MONTHLY. THE ENTIRE 12b-1 FEE
PAYABLE BY CLASS A AND A PORTION OF THE 12b-1 FEE PAYABLE BY EACH OF CLASS B
AND CLASS C EQUAL TO 0.20% OF THE AVERAGE DAILY NET ASSETS OF CLASS B AND
0.25% OF THE AVERAGE DAILY NET ASSETS OF CLASS C ARE CURRENTLY EACH
CHARACTERIZED AS A SERVICE FEE 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. THE REMAINDER
OF THE 12b-1 FEE, IF ANY, IS AN ASSET-BASED SALES CHARGE, AND IS A
DISTRIBUTION FEE PAID TO THE DISTRIBUTOR TO COMPENSATE IT FOR THE SERVICES
PROVIDED AND THE EXPENSES BORNE BY THE DISTRIBUTOR AND OTHERS IN THE
DISTRIBUTION OF THE FUND'S SHARES (SEE "PURCHASE OF FUND SHARES--PLAN OF
DISTRIBUTION").
(6) UPON CONVERSION OF CLASS B SHARES TO CLASS A SHARES, SUCH SHARES WILL BE
SUBJECT TO THE LOWER 12b-1 FEE APPLICABLE TO CLASS A SHARES. NO SALES CHARGE
IS IMPOSED AT THE TIME OF CONVERSION OF CLASS B SHARES TO CLASS A SHARES.
CLASS C SHARES DO NOT HAVE A CONVERSION FEATURE AND, THEREFORE, ARE SUBJECT
TO AN ONGOING 0.85% DISTRIBUTION FEE (SEE "PURCHASE OF FUND
SHARES--ALTERNATIVE PURCHASE ARRANGEMENTS").
(7) THERE WERE NO OUTSTANDING SHARES OF CLASS A, CLASS C OR CLASS D PRIOR TO
JULY 28, 1997. ACCORDINGLY, "TOTAL FUND OPERATING EXPENSES," AS SHOWN ABOVE
WITH RESPECT TO THOSE CLASSES, ARE ESTIMATES BASED UPON THE SUM OF 12b-1
FEES, MANAGEMENT FEES AND ESTIMATED "OTHER EXPENSES."
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXAMPLES 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) a 5% annual return
and (2) redemption at the end of each time period:
Class A................................................................................. $56 $86 $117 $205
Class B................................................................................. $71 $93 $129 $235
Class C................................................................................. $31 $63 $109 $235
Class D................................................................................. $12 $37 $ 64 $142
You would pay the following expenses on the same $1,000 investment assuming no redemption at
the end of the period:
Class A................................................................................. $56 $86 $117 $205
Class B................................................................................. $21 $63 $109 $235
Class C................................................................................. $21 $63 $109 $235
Class D................................................................................. $12 $37 $ 64 $142
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of Distribution"
and "Redemptions and Repurchases."
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>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, the notes thereto and the unqualified report of
independent accountants, which are contained in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, which may be obtained without
charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------
CLASS B SHARES 1997**++ 1996 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.......................... $ 9.33 $ 9.08 $ 8.55 $ 9.39 $ 9.11 $ 9.11 $ 10.38
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment income............ 0.55 0.60 0.55 0.55 0.59 0.62 0.82
Net realized and unrealized gain
(loss).......................... 0.07 0.48 0.48 (0.92) 0.27 0.01 (0.99)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations...................... 0.62 1.08 1.03 (0.37) 0.86 0.63 (0.17)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Less dividends and distributions
from:
Net investment income......... (0.92) (0.83) (0.50) (0.22) (0.58) (0.63) (0.86)
Net realized gain............. -- -- -- -- -- -- (0.24)
Paid-in-capital............... -- -- -- (0.25) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total dividends and
distributions................... (0.92) (0.83) (0.50) (0.47) (0.58) (0.63) (1.10)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period... $ 9.03 $ 9.33 $ 9.08 $ 8.55 $ 9.39 $ 9.11 $ 9.11
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN+......... 7.05% 12.60% 12.45% (3.99)% 9.72% 7.13% (1.75)%
RATIOS TO AVERAGE NET ASSETS:
Expenses......................... 2.02% 1.96% 1.93% 1.91% 1.87% 1.87% 1.76%
Net investment income............ 6.07% 6.39% 6.21% 5.87% 6.39% 6.78% 8.45%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands....................... $94,556 $114,022 $138,165 $179,563 $275,319 $324,185 $421,051
Portfolio turnover rate.......... 345% 263% 254% 229% 229% 214% 245%
<CAPTION>
FOR THE PERIOD
MARCH 30, 1989*
THROUGH
CLASS B SHARES 1990 OCTOBER 31, 1989
----------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.......................... $ 9.55 $ 10.00
----------- -------
Net investment income............ 0.95 0.49
Net realized and unrealized gain
(loss).......................... 0.78 (0.45)
----------- -------
Total from investment
operations...................... 1.73 0.04
----------- -------
Less dividends and distributions
from:
Net investment income......... (0.90) (0.49)
Net realized gain............. -- --
Paid-in-capital............... -- --
----------- -------
Total dividends and
distributions................... (0.90) (0.49)
----------- -------
Net asset value, end of period... $ 10.38 $ 9.55
----------- -------
----------- -------
TOTAL INVESTMENT RETURN+......... 19.22% 0.40% (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses......................... 1.81% 1.90% (2)
Net investment income............ 9.76% 9.10% (2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands....................... $462,709 $388,578
Portfolio turnover rate.......... 109% 113% (1)
</TABLE>
- ---------------
* COMMENCEMENT OF OPERATIONS.
** 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.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ 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.
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
OCTOBER 31,
CLASS A SHARES 1997++
----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 8.97
------
Net investment income................................................. 0.15
Net realized and unrealized gain...................................... 0.05
------
Total from investment operations...................................... 0.20
------
Less dividends from net investment income............................. (0.15)
------
Net asset value, end of period........................................ $ 9.02
------
------
TOTAL INVESTMENT RETURN+.............................................. 2.27%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.46%(2)
Net investment income................................................. 6.69%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $682
Portfolio turnover rate............................................... 345%
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 8.97
------
Net investment income................................................. 0.14
Net realized and unrealized gain...................................... 0.05
------
Total from investment operations...................................... 0.19
------
Less dividends from net investment income............................. (0.14)
------
Net asset value, end of period........................................ $ 9.02
------
------
TOTAL INVESTMENT RETURN+.............................................. 2.12%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 2.00%(2)
Net investment income................................................. 5.89%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $111
Portfolio turnover rate............................................... 345%
</TABLE>
- -------------
* THE DATE SHARES WERE FIRST ISSUED.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ 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.
7
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
OCTOBER 31,
1997++
----------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 8.97
------
Net investment income................................................. 0.16
Net realized and unrealized gain...................................... 0.05
------
Total from investment operations...................................... 0.21
------
Less dividends from net investment income............................. (0.15)
------
Net asset value, end of period........................................ $ 9.03
------
------
TOTAL INVESTMENT RETURN+.............................................. 2.44%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.16%(2)
Net investment income................................................. 6.83%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $39
Portfolio turnover rate............................................... 345%
</TABLE>
- -------------
* THE DATE SHARES WERE FIRST ISSUED.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE
PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
8
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter World Wide Income Trust (the "Fund") is an open-end,
non-diversified management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of Massachusetts on October 14, 1988.
Dean Witter InterCapital Inc. ("InterCapital" or (the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover &
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.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 103 investment companies, 29 of which are listed on
the New York Stock Exchange, with combined total assets of approximately $98.9
billion as of December 31, 1997. The Investment Manager also manages portfolios
of pension plans, other institutions and individuals which aggregated
approximately $4 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by or under the
direction of the Investment Manager to ensure that the Fund's general investment
policies and programs are being properly carried out and that administrative
services are being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily at an annual rate
of 0.75% of the daily net assets of the Fund up to $250 million, scaled down at
various asset levels to 0.30% of the daily net assets of the Fund exceeding $1
billion. For the fiscal year ended October 31, 1997, the Fund accrued total
compensation to the Investment Manager amounting to 0.75% of the Fund's average
daily net assets and the total expenses of Class B amounted to 2.02% of the
average daily net assets of Class B. Shares of Class A, Class C and Class D were
first issued on July 28, 1997. The expenses of the Fund include: the fee of the
Investment Manager; the fee pursuant to the Plan of Distribution (see "Purchase
of Fund Shares"); taxes; transfer agent, custodian and auditing fees; certain
legal fees; and printing and other expenses relating to the Fund's operations
which are not expressly assumed by the Investment Manager under its Investment
Management Agreement with the Fund.
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The primary investment objective of the Fund is to provide a high level of
current income. As a secondary objective, the Fund will seek appreciation in the
value of its assets. The Fund will attempt to achieve its investment objectives
by investing primarily in a portfolio of fixed-income securities issued by
foreign and U.S. corporations or issued or guaranteed by foreign governments,
government
9
<PAGE>
agencies or government subdivisions, supranational organizations (or any
subdivision thereof) and the U.S. Government, its agencies and
instrumentalities. There can be no assurance that the Fund will achieve its
objectives. The investment objectives are fundamental policies of the Fund and,
as such, may not be changed without the approval of the shareholders of the
Fund.
The Fund may invest in securities issued by government entities or
corporations of any single nation and which are denominated in any single
currency. The Investment Manager will, however, actively allocate the Fund's
investments among various geographic regions, nations, currencies and
corporations or governmental entities in its attempt to maximize the dividends
paid on the Fund's shares and, if possible, the appreciation of their value. In
addition, it is the Fund's policy that, during normal market conditions, its
assets will be comprised of investments in the securities of issuers located in
at least three separate nations (which may include the United States). The
Investment Manager will consider such factors as the yield of individual
securities, the anticipated appreciation of such securities, the state of the
economies of the countries in which the investments are made, the levels of
inflation existing in such countries, the liquidity and financial soundness of
the markets in which such securities trade, the levels of inflation existing
within the relevant country and the current and anticipated relationships of
such countries' currencies to the U.S. dollar. The currency in which the Fund's
securities will be principally denominated will be a function of these factors
in that, at any given time, the Investment Manager may determine, after review
of these factors, that the fixed-income securities in a given country are
superior to the fixed-income securities in a different country, and,
accordingly, increase the proportion of the Fund's assets denominated in the
currency of the country with the superior investment climate.
It is anticipated that the securities held by the Fund in its portfolio will
be denominated, principally, in the following currencies: the United States
dollar, Australian dollar, New Zealand dollar, German mark, Japanese yen, French
franc, British pound, Canadian dollar, Mexican peso, Swiss franc, Dutch guilder,
Belgian franc, Swedish kronor, Italian lira, Finnish markka and European
Currency Unit (a weighted composite of the currencies of member states of the
European Monetary System). Securities of issuers within a given country may be
denominated in the currency of a different country.
The U.S. Government securities in which the Fund may invest include U.S.
Treasury bonds, notes and bills, which are direct obligations of the U.S.
Government as well as in securities issued or guaranteed by agencies and
instrumentalities of the U.S. Government. Some of the securities of such
agencies and instrumentalities are backed by the full faith and credit of the
U.S. (e.g., the Government National Mortgage Association), while others are not
backed by the full faith and credit of the U.S. but are backed by the credit of
the issuing agency or instrumentality (e.g., the Federal Home Loan Bank) or are
backed by an existing line of credit with the U.S. Treasury from which its
issuing agency or instrumentality may borrow (e.g., the Federal National
Mortgage Association).
The Fund may invest in fixed-income securities issued or guaranteed by
supranational organizations. Such organizations are entities designated or
supported by a government or government entity to promote economic development,
and include, among others, the Asian Development Bank, the European Coal and
Steel Community, the European Economic Community and the World Bank. These
organizations do not have taxing authority and are dependent upon their members
for payments of interest and principal. Each supranational entity's lending
activities are limited to a percentage of its total capital (including "callable
capital" contributed by members at the entity's call), reserves and net income.
Securities issued by supranational organizations may be denominated in U.S.
dollars or in foreign currencies.
10
<PAGE>
In seeking to achieve its objectives, the Fund will normally invest at least
65% of its assets in fixed-income securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities or fixed-income securities issued
by U.S. corporations, foreign governments, foreign corporations or other
entities which have been rated within the four highest categories as determined
by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) or Standard &
Poor's Corporation ("S&P") (AAA, AA, A or BBB), or which are unrated by such
rating agencies but which are deemed to be of comparable quality by the
Investment Manager. The ratings of fixed-income securities by Moody's and S&P
are a generally accepted barometer of credit risk. Fixed-income securities rated
Baa by Moody's have certain speculative characteristics. A description of S&P
and Moody's ratings is contained in the Statement of Additional Information.
The types of fixed-income securities invested in by the Fund include
straight debt obligations of varying maturities, such as bonds, notes, bills,
debentures, equipment lease and trust certificates, conditional sales contracts,
commercial paper, commercial bank obligations, obligations of savings
institutions, bankers' acceptances, Eurodollar certificates of deposit and fixed
and adjustable rate preferred stocks.
The Fund may invest without limitation in notes and commercial paper, the
principal amount of which is indexed to certain specific foreign currency
exchange rates. Indexed notes and commercial paper typically provide that their
principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect fluctuations in the exchange rate between two currencies
during the period the obligation is outstanding, depending on the terms of the
specific security. In selecting the two currencies, the Investment Manager will
consider the correlation and relative yields of various currencies. The Fund
will purchase an indexed obligation using the currency in which it is
denominated and, at maturity, will receive interest and principal payments
thereon in that currency. The amount of principal payable by the issuer at
maturity, however, will vary (i.e., increase or decrease) in response to the
change (if any) in the exchange rates between the two specified currencies
during the period from the date the instrument is issued to its maturity date.
The potential for realizing gains as a result of changes in foreign currency
exchange rates may enable the Fund to hedge the currency in which the obligation
is denominated (or to effect cross-hedges against other currencies) against a
decline in the U.S. dollar value of investments denominated in foreign
currencies, while providing an attractive money market rate of return. The Fund
will purchase such indexed obligations to generate current income or for hedging
purposes and will not speculate in such obligations.
Under normal conditions, a percentage of the short-term investments in the
Fund's portfolio may be money market securities. Money market securities include
short-term obligations issued or guaranteed by the U.S. Government or foreign
governments or issued by such governments' respective agencies and
instrumentalities, bank money market instruments including certificates of
deposit, bankers' acceptances, time deposits and deposit notes and certain other
short-term obligations such as short-term commercial paper. With respect to bank
money instruments, the obligations may be issued by U.S. or foreign depository
institutions, foreign branches or subsidiaries of U.S. depository institutions
("Eurodollar" obligations), U.S. branches or subsidiaries of foreign depository
institutions ("Yankeedollar" obligations) or foreign branches or subsidiaries of
foreign depository institutions. Eurodollar and Yankeedollar obligations and
obligations of branches or subsidiaries of foreign depository institutions may
be general obligations of the parent bank or may be limited to the issuing
branch or subsidiary by the terms of the specific obligations or by government
regulation.
In addition, the Fund may invest in fixed-income securities which are
convertible into common stock, such as convertible debentures and convertible
preferred stock, and fixed-income securities to which are attached equity
features such as
11
<PAGE>
shares of common stock, warrants for the purchase of common stock,
participations based on revenues, sales or profits and other conversion and/or
exchange rights.
The Fund may also invest in securities of foreign issuers in the form of
American Depository Receipts (ADRs), European Depository Receipts (EDRs) or
other similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a United States bank or trust company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a similar arrangement.
Generally, ADRs, in registered form, are designed for use in the United States
securities markets and EDRs, in bearer form, are designed for use in European
securities markets.
There may be periods during which, in the opinion of the Investment Manager,
market conditions warrant reduction of some or all of the Fund's securities
holdings. During such periods, the Fund may adopt a temporary "defensive"
posture in which greater than 35% of its assets are invested in cash or money
market instruments. Under such circumstances, the money market instruments in
which the Fund may invest are securities issued or guaranteed by the U.S.
Government; U.S. bank obligations; Eurodollar certificates of deposit;
obligations of American savings institutions; fully insured certificates of
deposit; and commercial paper of U.S. issuers rated within the two highest
grades by Moody's or S&P or, if not rated, are issued by a company having an
outstanding debt issue rated at least AA by S&P or Aa by Moody's.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in the
market value of its portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. The Fund's yield will
also vary based on the yield of the Fund's portfolio securities.
All fixed-income securities are subject to two types of risks: the credit
risk and the interest rate risk. The credit risk relates to the ability of the
issuer to meet interest or principal payments or both as they come due. The
interest rate risk refers to the fluctuations in the net asset value of any
portfolio of fixed-income securities resulting from the inverse relationship
between price and yield of fixed-income securities; that is, when the general
level of interest rates rises, the prices of outstanding fixed-income securities
decline, and when interest rates fall, prices rise.
The Fund may also purchase fixed-income securities which are issued by U.S.
issuers and which are denominated in U.S. dollars but which return principal to
investors in amounts which are tied to the exchange rate between the U.S. dollar
and a foreign currency. The payment of interest on such securities is generally
made at a fixed U.S. dollar rate.
NON-DIVERSIFIED STATUS. The Fund is a non-diversified investment company
and, as such, is not subject to the diversification requirements of the
Investment Company Act of 1940, as amended (the "Act"). As a non-diversified
investment company, the Fund may invest a greater portion of its assets in the
securities of a single issuer and thus is subject to greater exposure to risks
such as a decline in the credit rating of that issuer. However, the Fund
anticipates that it will qualify as a regulated investment company under the
federal income tax laws and, if so qualified, will be subject to the applicable
diversification requirements of the Internal Revenue Code, as amended (the
"Code"). As a regulated investment company under the Code, the Fund may not, as
of the end of any of its fiscal quarters, have invested more than 25% of its
total assets in the securities of any one issuer (including a foreign
government), or as to 50% of its total assets, have invested more than 5% of its
total assets in the securities of a single issuer.
12
<PAGE>
FOREIGN SECURITIES. Investors should carefully consider the risks of
investing in securities of foreign issuers and securities denominated in
non-U.S. currencies. Fluctuations in the relative rates of exchange between the
currencies of different nations may affect the value of the Fund's investments.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's yield on such assets and the net asset value
of a share of the Fund as well as the amount of the Fund's distributions. For
example, if a substantial portion of the Fund's assets are denominated in
Japanese yen and the relative exchange rate of the yen falls with respect to the
U.S. dollar (i.e., a yen is worth a smaller fraction of a dollar than it had
been) then the Fund will be receiving a lesser amount of interest on its
fixed-income securities denominated in yen (when converted into U.S. dollars)
and when the Fund's assets are valued for purposes of determining the net asset
value per share of the Fund, the net assets of the Fund reflected by the
yen-denominated securities will have declined in U.S. dollar value and the net
asset value of the Fund (always stated in U.S. dollars) may have also declined.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade. The foreign currency transactions of
the Fund will be conducted on a spot basis or through forward contracts or
futures contracts (see below). The Fund may incur certain costs in connection
with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not generally subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of Fund trades effected in such markets. Inability to dispose of
portfolio securities due to settlement delays could result in losses to the Fund
due to subsequent declines in value of such securities and the inability of the
Fund to make intended security purchases due to settlement problems could result
in a failure of the Fund to make potentially advantageous investments.
------------
To hedge against adverse price movements in the securities held in its
portfolio and the currencies in which they are denominated (as well as in the
securities it might wish to purchase and their denominated currencies) the Fund
may engage in transactions in forward foreign currency contracts, options on
securities and currencies, and futures contracts and options on futures
contracts on securities, currencies and indexes. The Fund may also write options
on securities and currencies to assist it in meeting its objective of providing
a high level of current income. A discussion of these transactions follows and
is supplemented by further disclosure in the Statement of Additional
Information.
13
<PAGE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract ("forward contract") involves an obligation to purchase or
sell a currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances. When
the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar or
other currency which is being used for the security purchase and the foreign
currency in which the security is denominated during the period between the date
on which the security is purchased or sold and the date on which payment is made
or received.
At other times, when, for example, the Fund's Investment Manager believes
that the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar or some other foreign currency, it may enter
into a forward contract to sell, for a fixed amount of dollars or other
currency, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio securities (or securities which the Fund has purchased
for its portfolio) denominated in such foreign currency. Under identical
circumstances, the Fund may enter into a forward contract to sell, for a fixed
amount of U.S. dollars or other currency, an amount of foreign currency other
than the currency in which the securities to be hedged are denominated
approximating the value of some or all of the portfolio securities to be hedged.
The Investment Manager will select this method of hedging, called
"cross-hedging," when it determines that the foreign currency in which the
portfolio securities are denominated have insufficient liquidity or are trading
at a discount as compared with some other foreign currency with which it tends
to move in tandem.
In addition, when the Fund's Investment Manager anticipates purchasing
securities at some time in the future, and wishes to lock in the current
exchange rate of the currency in which those securities are denominated against
the U.S. dollar or some other foreign currency, it may enter into a forward
contract to purchase an amount of currency equal to some or all of the value of
the anticipated purchase, for a fixed amount of U.S. dollars or other currency.
The Fund may, however, close out the forward contract without purchasing the
security which was the subject of the "anticipatory" hedge.
Lastly, the Fund is permitted to enter into forward contracts with respect
to currencies in which certain of its portfolio securities are denominated and
on which options have been written (see "Options and Futures Transactions").
In all of the above circumstances, if the currency in which the Fund's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The Fund is
not required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Investment Manager.
14
<PAGE>
The Fund generally will not enter into a forward contract with a term of
greater than one year, although it may enter into forward contracts for periods
of up to five years. To the extent that the Fund enters into forward foreign
currency contracts to hedge against a decline in the value of portfolio holdings
denominated in a particular foreign currency resulting from currency
fluctuations, there is a risk that the Fund may nevertheless realize a gain or
loss as a result of currency fluctuations after such portfolio holdings are sold
if the Fund is unable to enter into an "offsetting" forward foreign currency
contract with the same party or another party. The Fund may be limited in its
ability to enter into hedging transactions involving forward contracts by the
Code requirements relating to qualification as a regulated investment company
(see "Dividends, Distributions and Taxes").
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on U.S. Treasury
notes, bonds and bills, on various foreign currencies and on equity securities
which are listed on several U.S. and foreign securities exchanges and are
written in over-the-counter transactions ("OTC options"). Listed options are
issued or guaranteed by the exchange on which they trade or by a clearing
corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives the Fund the right to buy from the OCC (in the U.S.) or
other clearing corporation or exchange, the underlying security or currency
covered by the option at the stated exercise price (the price per unit of the
underlying security or currency) by filing an exercise notice prior to the
expiration date of the option. Ownership of a listed put option would give the
Fund the right to sell the underlying security or currency to the OCC (in the
U.S.) or other clearing corporation or exchange at the stated exercise price.
OTC options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Fund. With
respect to OTC options, such variables as expiration date, exercise price and
premium will be agreed upon between the Fund and the transacting dealer, without
the intermediation of a third party such as the OCC.
COVERED CALL WRITING. The Fund is permitted to write covered call options
on portfolio securities which are denominated in either U.S. dollars or foreign
currencies, without limit, in order to aid it in achieving its investment
objectives and to close out long call option positions. As a writer of a call
option, the Fund has the obligation, upon notice of exercise of the option, to
deliver the security or amount of currency underlying the option (certain listed
and OTC call options written by the Fund will be exercisable by the purchaser
only on a specific date).
COVERED PUT WRITING. As a writer of covered put options, the Fund incurs an
obligation to buy the security (or currency) underlying the option from the
purchaser of the put at the option's exercise price at any time during the
option period, at the purchaser's election (certain listed and OTC put options
written by the Fund will be exercisable by the purchaser only on a specific
date). The Fund will write put options for three purposes: (1) to receive the
premiums paid by purchasers; (2) when the Investment Manager wishes to purchase
the security underlying the option (or a security denominated in the currency
underlying the option) at a price lower than its current market price, in which
case it will write the covered put at an exercise price reflecting the lower
purchase price sought; and (3) to close out a long put option position. The
aggregate value of the obligations underlying the puts determined as of the date
the options are sold will not exceed 50% of the Fund's net assets.
PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equalling up to 5% of its total assets. The Fund may
purchase call options to close out a written call position or to protect against
an increase in the price of a security it anticipates purchasing or, in the case
of call options on a foreign currency, to hedge against an adverse exchange rate
change of the currency in which the security it anticipates
15
<PAGE>
purchasing is denominated vis-a-vis the currency in which the exercise price is
denominated. The Fund may purchase put options on securities which it holds in
its portfolio only to protect itself against a decline in the value of the
security. Similarly, the Fund may purchase put options on currencies in which
securities which it holds are denominated only to protect itself against a
decline in value of such currency vis-a-vis the currency in which the exercise
price is denominated. There are no other limits on the Fund's ability to
purchase call and put options.
FUTURES CONTRACTS. The Fund may purchase and sell futures contracts that
are currently traded, or may in the future be traded, on U.S. and foreign
commodity exchanges on such underlying fixed-income securities as U.S. Treasury
bonds, notes, and bills and/or any foreign government fixed-income security
("interest rate" futures), on various currencies ("currency" futures) and on
such indexes of U.S. or foreign fixed-income securities as may exist or come
into being, such as the Moody's Investment-Grade Corporate Bond Index ("index"
futures). As a futures contract purchaser, the Fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
The Fund will purchase or sell interest rate futures contracts for the
purpose of hedging the value of its fixed-income portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
The Fund will purchase or sell index futures contracts for the purpose of
hedging its fixed-income portfolio (or anticipated portfolio) against changes in
their prices. The Fund will purchase or sell currency futures on currencies in
which its portfolio securities (or anticipated portfolio securities) are
denominated for the purposes of hedging against anticipated changes in currency
exchange rates. In addition to the above, interest rate, index and currency
futures will be bought or sold in order to close out a short or long position
maintained by the Fund in a corresponding futures contract.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures contract,
only if a liquid secondary market exists for options or futures contracts of
that series. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options will generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer.
Exchanges may limit the amount by which the price of many futures contracts
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk is that
16
<PAGE>
the Investment Manager could be incorrect in its expectations as to the
direction or extent of various interest rate or price movements or the time span
within which the movements take place. For example, if the Fund sold futures
contracts for the sale of securities in anticipation of an increase in interest
rates, and then interest rates went down instead, causing bond prices to rise,
the Fund would lose money on the sale.
Another risk which may arise in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities, currencies and indexes subject to futures contracts (and thereby the
futures contract prices) may correlate imperfectly with the behavior of the U.S.
dollar cash prices of the Fund's portfolio securities and their denominated
currencies. Another such risk is that prices of interest rate futures contracts
may not move in tandem with the changes in prevailing interest rates against
which the Fund seeks a hedge. A correlation may also be distorted by the fact
that the futures market is dominated by short-term traders seeking to profit
from the difference between a contract or security price objective and their
cost of borrowed funds. Such distortions are generally minor and would diminish
as the contract approached maturity.
The Fund, by entering into transactions in foreign futures and options
markets, will also incur risks similar to those discussed above under the
section entitled "Foreign Securities."
OTHER INVESTMENT POLICIES
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risks of default or
bankruptcy of the selling financial institution, the Fund follows procedures
designed to minimize those risks. These procedures include effecting repurchase
transactions only with large, well-capitalized and well-established financial
institutions whose financial condition will be continually monitored by the
Investment Manager subject to procedures established by the Board of Trustees of
the Fund.
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, entail less risk than the corporation's common stock. The value
of a convertible security is a function of its "investment value" (its value as
if it did not have a conversion privilege), and its "conversion value" (the
security's worth if it were to be exchanged for the underlying security, at
market value, pursuant to its conversion privilege). To the extent that a
convertible security's investment value is greater than its conversion value,
its price will be primarily a reflection of such investment value and its price
will be likely to increase when interest rates fall and decrease when interest
rates rise, as with a fixed-income security (the credit standing of the issuer
and other factors may also have an effect on the convertible security's value).
If the conversion value exceeds the investment value, the price of the
convertible security will rise above its investment value and, in addition, the
convertible security will sell at some premium over its conversion value. (This
premium represents the price investors are willing to pay for the privilege of
purchasing a fixed-income security with a possibility of capital appreciation
due to the conversion privilege.) At such times the price
17
<PAGE>
of the convertible security will tend to fluctuate directly with the price of
the underlying equity security.
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements as part of its investment strategy. Reverse repurchase agreements
involve sales by the Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price. Reverse
repurchase agreements involve the risk that the market value of the securities
the Fund is obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of the proceeds of the agreement may be restricted pending a determination by
the other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. Reverse repurchase agreements are
speculative techniques involving leverage, and are considered borrowings by the
Fund.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive their
full value at maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at a
constant rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received on interest-paying securities if prevailing interest rates
rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. There is no overall
limit on the percentage of the Fund's assets which may be committed to the
purchase of securities on a when-issued, delayed delivery or forward commitment
basis. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued, delayed delivery or forward commitment
basis may increase the volatility of the Fund's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. There is no overall limit on the
percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage of
the Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value.
PRIVATE PLACEMENTS. The Fund may invest up to 10% of its total assets in
securities which are subject to restrictions on resale because they have
18
<PAGE>
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or which are otherwise not readily marketable. (Securities
eligible for resale pursuant to Rule 144A of the Securities Act, and determined
to be liquid pursuant to the procedures discussed in the following paragraph,
are not subject to the foregoing restriction.) These securities are generally
referred to as private placements or restricted securities. Limitations on the
resale of such securities may have an adverse effect on their marketability, and
may prevent the Fund from disposing of them promptly at reasonable prices. The
Fund may have to bear the expense of registering such securities for resale and
the risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid," such security will
not be included within the category "illiquid securities," which is limited by
the Fund's investment restrictions to 10% of the Fund's total assets. Investing
in Rule 144A securities could have the effect of increasing the level of Fund
illiquidity to the extent the Fund, at a particular time, may be unable to find
qualified institutional buyers interested in purchasing such securities.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to certain notice provisions described in the Statement of
Additional Information), and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are at least equal to the market value, determined daily,
of the loaned securities. As with any extensions of credit, there are risks of
delay in recovery and in some cases even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans of portfolio
securities will only be made to firms deemed by the Investment Manager to be
creditworthy and when the income which can be earned from such loans justifies
the attendant risks.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as such,
may be changed without shareholder approval.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000 and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
For additional risk disclosure, please refer to the discussion of specific
investments under the "Investment Objectives and Policies" section of the
Prospectus and the "Investment Practices and Policies" section of the Statement
of Additional Information.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objectives.
19
<PAGE>
The Fund is managed within InterCapital's Taxable Fixed-Income Group, which
manages 23 funds and fund portfolios, with approximately $13.3 billion in assets
at December 31, 1997. Rajesh K. Gupta, Senior Vice President of InterCapital,
and Peter J. Seeley, Vice President of InterCapital (since April, 1996), each a
member of InterCapital's Taxable Fixed-Income Group, are the primary portfolio
managers of the Fund. Mr. Gupta and Mr. Seeley have been the Fund's primary
portfolio managers since February, 1998 and December, 1994, respectively. Mr.
Gupta has been managing portfolios consisting of fixed-income securities since
June, 1987. Mr. Seeley has been a portfolio manager with InterCapital since
July, 1994, prior to which time he was a portfolio manager with Nikko Capital
Management (October, 1992-June, 1994). In determining which securities to
purchase for the Fund or hold in the Fund's portfolio, the Investment Manager
will rely on information from various sources, including research, analysis and
appraisals of brokers and dealers, including Dean Witter Reynolds Inc. ("DWR"),
Morgan Stanley & Co. Incorporated and other broker-dealer affiliates of
InterCapital, and the views of others regarding economic developments and
interest rate trends, and the Investment Manager's own analysis of factors it
deems relevant.
Personnel of the Investment Manager have substantial experience in the use
of the investment techniques described above under the heading "Options and
Futures Transactions," which techniques require skills different from those
needed to select the portfolio securities underlying various options and futures
contracts.
Securities purchased by the Fund are generally sold by dealers acting as
principal for their own accounts. Orders for transactions in other portfolio
securities and commodities are placed for the Fund with a number of brokers and
dealers, including DWR, Morgan Stanley & Co. Incorporated and other
broker-dealers that are affiliates of InterCapital. The Fund may incur brokerage
commissions on transactions conducted through such affiliates. Pursuant to an
order of the Securities and Exchange Commission, the Fund may effect principal
transactions in certain money market instruments with DWR and Morgan Stanley &
Co. Incorporated.
The Fund may sell portfolio securities without regard to the length of time
that they have been held, in order to take advantage of new investment
opportunities or yield differentials, or because the Fund desires to preserve
gains or limit losses due to changing economic conditions, interest rate trends,
or the financial condition of the issuer. It is not anticipated that the Fund's
portfolio turnover rate will exceed 300% in any one year. The Fund will incur
underwriting discount costs (on underwritten securities) and brokerage costs
commensurate with its portfolio turnover rate. Short term gains and losses may
result from such portfolio transactions. See "Dividends, Distributions and
Taxes" for a discussion of the tax implications of the Fund's transactions.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. For purposes
of the following limitations: (i) all percentage limitations apply immediately
after a purchase or initial investment, and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry.
20
<PAGE>
2. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years of
continuous operation. This restriction shall not apply to any obligation issued
or guaranteed by the United States Government, its agencies or
instrumentalities.
3. Purchase or sell commodities or commodities contracts except that the Fund
may purchase or write interest rate, currency and stock and bond index futures
contracts and related options thereon.
4. Pledge its assets or assign or otherwise encumber them except to secure
permitted borrowings. (For the purpose of this restriction, collateral
arrangements with respect to the writing of options and collateral arrangements
with respect to initial or variation margin for futures are not deemed to be
pledges of assets.)
5. Purchase securities on margin (but the Fund may obtain short-term loans as
are necessary for the clearance of transactions). The deposit or payment by the
Fund of initial or variation margin in connection with futures contracts or
related options thereon is not considered the purchase of a security on margin.
6. Invest more than 10% of its total assets in "illiquid securities"
(securities for which market quotations are not readily available) and
repurchase agreements which have a maturity of longer than seven days.
Generally, OTC options and the assets used as "cover" for written OTC options
are illiquid securities. However, the Fund is permitted to treat the securities
it uses as cover for written OTC options as liquid provided it follows a
procedure whereby it will sell OTC options only to qualified dealers who agree
that the Fund may repurchase such options at a maximum price to be calculated
pursuant to a predetermined formula set forth in the option agreement. The
formula may vary from agreement to agreement, but is generally based on a
multiple of the premium received by the Fund for writing the option plus the
amount, if any, of the options intrinsic value. An OTC option is considered an
illiquid asset only to the extent that the maximum repurchase price under the
formula exceeds the intrinsic value of the option.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially all
of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and Dean
Witter Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers which have entered into selected dealer agreements with
the Distributor ("Selected Broker-Dealers"). The principal executive office of
the Distributor is located at Two World Trade Center, New York, New York 10048.
The Fund offers four classes of shares (each, a "Class"). Class A shares are
sold to investors with an initial sales charge that declines to zero for larger
purchases; however, Class A shares sold without an initial sales charge are
subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for certain specific circumstances. Class B
shares are sold without an initial sales charge but are subject to a CDSC
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years
after purchase. (Class B shares purchased by certain qualified plans are subject
to a CDSC scaled down from 2.0% to 1.0% if redeemed within three years after
purchase.) Class C shares are sold without an initial sales charge but are
subject to a CDSC of 1.0% on
21
<PAGE>
most redemptions made within one year after purchase. Class D shares are sold
without an initial sales charge or CDSC and are available only to investors
meeting an initial investment minimum of $5 million ($25 million for certain
qualified plans), and to certain other limited categories of investors. At the
discretion of the Board of Trustees of the Fund, Class A shares may be sold to
categories of investors in addition to those set forth in this prospectus at net
asset value without a front-end sales charge, and Class D shares may be sold to
certain other categories of investors, in each case as may be described in the
then current prospectus of the Fund. See "Alternative Purchase Arrangements--
Selecting a Particular Class" for a discussion of factors to consider in
selecting which Class of shares to purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25 million
for certain qualified plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5 million (or $25 million)
initial investment for Class D shares, and subject to the $1,000 minimum initial
investment for each Class of the Fund, an investor's existing holdings of Class
A shares of the Fund and other Dean Witter Funds that are multiple class funds
("Dean Witter Multi-Class Funds") and shares of Dean Witter Funds sold with a
front-end sales charge ("FSC Funds") and concurrent investments in Class D
shares of the Fund and other Dean Witter Multi-Class Funds will be aggregated.
Subsequent purchases of $100 or more may be made by sending a check, payable to
Dean Witter World Wide Income Trust, directly to Dean Witter Trust FSB (the
"Transfer Agent" or "DWT") at P.O. Box 1040, Jersey City, NJ 07303 or by
contacting an account executive of DWR or other Selected Broker-Dealer. When
purchasing shares of the Fund, investors must specify whether the purchase is
for Class A, Class B, Class C or Class D shares. If no Class is specified, the
Transfer Agent will not process the transaction until the proper Class is
identified. The minimum initial purchase in the case of investments through
EasyInvest-SM-, an automatic purchase plan (see "Shareholder Services"), is
$100, provided that the schedule of automatic investments will result in
investments totalling $1,000 within the first twelve months. The minimum initial
purchase in the case of an "Education IRA" is $500, if the Distributor has
reason to believe that additional investments will increase the investment in
the account to $1,000 within three years. In the case of investments pursuant to
(i) Systematic Payroll Deduction Plans (including Individual Retirement Plans),
(ii) the InterCapital mutual fund asset allocation program and (iii) fee-based
programs approved by the Distributor, pursuant to which participants pay an
asset based fee for services in the nature of investment advisory or
administrative services, the Fund, in its discretion, may accept investments
without regard to any minimum amounts which would otherwise be required,
provided, in the case of Systematic Payroll Deduction Plans, that the
Distributor has reason to believe that additional investments will increase the
investment in all accounts under such Plans to at least $1,000. Certificates for
shares purchased will not be issued unless requested by the shareholder in
writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions. Sales personnel of a Selected Broker-Dealer are compensated for
selling shares of the Fund by the Distributor or any of its affiliates and/or
the Selected Broker-Dealer. In addition, some sales personnel of
22
<PAGE>
the Selected Broker-Dealer will receive various types of non-cash compensation
as special sales incentives, including trips, educational and/or business
seminars and merchandise. The Fund and the Distributor reserve the right to
reject any purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their needs.
The general public is offered three Classes of shares: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales charges
and rate of expenses to which they are subject. A fourth Class of shares, Class
D shares, is offered only to limited categories of investors (see "No Load
Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs resulting
from the CDSC applicable to shares of those Classes. The ongoing distribution
fees that are imposed on Class A, Class B and Class C shares will be imposed
directly against those Classes and not against all assets of the Fund and,
accordingly, such charges against one Class will not affect the net asset value
of any other Class or have any impact on investors choosing another sales charge
option. See "Plan of Distribution" and "Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and the
factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
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 certain
purchases. Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charges at the
time of purchase but are subject to a CDSC of 1.0% on redemptions made within
one year after purchase, except for certain specific circumstances. Class A
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net
assets of the Class. See "Initial Sales Charge Alternative--Class A Shares."
CLASS B SHARES. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed
within three years after purchase.) This CDSC may be waived for certain
redemptions. Class B shares are also subject to an annual 12b-1 fee of 0.85% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund (not including reinvestments of dividends
or capital gains distributions), less the average daily aggregate net asset
value of the Fund's Class B shares redeemed since the Fund's inception upon
which a CDSC has been imposed or waived, or (b) the average daily net assets of
Class B. The Class B shares' distribution fee will cause that Class to have
higher expenses and pay lower dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time. See
"Contingent Deferred Sales Charge Alternative--Class B Shares."
23
<PAGE>
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 redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They are
subject to an annual 12b-1 fee of up to 0.85% of the average daily net assets of
the Class C shares. 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. See
"Level Load Alternative--Class C Shares."
CLASS D SHARES. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares are
sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
SELECTING A PARTICULAR CLASS. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly lower
CDSC upon redemptions, they do not, unlike Class B shares, convert into Class A
shares after approximately ten years, and, therefore, are subject to an ongoing
12b-1 fee of 0.85% (rather than the 0.25% fee applicable to Class A shares) for
an indefinite period of time. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks. Other
investors, however, may elect to purchase Class C shares if, for example, they
determine that they do not wish to be subject to a front-end sales charge and
they are uncertain as to the length of time they intend to hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all Dean
Witter Multi-Class Funds, shares of FSC Funds and shares of Dean Witter Funds
for which such shares have been exchanged will be included together with the
current investment amount.
Sales personnel may receive different compensation for selling each Class of
shares. Investors should understand that the purpose of a CDSC is the same as
that of the initial sales charge in that the sales charges applicable to each
Class provide for the financing of the distribution of shares of that Class.
24
<PAGE>
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
<C> <S> <C> <C>
- -----------------------------------------------------------
A Maximum 4.25% 0.25% No
initial sales
charge reduced for
purchases of
$25,000 and over;
shares sold
without an initial
sales charge
generally subject
to a 1.0% CDSC
during first year.
- -----------------------------------------------------------
B Maximum 5.0% CDSC 0.85% B shares convert
during the first to A shares
year decreasing to automatically
0 after six years after
approximately
ten years
- -----------------------------------------------------------
C 1.0% CDSC during 0.85% No
first year
- -----------------------------------------------------------
D None None No
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--
CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased), except for certain specific circumstances. The CDSC will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The CDSC will not be imposed (i) in the
circumstances set forth below in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case of
Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets of
the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset
Value" below), plus a sales charge (expressed as a percentage of the offering
price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF PUBLIC OFFERING PERCENTAGE OF AMOUNT
SINGLE TRANSACTION PRICE 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>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the sales
charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual,
25
<PAGE>
his or her spouse and their children under the age of 21 purchasing shares for
his, her or their own accounts; (c) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified under
Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue Code
of a single employer or of employers who are "affiliated persons" of each other
within the meaning of Section 2(a)(3)(c) of the Act; and for investments in
Individual Retirement Accounts of employees of a single employer through
Systematic Payroll Deduction plans; or (g) any other organized group of persons,
whether incorporated or not, provided the organization has been in existence for
at least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount.
COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The sales
charge payable on the purchase of the Class A shares of the Fund, the Class A
shares of the other Dean Witter Multi-Class Funds and the shares of the FSC
Funds will be at their respective rates applicable to the total amount of the
combined concurrent purchases of such shares.
RIGHT OF ACCUMULATION. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other Dean Witter Funds previously
purchased at a price including a front-end sales charge (including shares of the
Fund and other Dean Witter Funds acquired in exchange for those shares, and
including in each case shares acquired through reinvestment of dividends and
distributions), which are held at the time of such transaction, amounts to
$25,000 or more. If such investor has a cumulative net asset value of shares of
FSC Funds and Class A and Class D shares that together with the current
investment amount, is equal to at least $5 million ($25 million for certain
qualified plans), such investor is eligible to purchase Class D shares subject
to the $1,000 minimum initial investment requirement of that Class of the Fund.
See "No Load Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the dealer or shareholder when such an order is
placed by mail. The reduced sales charge will not be granted if: (a) such
notification is not furnished at the time of the order; or (b) a review of the
records of the Selected Broker-Dealer or the Transfer Agent fails to confirm the
investor's represented holdings.
LETTER OF INTENT. The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of Class A shares of the Fund
from DWR or other Selected Broker-Dealers. The cost of Class A shares of the
Fund or shares of other Dean Witter Funds which were previously purchased at a
price including a front-end sales charge during the 90-day period prior to the
date of receipt by the Distributor of the Letter of Intent, or of Class A shares
of the Fund or shares of other Dean Witter Funds acquired in exchange for shares
of such funds purchased during such period at a price including a front-end
sales charge, which are still owned by the shareholder, may also be included in
determining the applicable reduction.
ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of
$1 million or more,
26
<PAGE>
Class A shares also may be purchased at net asset value by the following:
(1) trusts for which DWT (an affiliate of the Investment Manager) provides
discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for services
in the nature of investment advisory or administrative services (such
investments are subject to all of the terms and conditions of such programs,
which may include termination fees, mandatory redemption upon termination and
such other circumstances as specified in the program's agreements, and
restrictions on transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section 401(a)
of the Internal Revenue Code ("Qualified Retirement Plans") with at least 200
eligible employees and for which DWT serves as Trustee or DWR's Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement;
(4) Qualified Retirement Plans for which DWT serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement;
(5) investors who are clients of a Dean Witter account executive who joined
Dean Witter from another investment firm within six months prior to the date of
purchase of Fund shares by such investors, if the shares are being purchased
with the proceeds from a redemption of shares of an open-end proprietary mutual
fund of the account executive's previous firm which imposed either a front-end
or deferred sales charge, provided such purchase was made within sixty days
after the redemption and the proceeds of the redemption had been maintained in
the interim in cash or a money market fund; and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--
CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain Qualified Retirement Plans,
three years) preceding the redemption. In addition, Class B shares are subject
to an annual 12b-1 fee of 0.85% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B shares since the inception of the
Fund (not including reinvestments of dividends or capital gains distributions),
less the average daily aggregate net asset value of the Fund's Class B shares
redeemed since the Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any CDSC upon redemption.
Shares redeemed earlier than six years after purchase may, however, be subject
to a CDSC which will be a percentage of the dollar amount of shares redeemed and
will be assessed on an amount equal to the lesser of the current market value or
the cost of the shares being redeemed. The size of this percentage
27
<PAGE>
will depend upon how long the shares have been held, as set forth in the
following table:
<TABLE>
<CAPTION>
CDSC AS A
YEAR SINCE PURCHASE PERCENTAGE OF
PAYMENT MADE 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>
In the case of Class B shares of the Fund purchased on or after July 28,
1997 by Qualified Retirement Plans for which DWT serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, shares held for three years or more after
purchase (calculated as described in the paragraph above) will not be subject to
any CDSC upon redemption. However, shares redeemed earlier than three years
after purchase may be subject to a CDSC (calculated as described in the
paragraph above), the percentage of which will depend on how long the shares
have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------------------- ---------------------
<S> <C>
First................................. 2.0%
Second................................ 2.0%
Third................................. 1.0%
Fourth and thereafter................. None
</TABLE>
CDSC WAIVERS. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or, in
the case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption; and (iii) the current
net asset value of shares purchased through reinvestment of dividends or
distributions and/or shares acquired in exchange for shares of FSC Funds or of
other Dean Witter Funds acquired in exchange for such shares. Moreover, in
determining whether a CDSC is applicable it will be assumed that amounts
described in (i), (ii) and (iii) above (in that order) are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) 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); (B)
distributions from an IRA or 403(b) Custodial
Account following attainment of age 59 1/2; or (C) a tax-free return of an
excess contribution to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which DWT serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement ("Eligible Plan"), provided that either: (a)
the plan continues to be an Eligible Plan after the redemption; or (b) the
redemption is in connection with the
28
<PAGE>
complete termination of the plan involving the distribution of all plan assets
to participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.
CONVERSION TO CLASS A SHARES. All shares of the Fund held prior to July 28,
1997 have been designated Class B shares. Shares held before May 1, 1997 will
convert to Class A shares in May, 2007. In all other instances Class B shares
will convert automatically to Class A shares, based on the relative net asset
values of the shares of the two Classes on the conversion date, which will be
approximately ten (10) years after the date of the original purchase. The ten
year period is calculated from the last day of the month in which the shares
were purchased or, in the case of Class B shares acquired through an exchange or
a series of exchanges, from the last day of the month in which the original
Class B shares were purchased, provided that shares originally purchased before
May 1, 1997 will convert to Class A shares in May, 2007. The conversion of
shares purchased on or after May 1, 1997 will take place in the month following
the tenth anniversary of the purchase. There will also be converted at that time
such proportion of Class B shares acquired through automatic reinvestment of
dividends and distributions owned by the shareholder as the total number of his
or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a Qualified Retirement Plan for which DWT serves as
Trustee or DWR's Retirement Plan Services serves as recordkeeper pursuant to a
written Recordkeeping Services Agreement, the plan is treated as a single
investor and all Class B shares will convert to Class A shares on the conversion
date of the first shares of a Dean Witter Multi-Class Fund purchased by that
plan. In the case of Class B shares previously exchanged for shares of an
"Exchange Fund" (see "Shareholder Services--Exchange Privilege"), the period of
time the shares were held in the Exchange Fund (calculated from the last day of
the month in which the Exchange Fund shares were acquired) is excluded from the
holding period for conversion. If those shares are subsequently re-exchanged for
Class B shares of a Dean Witter Multi-Class Fund, the holding period resumes on
the last day of the month in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date for conversion. Class B shares evidenced by share certificates that are
not received by the Transfer Agent at least one week prior to any conversion
date will be converted into Class A shares on the next scheduled conversion date
after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion, and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The conversion feature may be suspended if the ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions
29
<PAGE>
made within one year after purchase (calculated from the last day of the month
in which the shares were purchased). The CDSC will be assessed on an amount
equal to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of that
section shall mean one year in the case of Class C shares. Class C shares are
subject to an annual 12b-1 fee of up to 0.85% of the average daily net assets of
the Class. Unlike Class B shares, Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject to 12b-1
fees applicable to Class C shares for an indefinite period subject to annual
approval by the Fund's Board of Trustees and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million for
Qualified Retirement Plans for which DWT serves as Trustee or DWR's Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement) and the following categories of investors: (i) investors
participating in the InterCapital mutual fund asset allocation program pursuant
to which such persons pay an asset based fee; (ii) persons participating in a
fee-based program approved by the Distributor, pursuant to which such persons
pay an asset based fee for services in the nature of investment advisory or
administrative services (subject to all of the terms and conditions of such
programs referred to in (i) and (ii) above, which may include termination fees
mandatory redemption upon termination and such other circumstances as specified
in the programs' agreements and restrictions on transferability of Fund shares);
(iii) 401(k) plans established by DWR and SPS Transaction Services, Inc. (an
affiliate of DWR) for their employees; (iv) certain Unit Investment Trusts
sponsored by DWR; (v) certain other open-end investment companies whose shares
are distributed by the Distributor; and (vi) other categories of investors, at
the discretion of the Board, as disclosed in the then current prospectus of the
Fund. Investors who require a $5 million (or $25 million) minimum initial
investment to qualify to purchase Class D shares may satisfy that requirement by
investing that amount in a single transaction in Class D shares of the Fund and
other Dean Witter Multi-Class Funds, subject to the $1,000 minimum initial
investment required for that Class of the Fund. In addition, for the purpose of
meeting the $5 million (or $25 million) minimum investment amount, holdings of
Class A shares in all Dean Witter Multi-Class Funds, shares of FSC Funds and
shares of Dean Witter Funds for which such shares have been exchanged will be
included together with the current investment amount. If a shareholder redeems
Class A shares and purchases Class D shares, such redemption may be a taxable
event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act with respect to the distribution of Class A, Class B and Class C shares of
the Fund. In the case of Class A and Class C shares, the Plan provides that the
Fund will reimburse the Distributor and others for the expenses of certain
activities and services incurred by them specifically on behalf of those shares.
Reimbursements for these expenses will be made in monthly payments by the Fund
to the Distributor, which will in no event exceed amounts equal to payments at
the annual rates of 0.25% and 0.85% of the average daily net assets of Class A
and Class C, respectively. In the case of Class B shares, the Plan provides that
the Fund will pay the Distributor a fee, which is accrued daily and paid
monthly, at the annual rate of 0.85% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B
30
<PAGE>
shares since the inception of the Fund (not including reinvestments of dividends
or capital gains distributions), less the average daily aggregate net asset
value of the Fund's Class B shares redeemed since the Fund's inception upon
which a CDSC has been imposed or waived, or (b) the average daily net assets of
Class B. The fee is treated by the Fund as an expense in the year it is accrued.
In the case of Class A shares, the entire amount of the fee currently represents
a service fee within the meaning of the NASD guidelines. In the case of Class B
and Class C shares, a portion of the fee payable pursuant to the Plan, equal to
0.20% and 0.25% of the average daily net assets of each of these Classes,
respectively, is currently characterized as a service fee. A service fee is a
payment made for personal service and/or the maintenance of shareholder
accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of DWR's account executives
and others who engage in or support distribution of shares or who service
shareholder accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders; and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan in the case of Class B
shares to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
For the fiscal year ended October 31, 1997, Class B shares of the Fund
accrued payments under the Plan amounting to $881,250, which amount is equal to
0.85% of the average daily net assets of Class B for the fiscal year. These
payments accrued under the Plan were calculated pursuant to clause (b) of the
compensation formula under the Plan. All shares held prior to July 28, 1997 have
been designated Class B shares. For the fiscal period July 28 through October
31, 1997, Class A and Class C shares of the Fund accrued payments under the Plan
amounting to $169 and $165, respectively, which amounts on an annualized basis
are equal to 0.25% and 0.85% of the average daily net assets of Class A and
Class C, respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i) the
payments made by the Fund pursuant to the Plan, and (ii) the proceeds of CDSCs
paid by investors upon the redemption of Class B shares. For example, if $1
million in expenses in distributing Class B shares of the Fund had been incurred
and $750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that such
excess amounts, including the carrying charge described above, totalled
$8,370,199 at October 31, 1997, which was equal to 8.77% of the net assets of
the Fund on such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses or any requirement that
the Plan be continued from year to year, such excess amount does not constitute
a liability of the Fund. Although there is no legal obligation for the Fund to
pay expenses incurred in excess of payments made to the Distributor under the
Plan, and the proceeds of CDSCs paid by investors upon redemption of shares, if
for any reason the Plan is terminated the Trustees will consider at that time
the manner in which to treat such expenses. Any cumulative expenses incurred,
but not yet recovered through distribution fees or CDSCs, may or may not be
recovered through future distribution fees or CDSCs.
31
<PAGE>
In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 0.85% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the Fund
through payments in any subsequent year, except that expenses representing a
gross sales commission credited to account executives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the Fund
that unreimbursed expenses representing a gross sales commission credited to
account executives at the time of sale totalled $715 in the case of Class C at
December 31, 1997, which amount was equal to 0.61% of the net assets of Class C
on such date, and that there were no such expenses that may be reimbursed in the
subsequent year in the case of Class A on such date. No interest or other
financing charges will be incurred on any Class A or Class C distribution
expenses incurred by the Distributor under the Plan or on any unreimbursed
expenses due to the Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined once daily at 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open by taking the net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the Class
A, Class B, Class C and Class D shares will be invested together in a single
portfolio. The net asset value of each Class, however, will be determined
separately by subtracting each Class's accrued expenses and liabilities. The net
asset value per share will not be determined on Good Friday and on such other
federal and non-federal holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued (if there were no sales that
day, the security is valued at the latest bid price; in cases where securities
are traded on more than one exchange, the securities are valued on the exchange
designated as the primary market pursuant to procedures adopted by the
Trustees); and (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest available bid
price prior to the time of valuation. When market quotations are not readily
available, including circumstances under which it is determined by the
Investment Manager that sale and bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Fund's Trustees. For valuation purposes, quotations of foreign portfolio
securities, other assets and liabilities and forward contracts stated in foreign
currency are translated into U.S. dollar equivalents at the prevailing market
rates prior to the close of the New York Stock Exchange.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
Generally, trading in foreign securities, as well as corporate bonds, United
States government securities and money market instruments, is substantially
completed each day at various times prior
32
<PAGE>
to the close of the New York Stock Exchange. The values of such securities used
in computing the net asset value of the Fund's shares are determined as of such
times. Foreign currency exchange rates are also generally determined prior to
the close of the New York Stock Exchange. Occasionally, events which affect the
values of such securities and such exchange rates may occur between the times at
which they are determined and the close of the New York Stock Exchange and will
therefore not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as determined
in good faith under procedures established by and under the supervision of the
Trustees.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the shareholder,
in shares of any other open-end Dean Witter Fund), unless the
shareholder requests that they be paid in cash. Shares so acquired are acquired
at net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Redemptions and Repurchases").
EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund (see "Purchase of Fund Shares" and "Redemptions and Repurchases --
Involuntary Redemption").
INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution in shares of the
applicable Class at the net asset value per share next determined after receipt
by the Transfer Agent, by returning the check or the proceeds to the Transfer
Agent within thirty days after the payment date. Shares so acquired are acquired
at net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Redemptions and Repurchases.")
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable CDSC
will be imposed on shares redeemed under the Withdrawal Plan (see "Purchase of
Fund Shares"). Therefore, any shareholder participating in the Withdrawal Plan
will have sufficient shares redeemed from his or her account so that the
proceeds (net of any applicable CDSC) to the shareholder will be the designated
monthly or quarterly amount. Withdrawal plan payments should not be considered
as dividends, yields or income. If periodic withdrawal plan payments
continuously exceed net investment income and net capital gains, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Each withdrawal constitutes a redemption of shares and any gain or
loss realized must be recognized for federal income tax purposes.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and
33
<PAGE>
Custodial Accounts under Section 403(b)(7) of the Internal Revenue Code.
Adoption of such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Transfer
Agent.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any exchange fee.
Shares may also be exchanged for shares of the following funds: Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and five Dean Witter funds which are money market funds (the "Exchange Funds").
Class A shares may also be exchanged for shares of Dean Witter Multi-State
Municipal Series Trust and Dean Witter Hawaii Municipal Trust, which are Dean
Witter Funds sold with a front-end sales charge ("FSC Funds"). Class B shares
may also be exchanged for shares of Dean Witter Global Short-Term Income Fund
Inc. ("Global Short-Term"), which is a Dean Witter Fund offered with a CDSC.
Exchanges may be made after the shares of the Fund acquired by purchase (not by
exchange or dividend reinvestment) have been held for thirty days. There is no
waiting period for exchanges of shares acquired by exchange or dividend
reinvestment.
An exchange to another Dean Witter Multi-Class Fund, any FSC Fund, Global
Short-Term or any Exchange Fund that is not a money market fund is on the basis
of the next calculated net asset value per share of each fund after the exchange
order is received. When exchanging into a money market fund from the Fund,
shares of the Fund are redeemed out of the Fund at their next calculated net
asset value and the proceeds of the redemption are used to purchase shares of
the money market fund at their net asset value determined the following business
day. Subsequent exchanges between any of the money market funds and any of the
Dean Witter Multi-Class Funds, FSC Funds or Global Short-Term or any Exchange
Fund that is not a money market fund can be effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a Dean Witter Multi-Class
Fund or shares of Global Short-Term, the holding period previously frozen when
the first exchange was made resumes on the last day of the month in which shares
of a Dean Witter Multi-Class Fund or shares of Global Short-Term Fund are
reacquired. Thus, the CDSC is based upon the time (calculated as described
above) the shareholder was invested in shares of a Dean Witter Multi-Class Fund
or in shares of Global Short-Term (see "Purchase of Fund Shares"). In the case
of exchanges of Class A shares which are subject to a CDSC, the holding period
also includes the time (calculated as described above) the shareholder was
invested in shares of a FSC Fund. In the case of shares exchanged into an
Exchange Fund on or after April 23, 1990, upon a redemption of shares which
results in a CDSC being imposed, a credit (not to exceed the amount of the CDSC)
will be given in an amount equal to the Exchange Fund 12b-1 distribution fees
incurred on or after that date which are attributable to those shares. (Exchange
Fund 12b-1 distribution fees are described in the prospectuses for those funds.)
Class B shares of the Fund acquired in exchange for Class B shares of another
Dean Witter Multi-Class Fund having a different CDSC schedule than that of this
Fund will be subject to the higher CDSC schedule, even if such shares are
subsequently re-exchanged for shares of the fund with the lower CDSC schedule.
34
<PAGE>
ADDITIONAL INFORMATION REGARDING EXPENSES. Purchases and exchanges should be
made for investment purposes only. A pattern of frequent exchanges may be deemed
by the Investment Manager to be abusive and contrary to the best interests of
the Fund's other shareholders and, at the Investment Manager's discretion, may
be limited by the Fund's refusal to accept additional purchases and/ or
exchanges from the investor. Although the Fund does not have any specific
definition of what constitutes a pattern of frequent exchanges, and will
consider all relevant factors in determining whether a particular situation is
abusive and contrary to the best interests of the Fund and its other
shareholders, investors should be aware that the Fund and each of the other Dean
Witter Funds may in their discretion limit or otherwise restrict the number of
times this Exchange Privilege may be exercised by any investor. Any such
restriction will be made by the Fund on a prospective basis only, upon notice to
the shareholder not later than ten days following such shareholder's most recent
exchange. Also, the Exchange Privilege may be terminated or revised at any time
by the Fund and/or any of such Dean Witter Funds for which shares of the Fund
have been exchanged, upon such notice as may be required by applicable
regulatory agencies. Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement of
each Class of shares and any other conditions imposed by each fund. In the case
of a shareholder holding a share certificate or certificates, no exchanges may
be made until all applicable share certificates have been received by the
Transfer Agent and deposited in the shareholder's account. An exchange will be
treated for federal income tax purposes the same as a repurchase or redemption
of shares, on which the shareholder may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in situations
where there is an exchange of shares within ninety days after the shares are
purchased. The Exchange Privilege is only available in states where an exchange
may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or another Selected Broker-Dealer but who wish to make
exchanges directly by writing or telephoning the Transfer Agent) must complete
and forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Transfer Agent, to initiate an
exchange. If the Authorization Form is used, exchanges may be made in writing or
by contacting the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fradulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day
35
<PAGE>
the New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that 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 Dean Witter Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of any
applicable CDSC in the case of Class A, Class B or Class C shares (see "Purchase
of Fund Shares"). If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a
written request for redemption along with any additional information required by
the Transfer Agent.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the net
asset value next computed (see "Purchase of Fund Shares") after such repurchase
order is received by DWR or other Selected Broker-Dealer, reduced by any
applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund or the
Distributor. The offer by DWR and other Selected Broker-Dealers to repurchase
shares may be suspended without notice by them at any time. In that event,
shareholders may redeem their shares through the Fund's Transfer Agent as set
forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund in the same Class from which such shares were redeemed or
repurchased, at net asset value next determined after a reinstatement request,
together with the proceeds, is received by the Transfer Agent and receive a pro
36
<PAGE>
rata credit for any CDSC paid in connection with such redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or Custodial Account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100 or such lesser amount as may
be fixed by the Trustees or, in the case of an account opened through
EasyInvest, if after twelve months the shareholder has invested less than $1,000
in the account. However, before the Fund redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder that the value of
the shares is less than the applicable amount and allow the shareholder sixty
days to make an additional investment in an amount which will increase the value
of his or her account to at least the applicable amount before the redemption is
processed. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends separately for
each Class of shares and intends to pay monthly income dividends and to
distribute net short-term and net long-term capital gains, if any, at least once
each year. The Fund may, however, determine either to distribute or to retain
all or part of any long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in additional
shares of the same Class and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in
writing that all dividends and/or distributions be paid in cash. Shares acquired
by dividend and distribution reinvestments will not be subject to any front-end
sales charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a pro
rata basis. Distributions paid on Class A and Class D shares will be higher than
for Class B and Class C shares because distribution fees paid by Class B and
Class C shares are higher. (See "Shareholder Services--Automatic Investment of
Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment
income and net short-term and long-term capital gains to shareholders and remain
qualified as a regulated investment company under Subchapter M of the Code, it
is not expected that the Fund will be required to pay any federal income tax on
such income and capital gains.
Gains or losses on the Fund's transactions in certain listed options on
securities and on futures and options on futures generally are treated as 60%
long-term gain/loss and 40% short-term gain/loss. When the Fund engages in
options and futures transactions, various tax regulations applicable to the Fund
may have the effect of causing the Fund to recognize a gain or loss for tax
purposes before that gain or loss is realized, or to defer recognition of a
realized loss for tax purposes. Recognition, for tax purposes, of an unrealized
loss may result in a lesser amount of the Fund's realized net gains being
available for distribution.
Shareholders will normally have to pay federal income taxes, and any
applicable state and/or local income taxes, on the dividends and distributions
they receive from the Fund. Such dividends and distributions, to the extent that
they are derived from net investment income and net short-term capital gains,
are taxable to the shareholder as ordinary dividend income regardless of whether
the shareholder receives such distributions in additional shares or in cash. Any
dividends declared in the last
37
<PAGE>
quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed, for tax purposes, to have been received by the
shareholder in the prior year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return of
a portion of each shareholder's investment. All, or a portion, of such payments
will not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes,
including information as to the portion taxable as ordinary income and the
portion taxable as long-term capital gains. Shareholders will also be notified
of their proportionate share of long-term capital gains distributions that are
eligible for a reduced rate of tax under the Taxpayer Relief Act of 1997.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and has made the appropriate election with the Internal Revenue Service, the
Fund will report annually to its shareholders the amount per share of such
taxes, to enable shareholders to claim United States foreign tax credits or
deductions with respect to such taxes. In the absence of such an election, the
Fund would deduct foreign tax in computing the amount of its distributable
income.
The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject to
state and local taxes; therefore, each shareholder is advised to consult his or
her own tax adviser.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. These figures are computed separately
for Class A, Class B, Class C and Class D shares. Both the yield and the total
return of the Fund are based on historical earnings and are not intended to
indicate future performance. The yield of each Class of the Fund is computed by
dividing the Class's net investment income over a 30-day period by an average
value (using the average number of shares entitled to receive dividends and the
maximum offering price per share at the end of the period), all in accordance
with applicable regulatory requirements. Such amount is compounded for six
months and then annualized for a twelve-month period to derive the Fund's yield
for each Class.
The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an
initial investment in a Class of the Fund of $1,000 over periods of one, five
and ten years, as well as over the life of the Fund. Average annual total return
reflects all income earned by the Fund, any appreciation or depreciation of the
Fund's assets, all expenses incurred by the applicable Class and all sales
charges which would be incurred by shareholders, for the stated periods. It also
assumes reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
38
<PAGE>
and year-by-year or other types of total return figures. Such calculations may
or may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in each Class of
shares of the Fund. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc. and Salomon Brothers Treasury Index, Salomon Brothers
World Government Index, Salomon Brothers Corporate Index, Lehman
Corporate/Government Bond Index and Donahue's Money Market Index).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges except that
each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other matter
in which the interests of one Class differ from the interests of any other
Class. In addition, Class B shareholders will have the right to vote on any
proposed material increase in Class A's expenses, if such proposal is submitted
separately to Class A shareholders. Also, as discussed herein, Class A, Class B
and Class C bear the expenses related to the distribution of their respective
shares.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within sixty days of a
sale or a sale within sixty days of a purchase) of a security. In
39
<PAGE>
addition, investment personnel may not purchase or sell a security for their
personal account within thirty days before or after any transaction in any Dean
Witter Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve
its investment objectives by investing all of its investable assets in a
non-diversified, open-end management investment company having the same
investment objectives and policies and substantially the same investment
restrictions as those applicable to the Fund.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
40
<PAGE>
Dean Witter
World Wide Income Trust
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Rajesh K. Gupta
Vice President
Peter J. Seeley
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank
One Chase Plaza
New York, New York 10005
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
DEAN WITTER
WORLD WIDE
INCOME TRUST
[LOGO]
PROSPECTUS -- FEBRUARY 6, 1998
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TWO WORLD TRADE CENTER,
TRUST NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1998
DEAR SHAREHOLDER:
The twelve-month period ended October 31, 1998, was a historic year for the
global bond markets. During the first half of this period, Asian economic
problems portended slower world economic growth and created a global preference
for U.S.-dollar-denominated assets. This preference permitted yields to decline
and bond prices to rise in most high-grade bond markets and caused continued
strengthening of the U.S. dollar. After a market consolidation through the
spring, during which market participants increasingly came to doubt whether the
Asian crisis would have any lasting effect, the crisis spread. Fears grew of an
implosion in the Japanese economy, a virtual collapse potentially in the Russian
economy, contagion effects in most developing economies, and a consensus that
even the United States and western Europe's economies would suffer a major
slowdown. As a result, equity prices in most of the world's markets fell.
GLOBAL BOND MARKET OVERVIEW
During the period under review, U.S. and German government bond markets were
exceptionally strong. These markets peaked when hedge funds, which had hedged
their exposures to lesser credits by selling short against the U.S. and German
markets, were forced out of their positions. This movement caused an explosion
in yield spreads of other fixed-income securities relative to U.S. and German
government bonds, accompanied by well-publicized problems among some hedge
funds. Consequently, these two markets soared while other high-quality markets
lagged and lesser-quality markets fell and, in some cases, plunged. During this
period the U.S. dollar fell, because it was perceived to be exposed to the risks
affecting its Latin American and Canadian trading partners, and it was thought
that the Federal Reserve Board would be forced to cut short-term rates
aggressively.
The yields on 10-year U.S. Treasury notes fell to 4.61 percent by October 31,
1998, from 5.83 percent a year earlier. At the height of the flight to quality
in early October the yield fell to a record-low of 4.16 percent. Similarly,
yields on 10-year German government bonds fell
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1998, CONTINUED
from 5.58 percent to 4.14 percent. In Japan, bond yields fell below 1 percent,
while cash yields fell close to zero.
CURRENCY MARKET OVERVIEW
The transition from a flight into U.S.-dollar-denominated assets to an
international shift away from them appears to have marked the end of a
three-year rise in the value of the dollar relative to other major currencies.
Against the deutsche mark, for example, the dollar rose from 1.73 at the end of
October 1997 to around 1.89 before dropping to below 1.60 in October 1998. While
all of the major currency exchange rates exhibited roughly similar performance
patterns, there were some crucial differences in the underlying forces affecting
these exchange rates. In the case of the deutsche mark and other major European
currencies, exchange rates appeared to be driven by classical forces such as
interest-rate differentials and the relative strength of the U.S. and European
economies. For the Japanese yen, a growing flight of capital from Japan gave way
to repatriation of it as Japanese investors became skeptical of the
international financial outlook. Other major currencies (Australian, New Zealand
and Canadian dollars and the Scandinavian currencies) were more affected by
international commodity prices, since their economies tend to be resource based.
PERFORMANCE
For the twelve-month period ended October 31, 1998, Morgan Stanley Dean Witter
World Wide Income Trust's Class B shares posted a total return of 8.61 percent.
During this period, the Fund outperformed its peer group, which returned 4.46
percent, as measured by the Lipper Global Income Funds Index (Lipper index).
During the same period, the unmanaged Lehman Brothers Global Intermediate Bond
Index (Lehman index) returned 11.62 percent. For the same period, the Fund's
Class A, C and D shares had total returns of 9.16 percent, 8.62 percent and 9.41
percent, respectively. The performance of the Fund's four share classes varies
because of differing expenses. The accompanying chart compares the performance
of the Fund's Class B shares with that of the Lipper and Lehman indexes.
PORTFOLIO STRATEGY
The evolving international situation required several strategic adjustments in
the Fund's portfolio as the fiscal year progressed. Early in the year, the
Fund's investments were largely focused on U.S. fixed-income securities. Then,
as concerns about the Asian crisis waned, it became appropriate to shift
attention to the European markets, the United Kingdom, Italy, Spain and Denmark,
and New Zealand, which had high yields. As it appeared that the Asian crisis was
spreading, the Fund's assets were concentrated in the U.S. and German government
markets for safety and price appreciation. Finally, toward the end of the fiscal
year it became apparent that we could expect at least a
2
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1998, CONTINUED
temporary respite in the international situation, at which point investments
were shifted to high-grade sectors that had lagged during the surge in the U.S.
and German bond markets. These sectors included U.S. mortgage-backed securities
with yields approximately 2 percent above that of comparable U.S. government
securities, Danish mortgages with yields approximately 2.5 percent above those
of German government securities, New Zealand dollar-denominated securities
issued by the U.S. government agency FNMA with yields ranging up to 8 percent,
AA-rated banks with yields up to 160 basis points more than comparable United
Kingdom bonds and Greek government bonds with yields above 9 percent. As the
fiscal year came to a close, each of these spreads had contracted somewhat
relative to their government benchmarks.
The Fund also shifted from its policy of hedging most of its currency exposures
during the early part of the fiscal year (in order to protect it from declines
in the values of these currencies relative to the U.S. dollar) to one of
unhedging most of its European investments. We believe this strategy will enable
the Fund to better capture currency gains if the U.S. dollar declines.
LOOKING AHEAD
In the months ahead we expect a period of greater normalcy (e.g., consolidating
interest and exchange rates), allowing the spreads in high-grade securities to
narrow relative to comparable U.S. and German government securities. This
movement would result in these securities providing the Fund with an attractive
level of income and modest capital appreciation. We also expect this period to
be followed by a renewed decline in global bond yields and value of the U.S.
dollar as the domestic economy slows and unresolved emerging market problems
result in an additional disinflationary impulse affecting the global economy.
During this period of consolidation, we anticipate investing in high-grade
securities that are currently at historically high yield levels relative to
benchmark government securities, although we will remain ready to adjust our
strategy if market conditions change.
We appreciate your ongoing support of Morgan Stanley Dean Witter World Wide
Income Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
3
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME
TRUST
FUND PERFORMANCE OCTOBER 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH OF $10,000 -- CLASS B
($ in Thousands)
FUND LEHMAN(4) LIPPER(5)
<S> <C> <C> <C>
March-1989 $10,000 $10,000 $10,000
October-1989 $10,040 $10,504 $10,441
October-1990 $11,969 $12,032 $11,882
October-1991 $11,759 $13,172 $13,131
October-1992 $12,598 $14,846 $14,091
October-1993 $13,822 $16,188 $16,026
October-1994 $13,271 $16,974 $15,378
October-1995 $14,923 $19,429 $17,132
October-1996 $16,802 $20,742 $19,147
October-1997 $17,987 $21,031 $20,203
October-1998 $19,535(3) $23,474 $21,109
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS
A, CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B
SHARES SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES* CLASS A SHARES**
- ----------------------------------------------- --------------------------------------------------
PERIOD ENDED 10/31/98 PERIOD ENDED 10/31/98
- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 8.61%(1) 3.61%(2) 1 Year 9.16%(1) 4.53%(2)
5 Years 7.16%(1) 6.87%(2) Since Inception (7/28/97) 9.14%(1) 5.44%(2)
Since Inception (3/30/89) 7.23%(1) 7.23%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+ CLASS D SHARES++
- ----------------------------------------------------- --------------------------------------------------
PERIOD ENDED 10/31/98 PERIOD ENDED 10/31/98
- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 8.62%(1) 7.62%(2) 1 Year 9.41%(1)
Since Inception (7/28/97) 8.58%(1) 8.58%(2) Since Inception (7/28/97) 9.48%(1)
</TABLE>
- ------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on October 31, 1998.
(4) The Lehman Brothers Global Intermediate Bond Index, includes local
currency-denominated sovereign debt of 19 countries with maturities of 1 to
10 years. The performance of the Index does not include any expenses, fees
or charges. The Index is unmanaged and should not be considered an
investment.
(5) The Lipper Global Income Funds Index is an equally-weighted performance
index of the largest-qualifying funds (based on net assets) in the Lipper
Global Income Funds objective. The Index, which is adjusted for capital
gains distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 30 funds represented in the
Index.
* The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The
CDSC declines to 0% after six years.
** The maximum front-end sales charge for Class A is 4.25%.
+ The maximum CDSC for Class C shares is 1% for shares redeemed within one year
of purchase.
++ Class D shares have no sales charge.
4
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT & CORPORATE BONDS (99.7%)
DENMARK (4.5%)
GOVERNMENT OBLIGATION
DKK 25,000 Realkredit Denmark+.......................................................... 6.00% 10/01/29 $ 3,809,569
-----------
GREECE (5.4%)
GOVERNMENT OBLIGATION
GRD 1,250,000 Greece Government Bond+...................................................... 8.70 04/08/05 4,501,779
-----------
ITALY (5.0%)
GOVERNMENT OBLIGATION
ITL 6,250,000 Italy Treasury Bond+......................................................... 10.50 07/15/00 4,242,355
-----------
NEW ZEALAND (2.3%)
EXTRA GOVERNMENTAL INSTITUTIONS--BANKS
NZD 3,500 International Bank for Reconstruction & Development+......................... 7.00 09/18/00 1,888,593
-----------
NORWAY (2.6%)
GOVERNMENT OBLIGATION
NOK 14,000 Norway Government Bond....................................................... 9.50 10/31/02 2,183,841
-----------
SPAIN (6.1%)
GOVERNMENT OBLIGATION
ESP 650,000 Spain Treasury Bond+......................................................... 12.25 03/25/00 5,154,170
-----------
UNITED KINGDOM (11.0%)
MAJOR BANKS (3.2%)
GBP 1,500 Union Bank of Switzerland+................................................... 8.00 01/08/07 2,726,399
-----------
SMALLER BANKS (7.8%)
1,000 Alliance & Leicester PLC+.................................................... 8.75 12/07/06 1,900,948
1,000 Halifax PLC+................................................................. 9.375 05/15/21 2,214,636
1,250 Lloyds TSB Group PLC+........................................................ 8.50 03/29/06 2,403,826
-----------
6,519,410
-----------
TOTAL UNITED KINGDOM............................................................................ 9,245,809
-----------
UNITED STATES (62.8%)
MAJOR BANKS (2.1%)
GBP 1,000 Morgan Guaranty Trust Co.+................................................... 7.75 12/30/03 1,769,539
-----------
GOVERNMENT AGENCIES & OBLIGATIONS (60.7%)
NZD 7,700 Federal National Mortgage Assoc.+............................................ 7.00 09/26/00 4,152,831
9,600 Federal National Mortgage Assoc.+............................................ 7.25 06/20/02 5,285,441
$ 3,064 Federal National Mortgage Assoc.............................................. 6.00 10/01/28 3,026,085
1,986 Federal National Mortgage Assoc.............................................. 6.00 10/01/28 1,960,786
10,000 Federal National Mortgage Assoc.............................................. 5.50 ** 9,628,125
8,750 U.S. Treasury Bond*.......................................................... 13.125 05/15/01 10,582,250
5,000 U.S. Treasury Bond+.......................................................... 7.25 05/15/16 6,075,550
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 10,000 U.S. Treasury Bond Strip..................................................... 0.00% 11/15/09 $ 5,674,200
4,500 U.S. Treasury Note+.......................................................... 9.125 05/15/99 4,608,584
-----------
50,993,852
-----------
TOTAL UNITED STATES............................................................................. 52,763,391
-----------
TOTAL GOVERNMENT & CORPORATE BONDS
(IDENTIFIED COST $85,102,654)................................................................... 83,789,507
-----------
SHORT-TERM INVESTMENTS (10.8%)
UNITED STATES
TIME DEPOSIT (a) (5.4%)
MAJOR BANKS
GRD 1,269,408 Bankers Trust (IDENTIFIED COST $4,285,528)................................... 11.20 11/05/98 4,517,465
-----------
GOVERNMENT AGENCY (b) (5.4%)
$ 4,600 Federal Home Loan Mortgage Corp. (AMORTIZED COST $4,599,308)................. 5.42 11/02/98 4,599,308
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $8,884,836).................................................................... 9,116,773
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $93,987,490) (c).......................................................... 110.5 % 92,906,280
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................. (10.5) (8,828,097)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 84,078,183
------ ------------
------ ------------
</TABLE>
- ---------------------
* The market value of securities pledged to cover margin requirements for
open futures contracts is $76,500.
** Security purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date; the actual principal amount
and maturity date will be determined upon settlement.
+ Some or all of these securities are segregated in connection with open
forward foreign currency contracts.
(a) Subject to withdrawal restrictions until maturity.
(b) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,638,802 and the
aggregate gross unrealized depreciation is $2,720,012, resulting in net
unrealized depreciation of $1,081,210.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998, CONTINUED
FUTURES CONTRACTS OPEN AT OCTOBER 31, 1998:
<TABLE>
<CAPTION>
UNDERLYING
DESCRIPTION, FACE
NUMBER OF DELIVERY MONTH, AMOUNT AT UNREALIZED
CONTRACTS AND YEAR VALUE LOSS
- -------------------------------------------------------------------
<C> <S> <C> <C>
U.S. Treasury Note
90 December/1998..... $ 10,317,656 $ (57,656)
-------------- --------------
-------------- --------------
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 1998:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN DELIVERY APPRECIATION
TO DELIVER EXCHANGE FOR DATE (DEPRECIATION)
- -------------------------------------------------------------------
<S> <C> <C> <C>
GBP 1,900,000 $ 3,160,840 11/09/98 $ (19,887)
GBP 1,690,000 $ 2,878,915 11/16/98 50,846
NZD 4,300,000 $ 2,115,600 11/30/98 (160,877)
NZD 9,320,000 $ 4,960,850 12/02/98 26,469
GBP 1,900,000 $ 3,176,800 12/07/98 735
NOK 15,870,000 $ 2,140,256 12/07/98 (25,804)
GBP 1,095,000 $ 1,830,665 12/08/98 328
NZD 3,700,000 $ 1,948,013 12/09/98 (11,260)
NZD 3,700,000 $ 1,948,050 12/09/98 (11,223)
$ 4,252,597 CHF 5,650,000 12/15/98 (53,081)
$ 2,510,202 ATS 28,725,000 12/21/98 (34,351)
$ 2,083,637 BEF 70,812,000 12/21/98 (11,980)
$ 3,167,681 BEF 106,302,000 12/21/98 (57,738)
$ 4,017,346 NLG 7,365,000 12/21/98 (58,279)
--------------
Net unrealized depreciation.................. $ (366,102)
--------------
--------------
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
ATS Austrian Schilling.
BEF Belgian Franc.
GBP British Pound.
DKK Danish Krone.
NLG Dutch Guilder.
GRD Greek Drachma.
ITL Italian Lira.
NZD New Zealand Dollar.
NOK Norwegian Krone.
ESP Spanish Peseta.
CHF Swiss Franc.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $93,987,490)................................................................ $92,906,280
Unrealized appreciation on open forward foreign currency contracts............................. 78,378
Cash........................................................................................... 25,127
Receivable for:
Interest................................................................................... 2,378,220
Compensated forward foreign currency contracts............................................. 57,855
Capital stock sold......................................................................... 38,038
Prepaid expenses and other assets.............................................................. 47,874
-----------
TOTAL ASSETS.............................................................................. 95,531,772
-----------
LIABILITIES:
Unrealized depreciation on open forward foreign currency contracts............................. 444,480
Payable for:
Investments purchased...................................................................... 9,810,556
Compensated forward foreign currency contracts............................................. 825,767
Capital stock repurchased.................................................................. 63,346
Variation margin........................................................................... 61,875
Plan of distribution fee................................................................... 60,387
Investment management fee.................................................................. 54,454
Accrued expenses and other payables............................................................ 132,724
-----------
TOTAL LIABILITIES......................................................................... 11,453,589
-----------
NET ASSETS................................................................................ $84,078,183
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in-capital................................................................................ $88,543,404
Net unrealized depreciation.................................................................... (1,476,283)
Accumulated undistributed net investment income................................................ 982,035
Accumulated net realized loss.................................................................. (3,970,973)
-----------
NET ASSETS................................................................................ $84,078,183
-----------
-----------
CLASS A SHARES:
Net Assets..................................................................................... $ 1,227,088
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 134,755
NET ASSET VALUE PER SHARE................................................................. $9.11
-----------
-----------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 4.44% OF NET ASSET VALUE)......................................... $9.51
-----------
-----------
CLASS B SHARES:
Net Assets..................................................................................... $81,610,993
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 8,949,878
NET ASSET VALUE PER SHARE................................................................. $9.12
-----------
-----------
CLASS C SHARES:
Net Assets..................................................................................... $234,143
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 25,697
NET ASSET VALUE PER SHARE................................................................. $9.11
-----------
-----------
CLASS D SHARES:
Net Assets..................................................................................... $1,005,959
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 110,347
NET ASSET VALUE PER SHARE................................................................. $9.12
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME................................................................................. $7,095,976
----------
EXPENSES
Plan of distribution fee (Class A shares)....................................................... 2,781
Plan of distribution fee (Class B shares)....................................................... 730,749
Plan of distribution fee (Class C shares)....................................................... 1,316
Investment management fee....................................................................... 658,757
Transfer agent fees and expenses................................................................ 135,049
Registration fees............................................................................... 89,418
Professional fees............................................................................... 74,129
Shareholder reports and notices................................................................. 56,479
Custodian fees.................................................................................. 28,322
Directors' fees and expenses.................................................................... 16,843
Other........................................................................................... 12,530
----------
TOTAL EXPENSES............................................................................. 1,806,373
----------
NET INVESTMENT INCOME...................................................................... 5,289,603
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain (loss) on:
Investments................................................................................. 1,368,087
Futures contracts........................................................................... 1,389,964
Foreign exchange transactions............................................................... (842,488)
----------
NET GAIN................................................................................... 1,915,563
----------
Net change in unrealized appreciation/depreciation on:
Investments................................................................................. 143,713
Futures contracts........................................................................... (57,656)
Translation of forward foreign currency contracts, other assets and liabilities denominated
in foreign currencies..................................................................... (265,980)
----------
NET DEPRECIATION........................................................................... (179,923)
----------
NET GAIN................................................................................... 1,735,640
----------
NET INCREASE.................................................................................... $7,025,243
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................................. $ 5,289,603 $ 6,295,763
Net realized gain...................................................... 1,915,563 2,422,462
Net change in unrealized depreciation.................................. (179,923 ) (1,657,235 )
---------------- -----------------
NET INCREASE...................................................... 7,025,243 7,060,990
---------------- -----------------
DIVIDENDS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME:
Class A shares......................................................... (103,498 ) (6,031 )
Class B shares......................................................... (6,294,099 ) (10,673,831 )
Class C shares......................................................... (10,651 ) (1,171 )
Class D shares......................................................... (33,682 ) (283 )
---------------- -----------------
TOTAL DIVIDENDS................................................... (6,441,930 ) (10,681,316 )
---------------- -----------------
Net decrease from capital stock transactions........................... (11,893,088 ) (15,013,234 )
---------------- -----------------
NET DECREASE...................................................... (11,309,775 ) (18,633,560 )
NET ASSETS:
Beginning of period.................................................... 95,387,958 114,021,518
---------------- -----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $982,035 AND
$450,900, RESPECTIVELY)............................................ $ 84,078,183 $ 95,387,958
---------------- -----------------
---------------- -----------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter World Wide Income Trust (the "Fund"), formerly Dean
Witter World Wide Income Trust, is registered under the Investment Company Act
of 1940, as amended (the "Act"), as a non-diversified, open-end management
investment company. The Fund's primary investment objective is to provide a high
level of current income and, as a secondary objective, seeks appreciation in the
value of its assets. The Fund was organized as a Massachusetts business trust on
October 14, 1988 and commenced operations on March 30, 1989. On July 28, 1997,
the Fund commenced offering three additional classes of shares, with the then
current shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
these estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) all portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (2) futures contracts
are valued at the latest sale price on the commodities exchange on which they
trade unless the Trustees determine that such price does not reflect their
market value, in which case they will be valued at fair value as determined by
the Trustees; (3) when market quotations are not readily available, including
circumstances under which it is determined by Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), formerly Dean Witter InterCapital
Inc., that sale or bid prices are not reflective of a security's market value,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the
Trustees (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); (4) certain portfolio securities may be valued by an outside
pricing service approved by the Trustees. The pricing service may utilize a
matrix system incorporating security quality, maturity and coupon as the
evaluation
11
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
model parameters, and/or research and evaluations by its staff, including review
of broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the securities valued by such pricing service;
and (5) short-term debt securities having a maturity date of more than sixty
days at time of purchase are valued on a mark-to-market basis until sixty days
prior to maturity and thereafter at amortized cost based on their value on the
61st day. Short-term debt securities having a maturity date of sixty days or
less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FUTURES CONTRACTS -- A futures contract is an agreement between two parties
to buy and sell financial instruments at a set price on a future date. Upon
entering into such a contract, the Fund is required to pledge to the broker
cash, U.S. Government securities or other liquid portfolio securities equal to
the minimum initial margin requirements of the applicable futures exchange.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract
which is known as variation margin. Such receipts or payments are recorded by
the Fund as unrealized gains or losses. Upon closing of the contract, the Fund
realizes a gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
E. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward foreign currency
contracts are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the
exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses are included in the Statement of Operations
as realized and unrealized gain/loss on foreign exchange transactions. Pursuant
to U.S. Federal income tax regulations, certain foreign exchange gains/losses
included in realized and unrealized gain/loss are included in or are a reduction
of ordinary income for
12
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
federal income tax purposes. The Fund does not isolate that portion of the
results of operations arising as a result of changes in the foreign exchange
rates from the changes in the market prices of the securities.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward foreign
currency contracts which are valued daily at the appropriate exchange rates. The
resultant unrealized exchange gains and losses are included in the Statement of
Operations as unrealized foreign currency gain or loss. The Fund records
realized gains or losses on delivery of the currency or at the time the forward
contract is extinguished (compensated) by entering into a closing transaction
prior to delivery.
G. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with the Investment Manager the
Fund pays a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.75% to the portion of daily net assets not exceeding
$250 million; 0.60% to the portion of daily net assets exceeding $250 million
but not exceeding $500 million; 0.50% to the portion of daily net assets
exceeding $500 million but not exceeding $750 million; 0.40% to the portion of
daily net assets exceeding $750 million but not exceeding $1 billion; and 0.30%
to the portion of daily net assets exceeding $1 billion.
13
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 0.85% of
the lesser of: (a) the average daily aggregate gross sales of the Class B shares
since inception of the Fund (not including reinvestment of dividend or capital
gain distributions) less the average net asset value of the Class B shares
redeemed since the Fund's inception upon which a contingent deferred sales
charge has been imposed or waived; or (b) the average daily net assets of Class
B; and (iii) Class C -- up to 0.85% of the average daily net assets of Class C.
In the case of Class A shares, amounts paid under the Plan are paid to the
Distributor for services provided. In the case of Class B and Class C shares,
amounts paid under the Plan are paid to the Distributor for (1) services
provided and the expenses borne by it and others in the distribution of the
shares of these Classes, including the payment of commissions for sales of these
Classes and incentive compensation to, and expenses of, Morgan Stanley Dean
Witter Financial Advisors and others who engage in or support distribution of
the shares or who service shareholder accounts, including overhead and telephone
expenses; (2) printing and distribution of prospectuses and reports used in
connection with the offering of these shares to other than current shareholders;
and (3) preparation, printing and distribution of sales literature and
advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan, in the case of Class B shares, to compensate Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and Distributor,
and other selected broker-dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by
14
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
investors upon redemption of Class B shares. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan and the proceeds of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the Plan
is terminated, the Trustees will consider at that time the manner in which to
treat such expenses. The Distributor has advised the Fund that such excess
amounts, including carrying charges, totaled $8,425,068, at October 31, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 0.85% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended October 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.23% and
0.85%, respectively.
The Distributor has informed the Fund that for the year ended October 31, 1998,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares of $44,911 and received $232 in front-end sales charges
from sales of the Fund's Class A shares. The respective shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended October 31, 1998 aggregated
$243,684,179 and $241,712,753, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $115,360,708 and
$135,298,741, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At October 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $1,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended October 31, 1998 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$2,848. At October 31, 1998, the Fund had an accrued pension liability of
$48,382 which is included in accrued expenses in the Statement of Assets and
Liabilities.
15
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997*
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 362,853 $ 3,265,836 80,739 $ 714,181
Reinvestment of dividends........................................ 5,632 49,638 237 2,107
Redeemed......................................................... (309,381) (2,779,713) (5,325) (47,905)
----------- -------------- ----------- ------------
Net increase - Class A........................................... 59,104 535,761 75,651 668,383
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 3,566,324 31,772,971 3,523,435 31,673,600
Reinvestment of dividends........................................ 429,255 3,787,888 689,236 6,224,070
Redeemed......................................................... (5,520,553) (49,041,324) (5,959,324) (53,726,739)
----------- -------------- ----------- ------------
Net decrease - Class B........................................... (1,524,974) (13,480,465) (1,746,653) (15,829,069)
----------- -------------- ----------- ------------
CLASS C SHARES
Sold............................................................. 12,490 110,678 12,172 107,627
Reinvestment of dividends........................................ 1,027 9,061 130 1,156
Redeemed......................................................... (122) (1,111) -- --
----------- -------------- ----------- ------------
Net increase - Class C........................................... 13,395 118,628 12,302 108,783
----------- -------------- ----------- ------------
CLASS D SHARES
Sold............................................................. 109,596 964,530 4,286 38,458
Reinvestment of dividends........................................ 1,844 16,303 24 211
Redeemed......................................................... (5,403) (47,845) -- --
----------- -------------- ----------- ------------
Net increase - Class D........................................... 106,037 932,988 4,310 38,669
----------- -------------- ----------- ------------
Net decrease in Fund............................................. (1,346,438) $ (11,893,088) (1,654,390) $(15,013,234)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
- ---------------------
* For Class A, C and D shares, for the period July 28, 1997 (issue date)
through October 31, 1997.
6. FEDERAL INCOME TAX STATUS
During the year ended October 31, 1998, the Fund utilized approximately
$1,167,000 of its net capital loss carryover. At October 31, 1998, the Fund had
a net capital loss carryover of approximately $4,160,000 which will be available
through October 31, 2002 to offset future capital gains to the extent provided
by regulations.
As of October 31, 1998, the Fund had temporary book/tax differences primarily
attributable to the mark-to-market of open forward foreign currency exchange
contracts and compensated forward foreign currency exchange contracts and
permanent book/tax differences attributable to foreign
16
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
currency gains. To reflect reclassifications arising from the permanent
differences, accumulated net realized loss was charged and accumulated
undistributed net investment income was credited $1,683,462.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage its foreign currency exposure or to sell, for a fixed amount of
U.S. dollars or other currency, the amount of foreign currency approximating the
value of some or all of its holdings denominated in such foreign currency or an
amount of foreign currency other than the currency in which the securities to be
hedged are denominated approximating the value of some or all of its holdings to
be hedged. Additionally, when the Investment Manager anticipates purchasing
securities at some time in the future, the Fund may enter into a forward
contract to purchase an amount of currency equal to some or all the value of the
anticipated purchase for a fixed amount of U.S. dollars or other currency.
To hedge against adverse interest rate, foreign currency and market risks, the
Fund may enter into written options on interest rate futures and interest rate
futures contracts ("derivative investments").
Forward contracts and derivative instruments involve elements of market risk in
excess of the amount reflected in the Statement of Assets and Liabilities. The
Fund bears the risk of an unfavorable change in the foreign exchange rates
underlying the forward contracts. Risks may also arise upon entering into these
contracts from the potential inability of the counterparties to meet the terms
of their contracts.
At October 31, 1998, there were outstanding forward contracts used to facilitate
settlement of foreign currency denominated portfolio transactions and to manage
foreign currency exposure.
8. ACQUISITION OF MORGAN STANLEY DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
On October 29, 1998, the Trustees of the Fund and the Board of Directors of
Morgan Stanley Dean Witter Global Short-Term Income Fund Inc. ("Global
Short-Term") approved a reorganization plan ("the Plan") whereby Global
Short-Term would be merged into the Fund. The Plan is subject to the consent of
Global Short-Term's shareholders. If approved, the assets of Global Short-Term
would be combined with the assets of the Fund and shareholders of Global
Short-Term would become Class A shareholders of the Fund, receiving Class A
shares of the Fund equal to the value of their holdings in the Fund.
17
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31
-------------------------------------------------------
1998++ 1997*++ 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 9.03 $ 9.33 $ 9.08 $ 8.55 $ 9.39
----- --------- --------- ----- ---------
Net investment
income.......... 0.53 0.55 0.60 0.55 0.55
Net realized and
unrealized gain
(loss).......... 0.20 0.07 0.48 0.48 (0.92)
----- --------- --------- ----- ---------
Total from
investment
operations...... 0.73 0.62 1.08 1.03 (0.37)
----- --------- --------- ----- ---------
Less dividends
and
distributions
from:
Net investment
income........ (0.64) (0.92) (0.83) (0.50) (0.22)
Paid-in-capital... -- -- -- -- (0.25)
----- --------- --------- ----- ---------
Total dividends
and
distributions... (0.64) (0.92) (0.83) (0.50) (0.47)
----- --------- --------- ----- ---------
Net asset value,
end of period... $ 9.12 $ 9.03 $ 9.33 $ 9.08 $ 8.55
----- --------- --------- ----- ---------
----- --------- --------- ----- ---------
TOTAL INVESTMENT
RETURN+.......... 8.61% 7.05% 12.60% 12.45% (3.99)%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 2.07%(1) 2.02% 1.96% 1.93% 1.91%
Net investment
income.......... 6.01%(1) 6.07% 6.39% 6.21% 5.87%
SUPPLEMENTAL
DATA:
Net assets, end
of period, in
thousands....... $81,611 $94,556 $114,022 $138,165 $179,563
Portfolio
turnover rate... 309% 345% 263% 254% 229%
</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.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES++
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.02 $ 8.97
----- -----
Net investment income................................................. 0.59 0.15
Net realized and unrealized gain...................................... 0.20 0.05
----- -----
Total from investment operations...................................... 0.79 0.20
----- -----
Less dividends from net investment income............................. (0.70) (0.15)
----- -----
Net asset value, end of period........................................ $ 9.11 $ 9.02
----- -----
----- -----
TOTAL INVESTMENT RETURN+.............................................. 9.16% 2.27%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.45%(3) 1.46%(2)
Net investment income................................................. 6.63%(3) 6.69%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $1,227 $682
Portfolio turnover rate............................................... 309% 345%
</TABLE>
<TABLE>
<S> <C> <C>
CLASS C SHARES++
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.02 $ 8.97
----- -----
Net investment income................................................. 0.53 0.14
Net realized and unrealized gain...................................... 0.20 0.05
----- -----
Total from investment operations...................................... 0.73 0.19
----- -----
Less dividends from net investment income............................. (0.64) (0.14)
----- -----
Net asset value, end of period........................................ $ 9.11 $ 9.02
----- -----
----- -----
TOTAL INVESTMENT RETURN+.............................................. 8.62% 2.12%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 2.07%(3) 2.00%(2)
Net investment income................................................. 6.01%(3) 5.89%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $234 $111
Portfolio turnover rate............................................... 309% 345%
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES++
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.03 $ 8.97
----- -----
Net investment income................................................. 0.72 0.16
Net realized and unrealized gain...................................... 0.09 0.05
----- -----
Total from investment operations...................................... 0.81 0.21
----- -----
Less dividends from net investment income............................. (0.72) (0.15)
----- -----
Net asset value, end of period........................................ $ 9.12 $ 9.03
----- -----
----- -----
TOTAL INVESTMENT RETURN+.............................................. 9.41% 2.44%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.22%(3) 1.16%(2)
Net investment income................................................. 6.86%(3) 6.83%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $1,006 $39
Portfolio turnover rate............................................... 309% 345%
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME
TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter World
Wide Income Trust (the "Fund"), formerly Dean Witter World Wide Income Trust, at
October 31, 1998, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
NOVEMBER 20, 1998
21
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Rajesh K. Gupta
Vice President
Peter J. Seeley
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
WORLD WIDE
INCOME TRUST
[PHOTO]
ANNUAL REPORT
OCTOBER 31, 1998
