<PAGE>
PROSPECTUS - MAY 1, 1999
Morgan Stanley Dean Witter
NEW YORK MUNICIPAL MONEY MARKET TRUST
[COVER PHOTO]
A MONEY MARKET FUND THAT SEEKS TO PROVIDE
AS HIGH A LEVEL OF DAILY INCOME EXEMPT FROM
FEDERAL AND NEW YORK INCOME TAX AS IS
CONSISTENT WITH STABILITY OF PRINCIPAL AND LIQUIDITY
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
CONTENTS
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The Fund Investment Objective.................................. 1
Principal Investment Strategies....................... 1
Principal Risks....................................... 2
Past Performance...................................... 3
Fees and Expenses..................................... 4
Fund Management....................................... 5
Shareholder Information Pricing Fund Shares................................... 6
How to Buy Shares..................................... 6
How to Exchange Shares................................ 8
How to Sell Shares.................................... 10
Distributions......................................... 12
Tax Consequences...................................... 13
Financial Highlights ...................................................... 14
Our Family of Funds ...................................................... Inside Back Cover
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUND.
PLEASE READ IT CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.
</TABLE>
FUND CATEGORY
---------------------------
/ / Growth
/ / Growth and Income
/ / Income
/X/ MONEY MARKET
<PAGE>
(SIDEBAR)
MONEY MARKET
A MUTUAL FUND HAVING THE GOAL TO SELECT SECURITIES TO PROVIDE CURRENT INCOME
WHILE SEEKING TO MAINTAIN A STABLE SHARE PRICE OF $1.00.
YIELD
THE FUND'S YIELD REFLECTS THE ACTUAL INCOME THE FUND PAYS TO YOU EXPRESSED AS A
PERCENTAGE OF THE FUND'S SHARE PRICE. BECAUSE THE FUND'S INCOME FROM ITS
PORTFOLIO SECURITIES WILL FLUCTUATE, THE INCOME IT IN TURN DISTRIBUTES TO YOU
AND THE FUND'S YIELD WILL VARY.
(END SIDEBAR)
THE FUND
ICON INVESTMENT OBJECTIVE
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Morgan Stanley Dean Witter New York Municipal Money Market Trust (the
"Fund") is a money market fund that seeks to provide as high a level
of daily income exempt from federal and New York income tax as is
consistent with stability of principal and liquidity. There is no
guarantee that the Fund will achieve this objective.
ICON PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund will invest in high quality, short-term securities that are normally
municipal obligations that pay interest exempt from federal and New York income
taxes. The Fund's "Investment Manager," Morgan Stanley Dean Witter Advisors
Inc., seeks to maintain the Fund's share price at $1.00. The share price
remaining stable at $1.00 means that the Fund would preserve the principal value
of your investment.
The Investment Manager generally invests substantially all of the Fund's assets
in New York municipal obligations. The interest on these investments is exempt
from New York state, city and federal income tax. The Investment Manager may at
times purchase securities that pay interest that is exempt from federal income
tax but not from New York state or city taxes. The Fund may invest any amount of
its assets in securities that pay interest income subject to the "alternative
minimum tax," and some taxpayers may have to pay tax on a Fund distribution of
this income; see the "Tax Consequences" section of this PROSPECTUS for more
details.
Municipal obligations are securities issued by state and local governments, and
their agencies. These securities typically are "general obligation" or "revenue"
bonds, notes or commercial paper. The general obligation securities are secured
by the issuer's faith and credit, as well as its taxing power, for payment of
principal and interest. Revenue bonds, however, are generally payable from a
specific revenue source. They are issued for a wide variety of projects such as
financing public utilities, housing units, airports and highways, and schools.
Included within the revenue bonds category are participations in lease
obligations and installment contracts of municipalities.
The Fund has fundamental policies of investing at least eighty percent of its
assets in tax-exempt municipal obligations and sixty-five percent in New York
tax-exempt municipal obligations; these securities nevertheless may be subject
to an "alternative
1
<PAGE>
minimum tax." The fundamental policies may not be changed without shareholder
approval. While the Fund is classified as a "non-diversified" mutual fund, it
will comply with the federal diversification requirements that apply to money
market funds.
ICON PRINCIPAL RISKS
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CREDIT AND INTEREST RATE RISKS. A principal risk of investing in the Fund is
associated with its municipal investments, particularly its concentration in
municipal obligations of a single state. Municipal obligations, as with all debt
securities, are subject to two types of risks: credit risk and interest rate
risk.
Credit risk refers to the possibility that the issuer of a security will be
unable to make interest payments and repay the principal on its debt. However,
unlike most fixed-income mutual funds, the Fund is subject to the added credit
risk of concentrating its investments in a single state -- New York -- and its
municipalities. Because the Fund concentrates its investments in securities
issued by New York state and local governments and government authorities, the
Fund could be affected by political, economic and regulatory developments
concerning these issuers. Should any difficulties develop concerning New York
issuers ability to pay principal and/or interest on their debt obligations; the
Fund's value and yield could be adversely affected.
Interest rate risk, another risk of debt securities, refers to fluctuations in
the value of a fixed-income security resulting from changes in the general level
of interest rates.
The Investment Manager, however, actively manages the Fund's assets to reduce
the risk of losing any principal investment as a result of credit or interest
rate risks. The Fund's assets are reviewed to maintain or improve
creditworthiness. In addition, federal regulations require money market funds,
such as the Fund, to invest only in debt obligations of high quality and
short-term maturities.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the FDIC or any other government agency. Although the Fund seeks
to preserve the value of your investment at $1.00 per share, if it is unable to
do so, it is possible to lose money by investing in the Fund.
YEAR 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of the Investment Manager, the Fund's
other service providers and the markets and individual and governmental issuers
in which the Fund invests do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the Fund, the Investment Manager and
affiliates are working hard to avoid any problems and to obtain assurances from
their service providers that they are taking similar steps.
In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, governmental data processing errors may result in overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial. Accordingly, the Fund's investments may be
adversely affected.
2
<PAGE>
(SIDEBAR)
ANNUAL TOTAL RETURNS
THIS CHART SHOWS HOW THE PERFORMANCE OF THE FUND'S SHARES HAS VARIED FROM YEAR
TO YEAR OVER THE PAST 8 CALENDAR YEARS.
AVERAGE ANNUAL
TOTAL RETURNS
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL RETURNS WITH THOSE OF A BROAD
MEASURE OF MARKET PERFORMANCE OVER TIME.
(END SIDEBAR)
ICON PAST PERFORMANCE
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The bar chart and table below provide some indication of the risks of
investing in the Fund. The Fund's past performance does not indicate
how the Fund will perform in the future. For the Fund's most recent
7-day annualized yield, you may call (800) 869-NEWS.
ANNUAL TOTAL RETURNS - CALENDAR YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
91 3.57%
92 1.86%
93 1.36%
94 1.78%
95 2.84%
96 2.53%
97 2.68%
98 2.53%
</TABLE>
During the periods shown in the bar chart, the highest return for a calendar
quarter was 0.90% (quarter ended 3/31/91) and the lowest return for a calendar
quarter was 0.32% (quarter ended 3/31/93). Year-to-date total return as of March
31, 1999 was 0.50%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED THE 1998 CALENDAR YEAR)
- ----------------------------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR PAST 5 YEARS (SINCE 3/20/90)
<S> <C> <C> <C>
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NY Municipal Money Market 2.53% 2.47% 2.71%
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Lipper New York Tax-Exempt
Money Market Index(1) 2.84% 2.89% 3.05%
- ----------------------------------------------------------------------------------
</TABLE>
1 The Lipper New York Tax-Exempt Money Market Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper New York Tax-Exempt Money Market Funds objective. The Index,
which is adjusted for capital gain distributions and income dividends, is
unmanaged and should not be considered an investment. There are currently
30 funds represented in this Index.
3
<PAGE>
(SIDEBAR)
ANNUAL FUND
OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE FUND'S ASSETS AND ARE BASED ON EXPENSES
PAID FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.
(END SIDEBAR)
ICON FEES AND EXPENSES
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The Fund is a no-load fund. The Fund does not impose any sales charges and does
not charge account or exchange fees. The table below briefly describes the
Fund's fees and expenses that you may pay if you buy and hold shares of the
Fund.
<TABLE>
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ANNUAL FUND OPERATING
EXPENSES
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Management Fee 0.50%
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Distribution and service (12b-1) fees 0.10%
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Other expenses 0.27%
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Total annual Fund operating expenses 0.87%
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</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, the table below shows your costs at
the end of each period based on these assumptions.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
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$89 $278 $483 $1,074
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</TABLE>
4
<PAGE>
(SIDEBAR)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
THE INVESTMENT MANAGER IS WIDELY RECOGNIZED AS A LEADER IN THE MUTUAL FUND
INDUSTRY AND TOGETHER WITH MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC., ITS
WHOLLY-OWNED SUBSIDIARY, HAS MORE THAN $129 BILLION IN ASSETS UNDER MANAGEMENT
OR ADMINISTRATION AS OF MARCH 31, 1999.
(END SIDEBAR)
ICON FUND MANAGEMENT
- --------------------------------------------------------------------------------
The Fund has retained the Investment Manager - Morgan Stanley Dean Witter
Advisors Inc. - to provide administrative services, manage its business affairs
and invest its assets, including the placing of orders for the purchase and sale
of portfolio securities. The Investment Manager is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services. Its main business office is
located at Two World Trade Center, New York, NY 10048.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund, and for Fund
expenses assumed by the Investment Manager. The fee is based on the Fund's
average daily net assets. For the fiscal year ended December 31, 1998 the Fund
accrued total compensation to the Investment Manager amounting to 0.50% of the
Fund's average daily net assets.
5
<PAGE>
(SIDEBAR)
CONTACTING A FINANCIAL ADVISOR
IF YOU ARE NEW TO THE MORGAN STANLEY DEAN WITTER FAMILY OF FUNDS AND WOULD LIKE
TO CONTACT A FINANCIAL ADVISOR, CALL (800) THE-DEAN FOR THE TELEPHONE NUMBER OF
THE MORGAN STANLEY DEAN WITTER OFFICE NEAREST YOU.
YOU MAY ALSO ACCESS OUR OFFICE LOCATOR ON OUR INTERNET SITE AT:
www.deanwitter.com/funds
(END SIDEBAR)
SHAREHOLDER INFORMATION
ICON PRICING FUND SHARES
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The price of Fund shares, called "net asset value," is based on the
amortized cost of the Fund's portfolio securities. The amortized cost
valuation method involves valuing a debt obligation in reference to
its cost, rather than market forces.
The net asset value per share of the Fund is determined once daily at 4:00 p.m.
Eastern time on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York Stock Exchange is
closed.
ICON HOW TO BUY SHARES
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You may open a new account to buy Fund shares or buy additional
Fund shares for an existing account in several ways. When you buy
Fund shares, the shares are purchased at the next share price
calculated after we receive your investment in proper form and
accompanied by federal or other immediately available funds. You
begin earning dividends the business day after the shares are
purchased. We reserve the right to reject any order for the
purchase of Fund shares.
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
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MINIMUM INVESTMENT
--------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
<S> <C> <C>
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Regular Accounts
$5,000 $ 100
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EASYINVEST-SM-
(Automatically from your checking or
savings account)
not available $ 100
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</TABLE>
There is no minimum investment amount if you purchase Fund shares through: (1)
the Investment Manager's mutual fund asset allocation plan, (2) a program,
approved by the Fund's distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
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Contact Your NEW ACCOUNTS AND SUBSEQUENT INVESTMENTS
Financial Advisor You may buy Fund shares by contacting your Morgan Stanley
Dean Witter Financial Advisor or other authorized financial
ICON representative. Your Financial Advisor will assist you,
step-by-step, with the procedures to invest in the Fund.
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</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
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By Mail NEW ACCOUNTS
To open a new account to buy Fund shares:
ICON
- Complete and sign the attached Application.
- Make out a check for the investment amount to: Morgan
Stanley Dean Witter New York Municipal Money Market Trust.
- Mail the Application and check to Morgan Stanley Dean
Witter Trust FSB at P.O. Box 1040, Jersey City, New Jersey
07303.
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SUBSEQUENT INVESTMENTS
To buy additional shares for an existing Fund account:
- Write a "letter of instruction" to the Fund specifying the
name(s) on the account, the account number and the social
security or tax identification number, and the additional
investment amount. The letter must be signed by the
account owner(s).
- Make out a check for the investment amount to: Morgan
Stanley Dean Witter New York Municipal Money Market Trust.
- Mail the letter and check to Morgan Stanley Dean Witter
Trust FSB at the same address as for new accounts.
- --------------------------------------------------------------------------------
By wire NEW ACCOUNTS
To open a new account to buy Fund shares:
ICON
- Mail the attached Application, completed and signed, to
Morgan Stanley Dean Witter Trust FSB at P.O. Box 1040,
Jersey City, New Jersey 07303.
- Before sending instructions by wire, call us at (800)
869-NEWS advising us of your purchase and to confirm we have
received your Application.
- Wire the instructions specifying the name of the Fund and
your account number, along with the additional investment
amount, to The Bank of New York, for credit to the account
of Morgan Stanley Dean Witter Trust FSB, Harborside
Financial Center, Plaza Two, Jersey City, New Jersey
07303, Account No. 8900188413.
(When you buy Fund shares, wire purchases received by Morgan
Stanley Dean Witter FSB prior to 12:00 noon Eastern time are
normally effective that day and purchases received after
12:00 noon are normally effective the next business day.)
------------------------------------------------------------
SUBSEQUENT INVESTMENTS
To buy additional shares for an existing Fund account:
- Before sending instructions by wire, call us at (800)
869-NEWS advising us of your purchase.
- Wire the instructions specifying the name of the Fund and
your account number, along with the investment amount, to
The Bank of New York, for credit to the account of Morgan
Stanley Dean Witter Trust FSB in the same manner as
opening an account.
(Also, when you buy additional Fund shares, wire purchases
received by Morgan Stanley Dean Witter FSB prior to 12:00
noon Eastern time are normally effective that day and
purchases received after 12:00 noon are normally effective
the next business day.)
- --------------------------------------------------------------------------------
EASYINVEST-SM- NEW ACCOUNTS
(Automatically This program is not available to open a new Fund account or
from your a new account of another Money Market Fund.
checking or ------------------------------------------------------------
savings SUBSEQUENT INVESTMENTS
account) EASYINVEST-SM- is a purchase plan that allows you to
transfer money automatically from your checking or savings
account to an existing Fund account on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean
Witter Financial Advisor or other authorized financial
representative for further information about this
ICON
service.
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
ADDITIONAL PURCHASE INFORMATION. If you are a customer of Dean Witter Reynolds
or another authorized dealer of Fund shares, you may upon request: (a) have the
proceeds from the sale of listed securities invested in Fund shares the day
after you receive the proceeds; and (b) pay for the purchase of certain listed
securities by automatic sale of Fund shares that you own. In addition, if you
are a customer of Dean Witter Reynolds or another authorized dealer of Fund
shares, you may have cash balances in your securities account (which do not
exceed $5,000) automatically invested in shares of the Fund on a weekly basis.
PLAN OF DISTRIBUTION. The Fund has adopted a Plan of Distribution in accordance
with Rule 12b-1 under the Investment Company Act of 1940. The Plan allows the
Fund to pay distribution fees for the sale and distribution of these shares. It
also allows the Fund to pay for services to shareholders. Because these fees are
paid out of the Fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
ICON HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may only exchange shares of the Fund for shares
of other continuously offered Morgan Stanley Dean Witter Funds if the Fund
shares were acquired in an exchange of shares initially purchased in a
Multi-Class Fund or an FSC Fund (subject to a front-end sales charge). In that
case, the shares may be subsequently re-exchanged for shares of the same Class
of any Multi-Class Fund or FSC Fund or for shares of another Money Market Fund,
No-Load Fund or Short-Term U.S. Treasury Trust. Of course, if an exchange is not
permitted, you may sell shares of the Fund and buy another Fund's shares with
the proceeds.
See the inside back cover of this PROSPECTUS for each Morgan Stanley Dean Witter
Fund's designation as a Multi-Class Fund, FSC Fund, No-Load Fund or Money Market
Fund. If a Morgan Stanley Dean Witter Fund is not listed, consult the inside
back cover of that Fund's PROSPECTUS for its designation. For purposes of
exchanges, shares of FSC Funds are treated as Class A shares of a Multi-Class
Fund.
An exchange privilege account also may be maintained for you if you acquired
Fund shares in exchange for shares of various TCW/DW Funds.
The current PROSPECTUS for each Fund describes its investment objective(s),
policies and investment minimums, and should be read before investing.
EXCHANGE PROCEDURES. You can process an exchange by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Otherwise, you must forward an exchange privilege authorization
form to the Fund's transfer agent - Morgan Stanley Dean Witter Trust FSB - and
then write the transfer agent or call (800) 869-NEWS to place an exchange order.
You can obtain an exchange privilege authorization form by contacting your
Financial Advisor or other authorized financial representative or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be processed
until we have received all applicable share certificates.
8
<PAGE>
An exchange to any Morgan Stanley Dean Witter Fund (except a Money Market Fund)
is made on the basis of the next calculated net asset values of the Funds
involved after the exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next calculated net asset
value and the Money Market Fund's shares are purchased at their net asset value
on the following business day.
The Fund may terminate or revise the exchange privilege upon required notice.
Certain services normally available to shareholders of Money Market Funds,
including the check writing privilege, are not available for Money Market Fund
shares you acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley Dean Witter
Trust FSB, we will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. These procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number. Telephone
instructions also may be recorded.
Telephone instructions will be accepted if received by the Fund's transfer agent
between 9:00 a.m. and 4:00 p.m. Eastern time on any day the New York Stock
Exchange is open for business. During periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be difficult
to implement, although this has not been the case with the Fund in the past.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the exchange of such shares.
EXCHANGING SHARES OF ANOTHER FUND SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE
("CDSC"). There are special considerations when you exchange shares subject to a
CDSC of another Morgan Stanley Dean Witter Fund for shares of the Fund. When
determining the length of time you held the shares and the corresponding CDSC
rate, any period (starting at the end of the month) during which you held shares
of the Fund WILL NOT BE COUNTED. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into the Fund.
Nevertheless, if shares subject to a CDSC are exchanged for shares of the Fund,
you will receive a credit when you sell the shares equal to the distribution
(12b-1) fees, if any, you paid on those shares while in the Fund up to the
amount of any applicable CDSC. See the PROSPECTUS of the Fund that charges the
CDSC for more details.
FREQUENT EXCHANGES. A pattern of frequent exchanges may result in the Fund
limiting or prohibiting, at its discretion, additional purchases and/or
exchanges. The Fund will notify you in advance of limiting your exchange
privileges.
For further information regarding exchange privileges, you should contact your
Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.
9
<PAGE>
ICON HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell some or all of your Fund shares at any time. Your shares
will be sold at the next share price calculated after we receive your
order to sell as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
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Contact your To sell your shares, simply call your Morgan Stanley Dean Witter Financial Advisor or
Financial Advisor other authorized financial representative.
------------------------------------------------------------------------------------------
[ICON]
Payment will be sent to the address to which the account is registered or deposited in
your brokerage account.
- --------------------------------------------------------------------------------------------------------------
Check-writing You may order a supply of blank checks by requesting them on the investment application or
Option by contacting your Morgan Stanley Dean Witter Financial Advisor.
------------------------------------------------------------------------------------------
[ICON]
Checks may be written in any amount not less than $500. You must sign checks exactly as
their shares are registered. If the account is a joint account, the check may contain one
signature unless the joint owners have specified on an investment application that all
owners are required to sign checks. Only accounts in which no share certificates have been
issued are eligible for the checkwriting privilege.
------------------------------------------------------------------------------------------
Payment of check proceeds normally will be made on the next business day after we receive
your check in proper form. Shares purchased by check (including a certified or bank
cashier's check) are not normally available to cover redemption checks until fifteen days
after Morgan Stanley Dean Witter Trust FSB receives the check used for investment. A check
will not be honored in an amount exceeding the value of the account at the time the check
is presented for payment.
- --------------------------------------------------------------------------------------------------------------
By Letter You may also sell your shares by writing a "letter of instruction" that includes:
- your account number;
- the dollar amount or the number of shares you wish to sell; and
[ICON]
- the signature of each owner as it appears on the account.
------------------------------------------------------------------------------------------
If you are requesting payment to anyone other than the registered owner(s) or that payment
be sent to any address other than the address of the registered owner(s) or pre-designated
bank account, you will need a signature guarantee. You can obtain a signature guarantee
from an eligible guarantor acceptable to Morgan Stanley Dean Witter Trust FSB. (You should
contact Morgan Stanley Dean Witter Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.) A notary public CANNOT provide
a signature guarantee. Additional documentation may be required for shares held by a
corporation, partnership, trustee or executor.
------------------------------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at P.O. Box 983, Jersey City, NJ
07303. If you hold share certificates, you must return the certificates, along with the
letter and any required additional documentation.
------------------------------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account is registered, or
otherwise according to your instructions.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
- --------------------------------------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter Family of Funds has a total
Withdrawal market value of at least $10,000, you may elect to withdraw amounts of $25 or more, or in
Plan any whole percentage of a Fund's balance (provided the amount is at least $25), on a
monthly, quarterly, semi-annual or annual basis, from any Fund with a balance of at least
$1,000. Each time you add a Fund to the plan, you must meet the plan requirements.
------------------------------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan Stanley Dean Witter
Financial Advisor or call (800) 869-NEWS. You may terminate or suspend your plan at any
time. Please remember that withdrawals from the plan are sales of shares, not Fund
"distributions," and ultimately may exhaust your account balance. The Fund may terminate
or revise the plan at any time.
------------------------------------------------------------------------------------------
When you sell Fund shares through the Systematic Withdrawal Plan, the shares may be
subject to a contingent deferred sales charge ("CDSC") if they were obtained in exchange
for shares subject to a CDSC of another Morgan Stanley Dean Witter Fund. The CDSC,
however, will be waived in an amount up to 12% annually of the Fund's value, although Fund
shares with no CDSC will be sold first, followed by those with the lowest CDSC. As such,
the waiver benefit will be reduced by the amount of your shares that are not subject to a
CDSC. See the PROSPECTUS of the Fund that charges the CDSC for more details.
------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
By Telephone You may also sell your shares by calling Morgan Stanley Dean Witter Trust FSB at (800)
or Wire 869-NEWS or by sending wire instructions to Morgan Stanley Dean Witter Trust FSB at Telex
No. 125076. A check will be mailed to the name(s) and address in which the account is
[ICON] registered or, for amounts of $1,000 or more, you may request a wire transfer to the bank
account designated in the application. If you hold share certificates in your
[ICON]
account, you are not eligible for wire redemptions.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
PAYMENT FOR SOLD SHARES. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.
Payment may be postponed or the right to sell your shares suspended under
unusual circumstances. If you request to sell shares that were recently
purchased by check, payment of the sale proceeds may be delayed for the minimum
time needed to verify that the check has been honored (not more than fifteen
days from the time we receive the check).
INVOLUNTARY SALES. The Fund reserves the right, on sixty days' notice, to sell
the shares of any shareholder whose shares, due to sales by the shareholder,
have a value below $1,000, or in the case of an account opened through
EASYINVEST -SM-, if after 12 months the shareholder has invested less than
$5,000 in the account.
However, before the Fund sells your shares in this manner, we will notify you
and allow you sixty days to make an additional investment in an amount that will
increase the value of your account to at least the required amount before the
sale is processed.
11
<PAGE>
(SIDEBAR)
TARGETED DIVIDENDS-SM-
YOU MAY SELECT TO HAVE YOUR FUND DISTRIBUTIONS AUTOMATICALLY INVESTED IN ANOTHER
MORGAN STANLEY DEAN WITTER FUND THAT YOU OWN. CONTACT YOUR MORGAN STANLEY DEAN
WITTER FINANCIAL ADVISOR FOR FURTHER INFORMATION ABOUT THIS SERVICE.
(END SIDEBAR)
MONEY MARKET FUND AUTOMATIC SALE PROCEDURES. If you maintain a brokerage account
with Dean Witter Reynolds or another authorized dealer of Fund shares, you may
elect to have your Fund shares automatically sold from your account to satisfy
amounts you owe as a result of purchasing securities or other transactions in
your brokerage account.
If you elect to participate by notifying Dean Witter Reynolds or another
authorized dealer of Fund shares, your brokerage account will be scanned each
business day prior to the close of business (4:00 p.m. Eastern time). After any
cash balances in the account are applied, a sufficient number of Fund shares may
be sold to satisfy any amounts you are obligated to pay to Dean Witter Reynolds
or another authorized dealer of fund shares. Sales will be effected on the
business day before the date you are obligated to make payment, and Dean Witter
Reynolds or another authorized dealer of Fund shares will receive the sale
proceeds on the following day.
EASYINVEST -SM- - AUTOMATIC REDEMPTION. You may invest in shares of certain
other Morgan Stanley Dean Witter Funds by subscribing to EASYINVEST -SM-, AN
AUTOMATIC PURCHASE PLAN THAT PROVIDES FOR THE AUTOMATIC INVESTMENT OF ANY AMOUNT
FROM $100 TO $5,000 IN SHARES OF THE SPECIFIED FUND. UNDER EASYINVEST -SM-, YOU
MAY DIRECT THAT A SUFFICIENT NUMBER OF SHARES OF THE FUND BE AUTOMATICALLY SOLD
AND THE PROCEEDS TRANSFERRED TO MORGAN STANLEY DEAN WITTER TRUST FSB, ON A
SEMI-MONTHLY, MONTHLY OR QUARTERLY BASIS, FOR INVESTMENT IN SHARES OF THE
SPECIFIED FUND. SALES OF YOUR FUND SHARES WILL BE MADE ON THE BUSINESS DAY
PRECEDING THE INVESTMENT DATE AND MORGAN STANLEY DEAN WITTER TRUST FSB WILL
RECEIVE THE PROCEEDS FOR INVESTMENT ON THE DAY FOLLOWING THE SALE DATE.
MARGIN ACCOUNTS. Certain restrictions may apply to Fund shares pledged in margin
accounts with Dean Witter Reynolds or another authorized broker-dealer of Fund
shares. If you hold Fund shares in this manner, please contact your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative for more details.
ICON DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund passes substantially all of its earnings along to its investors as
"distributions." The Fund earns interest from fixed-income investments. These
amounts are passed along to Fund shareholders as "income dividend
distributions." The Fund realizes capital gains whenever it sells securities for
a higher price than it paid for them. These amounts may be passed along as
"capital gain distributions;" the Investment Manager does not anticipate that
there will be significant capital gain distributions.
The Fund declares income dividends, payable on each day the New York Stock
Exchange is open for business, of all of its daily net income to shareholders of
record as of the close of business the preceding business day. Capital gains, if
any, are distributed periodically.
12
<PAGE>
Distributions are reinvested automatically in additional shares of the Fund
(rounded to the last 1/100 of a share) and automatically credited to your
account unless you request in writing that distributions be paid in cash. If you
elect the cash option, the Fund will reinvest the additional shares and credit
your account during the month, then redeem the credited amount no later than the
last business day of the month, and mail a check to you no later than seven
business days after the end of the month. No interest will accrue on uncashed
checks. If you wish to change how your distributions are paid, your request
should be received by the Fund's transfer agent, Morgan Stanley Dean Witter
Trust FSB, at least five business days prior to the record date of the
distributions.
ICON TAX CONSEQUENCES
- --------------------------------------------------------------------------------
As with any investment, you should consider how your Fund investment
will be taxed. The tax information in this PROSPECTUS is provided as
general information. You should consult your own tax professional
about the tax consequences of an investment in the Fund.
Your income dividend distributions are exempt from federal and New York state
and city income taxes -- to the extent they are derived from New York municipal
obligations. Income derived from other portfolio securities may be subject to
federal, state and/or local income taxes.
Income derived from some municipal securities is subject to the federal
"alternative minimum tax." Certain tax-exempt securities whose proceeds are used
to finance private, for-profit organizations are subject to this special tax
system that ensures that individuals pay at least some federal taxes. Although
interest on these securities is generally exempt from federal income tax, some
taxpayers who have many tax deductions or exemptions nevertheless may have to
pay tax on the income.
If the Fund makes any capital gain distributions, those distributions will
normally be subject to federal, New York state and New York City income tax when
they are paid, whether you take them in cash or reinvest them in Fund shares.
Any short-term capital gain distributions are taxable to you as ordinary income.
Any long-term capital gain distributions are taxable to you as long-term capital
gains, no matter how long you have owned shares in the Fund.
Every January, you will be sent a statement (IRS Form 1099-DIV) showing the
distributions paid to you in the previous year. The statement provides full
information on your dividends and capital gains for tax purposes.
When you open your Fund account, you should provide your social security or tax
identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax of
31% on taxable distributions and sale proceeds. Any withheld amount would be
sent to the IRS as an advance tax payment.
13
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 fiscal years of the Fund. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost on
an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the annual report,
which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.025 0.026 0.025 0.028 0.018
Less dividends from net investment income (0.025) (0.026) (0.025) (0.028) (0.018)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 2.53% 2.68% 2.53% 2.84% 1.78%
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses 0.87%(1) 0.96%(1) 0.95%(1) 1.01%(1) 1.03%
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 2.48% 2.64% 2.48% 2.79% 1.75%
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $77,080 $49,336 $40,758 $39,108 $39,629
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
(1) Does not reflect the effect of the expense offset of 0.01%.
14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
5 5 0 --
for office use only
Morgan Stanley Dean Witter
New York
Municipal
Money Market
Trust
</TABLE>
[REMOVE APPLICATION CAREFULLY]
APPLICATION
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
Send to: Morgan Stanley Dean Witter Trust FSB (the "Transfer Agent"), P.O.
Box 1040, Jersey City, NJ 07303
INSTRUCTIONS For assistance in completing this application, telephone Morgan
Stanley Dean Witter Trust FSB at (800) 869-NEWS (Toll-Free).
<TABLE>
<S> <C> <C>
TO REGISTER
SHARES
(please print) 1.
---------------------------------------------------------------------------------------------------
First Name Last Name
- -As joint
tenants,
use line 1 & 2 2.
---------------------------------------------------------------------------------------------------
First Name Last Name
(Joint tenants with rights of survivorship unless otherwise specified)
---------------------------------------
Social Security Number
- -As custodian
for a minor,
use lines 1 & 3 3.
-------------------------------------------------------------------------------------------------
Minor's Name
---------------------------------------
Minor's Social Security Number
Under the ___________________________ Uniform Gifts to Minors Act
State of Residence of Minor
- -In the name of a
corporation, 4.
trust, ---------------------------------------------------------------------------------------------------
partnership
or other Name of Corporation, Trust (including trustee name(s)) or Other Organization
institutional
investors,
use
line 4 ---------------------------------------------------------------------------------------------------
---------------------------------------
Tax Identification Number
If Trust, Date of Trust Instrument: _____________________________
ADDRESS ---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
City State Zip Code
TO PURCHASE
SHARES:
Minimum Initial / / CHECK (enclosed) $________________ (Make Payable to Morgan Stanley Dean Witter New York Municipal
Investment: Money Market Trust)
$5,000
/ / WIRE* On_______________ MF* _________________________________
(Date) (Control number, this transaction)
--------------------------------------------------------------------------------------------------
Name of Bank Branch
--------------------------------------------------------------------------------------------------
Address
--------------------------------------------------------------------------------------------------
Telephone Number
* For an initial investment made by wiring funds, obtain a control number by calling: (800) 869-NEWS
(Toll-Free) or (201) 413-7067.
Your bank should wire to:
Bank of New York for credit to account of Morgan Stanley Dean Witter Trust FSB
Account Number: 8900188413
Re: Morgan Stanley Dean Witter New York Municipal Money Market Trust
Account Of: _____________________________________________
(Investor's Account as Registered at the Transfer Agent)
Control or Account Number:______________________________________
(Assigned by Telephone)
OPTIONAL SERVICES
NOTE: If you are a current shareholder of Morgan Stanley Dean Witter New York Municipal Market Trust, please
indicate your fund account number here.
[5] [5] [0] -
------------------------------
DIVIDENDS All dividends will be reinvested daily in additional shares, unless the following option is selected:
/ / Pay income dividends by check at the end of each month.
WRITE YOUR OWN / / Send an initial supply of checks.
CHECK FOR JOINT ACCOUNTS:
/ / Check this box if all owners are required to sign checks.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
PAYMENT TO / / Morgan Stanley Dean Witter Trust FSB is hereby authorized to honor telephonic or other
PREDESIGNATED instructions, without signature guarantee, from any person for the redemption of any
BANK ACCOUNT or all shares of Morgan Stanley Dean Witter New York Municipal Money Market Trust held
in my (our) account provided that proceeds are transmitted only to the following bank
account. (Absent its own negligence, neither Morgan Stanley Dean Witter New York
Municipal Money Market Trust nor Dean Witter Trust FSB (the "Transfer Agent") shall be
liable for any redemption caused by unauthorized instruction(s)):
Bank Account must be in
same name as shares are
registered -------------------------------------------------------------- ----------------------------
NAME & BANK ACCOUNT NUMBER BANK'S ROUTING TRANSMIT CODE
(ASK YOUR BANK)
Minimum Amount:
$1,000 ---------------------------------------------------------------
NAME OF BANK
---------------------------------------------------------------
ADDRESS OF BANK
( )
---------------------------------------------------------------
TELEPHONE NUMBER OF BANK
SIGNATURE AUTHORIZATION
- ---------------------------------------------------------------------------------------------------------------------
FOR ALL ACCOUNTS NOTE: RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY MODIFICATION OF THE INFORMATION
BELOW WILL REQUIRE AN AMENDMENT TO THIS FORM. THIS DOCUMENT IS IN FULL FORCE AND EFFECT
UNTIL ANOTHER DULY EXECUTED FORM IS RECEIVED BY THE TRANSFER AGENT.
The "Transfer Agent" is hereby authorized to act as agent for the registered owner of
shares of Morgan Stanley Dean Witter New York Municipal Money Market Trust (the "Fund")
in effecting redemptions of shares and is authorized to recognize the signature(s) below
in payment of funds resulting from such redemptions on behalf of the registered owners
of such shares. The Transfer Agent shall be liable only for its own negligence and not
for default or negligence of its correspondents, or for losses in transit. The Fund
shall not be liable for any default or negligence of the Transfer Agent.
I (we) certify to my (our) legal capacity, or the capacity of the investor named above, to
invest in and redeem shares of, and I (we) acknowledge receipt of a current prospectus of,
Morgan Stanley Dean Witter New York Municipal Money Market Trust and (we) further certify
my (our) authority to sign and act for and on behalf of the investor.
Under penalties of perjury, I certify (1) that the number shown on this form is my correct
taxpayer identification number and (2) that I am not subject to backup withholding either
because I have not been notified that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or the Internal Revenue Service has notified
me that I am no longer subject to backup withholding. (Note: You must cross out item (2)
above if you have been notified by IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax return.)
For Individual, Joint and Custodial Accounts for Minors, Check Applicable Box:
/ / I am a United States Citizen. / / I am not a United States Citizen.
SIGNATURE(S) (IF JOINT TENANTS, ALL MUST SIGN)
Name(s) must be
signed exactly the
same as shown on
lines 1 to 4 on the
reverse side of this
application
---------------------------------------- ---------------------------------------
SIGNATURE MUST BE KEPT WITHIN ABOVE AREA SIGNATURE MUST BE KEPT WITHIN ABOVE AREA
---------------------------------------- ----------------------------------------
SIGNATURE MUST BE KEPT WITHIN ABOVE AREA SIGNATURE MUST BE KEPT WITHIN ABOVE AREA
SIGNED THIS ___________________ DAY OF ____________________, 19__.
FOR CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER ORGANIZATIONS
The following named persons are currently officers/trustees/general partners/other authorized
signatories of the Registered Owner, and any __* of them ("Authorized Person(s)") is/are currently
authorized under the applicable governing document to act with full power to sell, assign or
transfer securities of the the Fund for the Registered Owner and to execute and deliver any
instrument necessary to effectuate the authority hereby conferred:
NAME/TITLE SIGNATURE
In addition,
complete
Section A or B
below.
---------------------------------------- ----------------------------------------
SIGNATURE MUST BE KEPT WITHIN ABOVE AREA SIGNATURE MUST BE KEPT WITHIN ABOVE AREA
---------------------------------------- ----------------------------------------
SIGNATURE MUST BE KEPT WITHIN ABOVE AREA SIGNATURE MUST BE KEPT WITHIN ABOVE AREA
---------------------------------------- ----------------------------------------
SIGNATURE MUST BE KEPT WITHIN ABOVE AREA SIGNATURE MUST BE KEPT WITHIN ABOVE AREA
SIGNED THIS ___________________ DAY OF ____________________, 19__.
The Transfer Agent may, without inquiry, act only upon the instruction of ANY PERSON(S) purporting
to be (an) Authorized Person(s) as named in the Certification Form last received by the Transfer
Agent. The Transfer Agent and the Fund shall not be liable for any claims, expenses (including legal
fees) or losses resulting from the Transfer Agent having acted upon any instruction reasonably
believed genuine.
----------------------------------------------------------------------------------------------------
*INSERT A NUMBER. UNLESS OTHERWISE INDICATED, THE TRANSFER AGENT MAY HONOR INSTRUCTIONS OF ANY ONE
OF THE PERSONS NAMED ABOVE.
SECTION (A) NOTE: EITHER A SIGNATURE GUARANTEE OR CORPORATE SEAL IS REQUIRED.
CORPORATIONS AND
INCORPORATED
ASSOCIATIONS ONLY. I, ______________________, Secretary of the Registered Owner, do hereby certify that at a meeting
on _____________________ at which a quorum was present throughout, the Board of Directors of the
corporation/the officers of the association duly adopted a resolution, which is in full force and
SIGN ABOVE AND COM- effect and in accordance with the Registered Owner's charter and by-laws, which resolution did
PLETE THIS the following: (1) empowered the above-named Authorized Person(s) to effect securities
SECTION transactions for the Registered Owner on the terms described above; (2) authorized the Secretary
to certify, from time to time, the names and titles of the officers of the Registered Owner and
to notify the Transfer Agent when changes in office occur; and (3) authorized the Secretary to
certify that such a resolution has been duly adopted and will remain in full force and effect
until the Transfer Agent receives a duly execute amendment to the Certification Form.
SIGNATURE
GUARANTEE** Witness my hand on behalf of the corporation/association this__________ day of ___________ , 19__.
(or Corporate Seal)
------------------------------------------------------------------------
Secretary**
The undersigned officer (other than the Secretary) hereby certifies that the foregoing instrument
has been signed by the Secretary of the corporation/association.
SIGNATURE
GUARANTEE**
(or Corporate Seal)
------------------------------------------------------------------------
Certifying Officer of the Corporation or Incorporated Association**
SECTION (B) ALL NOTE: A SIGNATURE GUARANTEE IS REQUIRED.
OTHER
INSTITUTIONAL
INVESTORS ---------------------------------------------------------------------------------------
Certifying
SIGNATURE Trustee(s)/General Partner(s)/Other(s)**
GUARANTEE**
SIGN ABOVE AND COM- ---------------------------------------------------------------------------------------
PLETE THIS SECTION Certifying
Trustee(s)/General Partner(s)/Other(s)**
----------------------------------------------------------------------------------------------------
**SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
DEALER Above signature(s) guaranteed. Prospectus has been delivered by undersigned to above-named applicant(s).
(if any)
Completion by
dealer only
------------------------------------------ ------------------------------------------------------
Firm Name Office Number-Account Number at Dealer-F/A Number
------------------------------------------ ------------------------------------------------------
Address Financial Advisor's Last Name
------------------------------------------ ------------------------------------------------------
City, State, Zip Code Branch Office
- -Registered Trademark- 1998 Morgan Stanley Dean Witter Distributors Inc.
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers
investors a wide range of investment choices. Come on
in and meet the family!
- --------------------------------------------------------------------------------
GROWTH FUNDS
- ---------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Equity Fund
Growth Fund
Market Leader Trust
Mid-Cap Growth Fund
Special Value Fund
Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund Natural Resource Development Securities
Precious Metals and Minerals Trust
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas" Portfolio
European Growth Fund
Fund of Funds - International Portfolio
Global Dividend Growth Securities
International SmallCap Fund
Japan Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUNDS
- ---------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Real Estate Fund
Utilities Fund
- --------------------------------------------------------------------------------
INCOME FUNDS
- ---------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust (FSC)
Limited Term Municipal Trust (KL)
Multi-State Municipal Series Trust (FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
- ---------------------------------
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund (MM)
U.S. Government Money Market Trust (MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust (MM)
New York Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)
There may be Funds created after this PROSPECTUS was published. Please consult
the inside front cover of a new Fund's PROSPECTUS for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
Short-Term U.S. Treasury Trust, is a Multi-Class Fund. A Multi-Class Fund is a
mutual fund offering multiple Classes of shares. The other types of funds are:
NL - No-Load (Mutual) Fund; MM - Money Market Fund; FSC - A mutual fund sold
with a front-end sales charge and a distribution (12b-1) fee.
<PAGE>
PROSPECTUS - MAY 1, 1999
Additional information about the Fund's investments is available in the Fund's
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. In the Fund's ANNUAL REPORT, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's STATEMENT OF ADDITIONAL INFORMATION also provides additional information
about the Fund. The STATEMENT OF ADDITIONAL INFORMATION is incorporated herein
by reference (legally is part of this PROSPECTUS). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
www.deanwitter.com/funds
Information about the Fund (including the STATEMENT OF ADDITIONAL INFORMATION)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site at
www.sec.gov, and copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC, Washington,
DC 20549-6009.
Morgan Stanley Dean Witter
NEW YORK MUNICIPAL
MONEY MARKET TRUST
[BACK COVER PHOTO]
A MONEY MARKET FUND THAT SEEKS
TO PROVIDE AS HIGH A LEVEL OF
DAILY INCOME EXEMPT FROM FEDERAL
AND NEW YORK INCOME TAX AS IS
CONSISTENT WITH STABILITY OF
PRINCIPAL AND LIQUIDITY
TICKER SYMBOL: DWNXX
(INVESTMENT COMPANY ACT FILE NO. 811-5987)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MORGAN
MAY 1, 1999 STANLEY
DEAN WITTER
NEW YORK
MUNICIPAL
MONEY
MARKET TRUST
- --------------------------------------------------------------------------------
This STATEMENT OF ADDITIONAL INFORMATION is not a PROSPECTUS. The PROSPECTUS
(dated May 1, 1999) for the Morgan Stanley Dean Witter New York Municipal Money
Market Trust may be obtained without charge from the Fund at its address or
telephone number listed below or from Dean Witter Reynolds at any of its branch
offices.
Morgan Stanley Dean Witter
New York Municipal Money Market Trust
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
I. Fund History........................................................................ 4
II. Description of the Fund and Its Investments and Risks.............................. 4
A. Classification.................................................................... 4
B. Investment Strategies and Risks................................................... 4
C. Fund Policies/Investment Restrictions............................................. 12
III. Management of the Fund............................................................ 14
A. Board of Trustees................................................................. 14
B. Management Information............................................................ 14
C. Compensation...................................................................... 19
IV. Control Persons and Principal Holders of Securities................................ 21
V. Investment Management and Other Services............................................ 21
A. Investment Manager................................................................ 21
B. Principal Underwriter............................................................. 22
C. Services Provided by the Investment Manager and Fund Expenses Paid by Third
Parties............................................................................. 22
D. Rule 12b-1 Plan................................................................... 23
E. Other Service Providers........................................................... 25
VI. Brokerage Allocation and Other Practices........................................... 25
A. Brokerage Transactions............................................................ 25
B. Commissions....................................................................... 25
C. Brokerage Selection............................................................... 26
D. Directed Brokerage................................................................ 27
E. Regular Broker-Dealers............................................................ 27
VII. Capital Stock and Other Securities................................................ 27
VIII. Purchase, Redemption and Pricing of Shares....................................... 28
A. Purchase/Redemption of Shares..................................................... 28
B. Offering Price.................................................................... 28
IX. Taxation of the Fund and Shareholders.............................................. 30
X. Underwriters........................................................................ 32
XI. Calculation of Performance Data.................................................... 33
XII. Financial Statements.............................................................. 33
</TABLE>
2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
- --------------------------------------------------------------------------------
The terms defined in this glossary are frequently used in this STATEMENT OF
ADDITIONAL INFORMATION (other terms used occasionally are defined in the text of
the document).
"CUSTODIAN"--The Bank of New York is the Custodian of the Fund's assets.
"DEAN WITTER REYNOLDS"--Dean Witter Reynolds Inc., a wholly-owned broker-dealer
subsidiary of MSDW.
"DISTRIBUTOR"--Morgan Stanley Dean Witter Distributors Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"FINANCIAL ADVISORS"--Morgan Stanley Dean Witter authorized financial services
representatives.
"FUND"--Morgan Stanley Dean Witter New York Municipal Money Market Trust, a
registered open-end investment company.
"INVESTMENT MANAGER"--Morgan Stanley Dean Witter Advisors Inc., a wholly-owned
investment advisor subsidiary of MSDW.
"INDEPENDENT TRUSTEES"--Trustees who are not "INTERESTED PERSONS" (as defined by
the Investment Company Act) of the Fund.
"MORGAN STANLEY & CO."--Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"MORGAN STANLEY DEAN WITTER FUNDS"--Registered investment companies (i) for
which the Investment Manager serves as the investment advisor and (ii) that hold
themselves out to investors as related companies for investment and investor
services.
"MSDW"--Morgan Stanley Dean Witter & Co., a preeminent global financial services
firm.
"MSDW SERVICES COMPANY"--Morgan Stanley Dean Witter Services Company Inc., a
wholly-owned fund services subsidiary of the Investment Manager.
"TRANSFER AGENT"--Morgan Stanley Dean Witter Trust FSB, a wholly-owned transfer
agent subsidiary of MSDW.
"TRUSTEES"--The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
- --------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on December 28, 1989, with the name Dean Witter/Sears New
York Municipal Money Market Trust. On February 19, 1993, the Fund's name was
changed to Dean Witter New York Municipal Money Market Trust. Effective June 22,
1998, the Fund's name was changed to Morgan Stanley Dean Witter New York
Municipal Money Market Trust.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end, non-diversified management investment company whose
investment objective is to provide as high a level of daily income exempt from
federal and New York income tax as is consistent with stability of principal and
liquidity.
B. INVESTMENT STRATEGIES AND RISKS
The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's PROSPECTUS titled "Principal
Investment Strategies" and "Principal Risks."
LEASE OBLIGATIONS. Included within the revenue bonds category in which the
Fund may invest are participations in lease obligations or installment purchase
contracts (collectively called "lease obligations") of municipalities. State and
local governments issue lease obligations to acquire equipment and facilities.
Lease obligations may have risks not normally associated with general
obligation or other revenue bonds. Leases and installment purchase or
conditional sale contracts (which may provide for title to the leased asset to
pass eventually to the issuer) have developed as a means for governmental
issuers to acquire property and equipment without the necessity of complying
with the constitutional and statutory requirements generally applicable for the
issuance of debt. Certain lease obligations contain "non-appropriation" clauses
that provide that the governmental issuer has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on an annual or other periodic
basis. Consequently, continued lease payments on those lease obligations
containing "non-appropriation" clauses are dependent on future legislative
actions. If such legislative actions do not occur, the holders of the lease
obligation may experience difficulty in exercising their rights, including
disposition of the property.
TAXABLE SECURITIES. The Fund may invest up to 20% of its total assets in
taxable money market instruments and repurchase agreements. Investments in
taxable money market instruments would generally be made under any one of the
following circumstances: (a) pending investment proceeds of sale of Fund shares
or of portfolio securities; (b) pending settlement of purchases of portfolio
securities; and (c) to maintain liquidity for the purpose of meeting anticipated
redemptions. Only those non-New York tax-exempt securities which satisfy the
standards established for New York tax-exempt securities may be purchased by the
Fund.
The types of taxable money market instruments in which the Fund may invest
are limited to the following short-term fixed-income securities (maturing in one
year or less from the time of purchase): (i) obligations of the United States
Government, its agencies, instrumentalities or authorities; (ii) commercial
paper rated P-1 by Moody's Investors Services, Inc. ("Moody's") or A-1 by
Standard & Poor's Corporation ("S&P"); (iii) certificates of deposit of domestic
banks with assets of $1 billion or more; and (iv) repurchase agreements with
respect to portfolio securities.
VARIABLE RATE AND FLOATING RATE OBLIGATIONS. The Fund may invest in
Municipal Bonds and Municipal Notes ("Municipal Obligations") of the type called
variable rate and floating rate obligations. The interest rate payable on a
variable rate obligation is adjusted either at predesignated periodic intervals
and, on a floating rate obligation, whenever there is a change in the market
rate of interest on which the interest rate payable is based. Other features may
include the right whereby the Fund may
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demand prepayment of the principal amount of the obligation prior to its stated
maturity (a "demand feature") and the right of the issuer to prepay the
principal amount prior to maturity. The principal benefit of a variable rate
obligation is that the interest rate adjustment minimizes changes in the market
value of the obligation. As a result, the purchase of variable rate and floating
rate obligations should enhance the ability of the Fund to maintain a stable net
asset value per share and to sell obligations prior to maturity at a price that
is approximately the full principal amount of the obligations. The principal
benefit to the Fund of purchasing obligations with a demand feature is that
liquidity, and the ability of the Fund to obtain repayment of the full principal
amount of an obligation prior to maturity, is enhanced. The payment of principal
and interest by issuers of certain obligations purchased by the Fund may be
guaranteed by letters of credit or other credit facilities offered by banks or
other financial institutions. Such guarantees will be considered in determining
whether an obligation meets the Fund's investment quality requirements.
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL BONDS. The Fund may invest
more than 25% of its total assets in industrial development and pollution
control bonds (two kinds of tax-exempt Municipal Bonds) whether or not the users
of facilities financed by such bonds are in the same industry. In cases where
such users are in the same industry, there may be additional risk to the Fund in
the event of an economic downturn in such industry, which may result generally
in a lowered need for such facilities and a lowered ability of such users to pay
for the use of such facilities.
PUT OPTIONS. The Fund may purchase securities together with the right to
resell them to the seller at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell is
commonly known as a "put," and the aggregate price which the Fund pays for
securities with puts may be higher than the price which otherwise would be paid
for the securities. The primary purpose of this practice is to permit the Fund
to be fully invested in securities, the interest on which is exempt from Federal
and New York personal income tax, while preserving the necessary flexibility and
liquidity to purchase securities on a when-issued basis, to meet unusually large
redemptions and to purchase at a later date securities other than those subject
to the put. The Fund's policy is, generally, to exercise the puts on their
expiration date, when the exercise price is higher than the current market price
for the related securities. Puts may be exercised prior to the expiration date
in order to fund obligations to purchase other securities or to meet redemption
requests. These obligations may arise during periods in which proceeds from
sales of Fund shares and from recent sales of portfolio securities are
insufficient to meet such obligations or when the funds available are otherwise
allocated for investment. In addition, puts may be exercised prior to their
expiration date in the event the Investment Manager revises its evaluation of
the creditworthiness of the issuer of the underlying security. In determining
whether to exercise puts prior to their expiration date and in selecting which
puts to exercise in such circumstances, the Investment Manager considers, among
other things, the amount of cash available to the Fund, the expiration dates of
the available puts, any future commitments for securities purchases, the yield,
quality and maturity dates of the underlying securities, alternative investment
opportunities and the desirability of retaining the underlying securities in the
Fund's portfolio.
The Fund values securities which are subject to puts at their amortized cost
and values the put, apart from the security, at zero. Thus, the cost of the put
will be carried on the Fund's books as an unrealized loss from the date of
acquisition and will be reflected in realized gain or loss when the put is
exercised or expires. Since the value of the put is dependent on the ability of
the put writer to meet its obligation to repurchase, the Fund's policy is to
enter into put transactions only with municipal securities dealers who are
approved by the Trustees. Each dealer will be approved on its own merits and it
is the Fund's general policy to enter into put transactions only with those
dealers which are determined to present minimal credit risks. In connection with
such determination, the Trustees will review, among other things, the ratings,
if available, of equity and debt securities of such municipal securities
dealers, their reputations in the municipal securities markets, the net worth of
such dealers and their efficiency in consummating transactions. Bank dealers
normally will be members of the Federal Reserve System, and other dealers will
be members of the National Association of Securities Dealers, Inc. or members of
a national securities exchange. The Trustees have directed the Investment
Manager not to enter into put
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transactions with, and to exercise outstanding puts of, any municipal securities
dealer which, in the judgment of the Investment Manager, ceases at any time to
present a minimal credit risk. In the event that a dealer should default on its
obligation to repurchase an underlying security, the Fund is unable to predict
whether all or any portion of any loss sustained could be subsequently recovered
from such dealer. The Fund may not invest more than 10% of its total assets in
puts at any given time. During the fiscal year ended December 31, 1998, the Fund
did not purchase any put options.
In Revenue Ruling 82-144, the Internal Revenue Service stated that, under
certain circumstances, a purchaser of tax-exempt obligations which are subject
to puts will be considered the owner of the obligations for Federal income tax
purposes.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The Fund will accrue interest from the institution until the
time when the repurchase is to occur. Although this date is deemed by the Fund
to be the maturity date of a repurchase agreement, the maturities of securities
subject to repurchase agreements are not subject to any limits.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well capitalized and well established financial institutions, whose
financial condition will be continuously monitored. In addition, the value of
the collateral underlying the repurchase agreement will always be at least equal
to the resale price which consists of the acquisition price paid to the seller
of the securities plus the accrued resale premium which is defined as the amount
specified in the repurchase agreement or the daily amortization of the
difference between the acquisition price and the resale price specified in the
repurchase agreement. Such collateral will consist entirely of securities that
are direct obligations of, or that are fully guaranteed as to principal and
interest by, the United States or any agency thereof, and/or certificates of
deposit, bankers' acceptances which are eligible for acceptance by a Federal
Reserve Bank, and, if the seller is a bank, mortgage related securities (as such
term is defined in section 3(a)(41) of the Securities Exchange Act of 1934 that,
at the time the repurchase agreement is entered into, are rated in the highest
rating category by the Requisite NRSROs (as defined under Rule 2a-7 of the
Investment Company Act of 1940). Additionally, Upon an Event of Insolvency (as
defined under Rule 2a-7) with respect to the seller, the collateral must qualify
the repurchase agreement for preferential treatment under a provision of
applicable insolvency law providing an exclusion from any automatic stay of
creditors' rights against the seller . In the event of a default or bankruptcy
by a selling financial institution, the Fund will seek to liquidate such
collateral.
However, the exercising of the Fund's right to liquidate such collateral
could involve certain costs or delays and, to the extent that proceeds from any
sale upon a default of the obligation to repurchase were less than the
repurchase price, the Fund could suffer a loss. It is the current policy of the
Fund not to invest in repurchase agreements that do not mature within seven days
if any such investment, together with any other illiquid assets held by the
Fund, amount to more than 10% of its total assets. The Fund's investments in
repurchase agreements may at times be substantial when, in the view of the
Fund's investment manager, liquidity or other considerations warrant.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. From time to time the Fund may
purchase tax-exempt securities on a when-issued or delayed delivery basis. When
these transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of commitment. While the Fund will only purchase securities on a
when-issued,
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delayed delivery with the intention of acquiring the securities, the Fund may
sell the securities before the settlement date, if it is deemed advisable. The
securities so purchased or sold are subject to market fluctuation and no
interest or dividends accrue to the purchaser prior to the settlement date.
At the time the Fund makes the commitment to purchase or sell securities on
a when-issued, delayed delivery, it will record the transaction and thereafter
reflect the value, each day, of such security purchased, or if a sale, the
proceeds to be received, in determining its net asset value. At the time of
delivery of the securities, their value may be more or less than the purchase or
sale price. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued, delayed delivery may increase the
volatility of its net asset value. The Fund will also establish a segregated
account on the Fund's books in which it will continually maintain cash or cash
equivalents or other liquid portfolio securities equal in value to commitments
to purchase securities on a when-issued or delayed delivery basis.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000 and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
THE STATE OF NEW YORK--SPECIAL INVESTMENT CONSIDERATIONS. Since the Fund
concentrates its investments in New York tax-exempt securities, the Fund is
significantly affected by any political, economic or regulatory developments
affecting the ability of New York tax-exempt issuers to pay interest or repay
principal. Investors should be aware that certain issuers of New York tax-exempt
securities have experienced serious financial difficulties in recent years. A
reoccurrence of these difficulties may impair the ability of certain New York
issuers to maintain debt service on their obligations.
The fiscal stability of New York State is related to the fiscal stability of
the State's municipalities, its agencies and authorities (which generally
finance, construct and operate revenue-producing public benefit facilities).
This is due in part to the fact that agencies, authorities and local governments
in financial trouble often seek State financial assistance. The experience has
been that if New York City or any of the agencies or authorities suffers serious
financial difficulty, both the ability of the State, the City, the State's
political subdivisions, the agencies and the authorities to obtain financing in
the public credit markets and the market price of outstanding New York
tax-exempt securities are adversely affected.
The following information on risk factors in concentrating in New York
Municipal Obligations is only a summary, based on publicly available official
statements relating to offerings of New York issuers of Municipal Obligations on
or prior to December 15, 1998 with respect to offerings of the State and
December 18, 1998 with respect to offerings of the City. No representation is
made as to the accuracy of such information.
During the mid-1970's, the State, some of its agencies, instrumentalities
and public benefit corporations (the "Authorities"), and certain of its
municipalities faced serious financial difficulties. To address
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many of these financial problems, the State developed various programs, many of
which were successful in ameliorating the financial crisis. Any further
financial problems experienced by these Authorities or municipalities could have
a direct adverse effect on the New York Municipal Obligations in which the Fund
invests.
NEW YORK CITY
GENERAL. The national economic downturn which began in July 1990 adversely
affected the local economy, which had been declining since late 1989. As a
result, the City experienced job losses in 1990 and 1991 and real Gross City
Product ("GCP") fell in those two years. Beginning in 1992, the improvement in
the national economy helped stabilize conditions in the City. Employment losses
moderated toward year-end and real GCP increased, boosted by strong wage gains.
After noticeable improvements in the City's economy during 1994, economic growth
slowed in 1995 and thereafter improved commencing in calendar year 1996,
reflecting improved securities industry earnings and employment in other
sectors. Overall, the City's economic improvement accelerated significantly in
1997 and 1998. The City's current financial plan assumes that, after strong
growth in 1997-1998, moderate economic growth will exist through calendar year
2002, with moderating job growth and wage increases.
For each of the 1981 through 1998 fiscal years, the City had an operating
surplus, before discretionary and other transfers, and achieved balanced
operating results as reported in accordance with then applicable generally
accepted accounting principles ("GAAP"). The City has been required to close
substantial gaps between forecast revenues and forecast expenditures in order to
maintain balanced operating results. There can be no assurance that the City
will continue to maintain balanced operating results as required by State law
without tax or other revenue increases or reductions in City services or
entitlement programs, which could adversely affect the City's economic base.
1999-2002 NEW YORK CITY FINANCIAL PLAN. The Mayor is responsible for
preparing the City's financial plan including the current financial plan for the
1999 through 2002 fiscal years (the "1999-2002 Financial Plan," the "Financial
Plan" or "City Plan").
The Financial Plan projects revenues and expenditures for the 1999 fiscal
year balanced in accordance with GAAP. The Financial Plan takes into account an
increase in projected tax revenues in 1999 and 2000 and a decrease in projected
tax revenues in 2001 and 2002; an increase in planned expenditures for health
insurance; a decrease in projected pension expenditures; and other agency
spending increases. In addition, the Financial Plan includes a proposed
discretionary transfer to the 1999 fiscal year of $465 million to pay debt
service due in fiscal year 2000. The Financial Plan also sets forth projections
for the 2000 through 2002 fiscal years and projects gaps of $2.2 billion, $2.9
billion and $2.4 billion for the 2000 through 2002 fiscal years, respectively.
The Financial Plan assumes (i) approval by the Governor and the State
Legislature of the extension of the 14% personal income tax surcharge, which is
scheduled to expire on December 31, 1999, and which is projected to provide
revenue of $183 million, $524 million and $544 million in the 2000, 2001 and
2002 fiscal years, respectively; and (ii) collection of the projected rent
payments for the City's airports, totaling $6 million, $365 million, $155
million and $185 million in the 1999 through 2002 fiscal years, respectively, a
substantial portion of which may depend on the successful completion of
negotiations with The Port Authority of New York and New Jersey or on the
enforcement of the City's rights under the existing leases through pending legal
actions. The Financial Plan provides no additional wage increases for City
employees after their contracts expire in fiscal years 2000 and 2001. In
addition, the economic and financial condition of the City may be affected by
various financial, social, economic and political factors which could have a
material effect on the City.
On July 23, 1998, the New York State Comptroller issued a report which noted
that a significant cause for concern is the budget gaps in the 1999-2000 and
2000-2001 fiscal years, which the State Comptroller projected at $1.8 billion
and $5.5 billion, respectively, after excluding the uncertain receipt by the
State of $250 million of funds from the tobacco settlement assumed for each of
such fiscal years, as well as the unspecified actions assumed in the State's
projections. The State Comptroller also stated that if the securities industry
or economy slows, the size of the gaps would increase.
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The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. There can be no assurance
that there will not be reductions in State aid to the City from amounts
currently projected; that the State budgets in future fiscal years will be
adopted by the April 1 statutory deadline, or interim appropriations enacted; or
that any such reductions or delays will not have adverse effects on the City's
cash flow or expenditures.
The City's projections set forth in the City Plan are based on various
assumptions and contingencies which are uncertain and which may not materialize.
Implementation of the Financial Plan is dependent upon the City's ability to
market its securities successfully. The City's financing program for fiscal
years 1999 through 2002 contemplates the issuance of $5.2 billion of general
obligation bonds and $5.4 billion of bonds to be issued by the New York City
Transitional Finance Authority (the "Finance Authority") to finance City capital
projects. The Finance Authority was created to assist the City in financing its
capital program while keeping City indebtedness within the forecast level of the
constitutional restrictions on the amount of debt the City is authorized to
incur. In addition, the City issues revenue and tax anticipation notes to
finance its seasonal working capital requirements. The success of projected
public sales of City bonds and notes, New York City Municipal Water Finance
Authority ("Water Authority") bonds and Finance Authority bonds will be subject
to prevailing market conditions. The City's planned capital and operating
expenditures are dependent upon the sale of its general obligation bonds and
notes, and the Water Authority and Finance Authority bonds. Future developments
concerning the City and public discussion of such developments, as well as
prevailing market conditions, may affect the market for outstanding City general
obligation bonds and notes.
The City Comptroller and other agencies and public officials issue reports
and make public statements which, among other things, state that projected
revenues and expenditures may be different from those forecasted in the City
Plan. It is reasonable to expect that such reports and statements will continue
to be issued and to engender public comment.
RATINGS. Moody's has rated the City's general obligation bonds A3. S&P has
rated such bonds A-. Fitch IBCA, Inc. ("Fitch") has rated such bonds A-. Such
ratings reflect only the views of Moody's, S&P and Fitch from which an
explanation of the significance of such ratings must be obtained. There is no
assurance that such ratings will continue for any given period of time or that
they will not be revised downward or withdrawn entirely. Any such downward
revision or withdrawal could have an adverse effect on the market prices of such
bonds. On July 16, 1998, S&P revised its rating of City bonds upward to A- from
BBB+. Moody's rating of City bonds was revised in February 1998 to A3 from Baa1.
Moody's, S&P and Fitch currently rate the City's outstanding general obligation
bonds A3, A- and A-, respectively.
OUTSTANDING NET INDEBTEDNESS. As of September 30, 1998, the City and the
Municipal Assistance Corporation for the City of New York had, respectively,
$26.391 billion and $3.141 billion of outstanding net long-term debt.
LITIGATION. The City is a defendant in lawsuits pertaining to material
matters, including claims asserted which are incidental to performing routine
governmental and other functions. This litigation includes, but is not limited
to, actions commenced and claims asserted against the City arising out of
alleged torts, alleged breaches of contracts, alleged violations of law and
condemnation proceedings. As of June 30, 1998 and 1997, claims in excess of $472
billion and $530 billion, respectively, were outstanding against the City for
which the City estimates its potential future liability to be $3.5 billion for
both fiscal years 1998 and 1997.
NEW YORK STATE
RECENT DEVELOPMENTS. The national economy has maintained a robust rate of
growth, with over 16.5 million jobs added nationally since early 1992. The State
economy has continued to expand, but growth remains somewhat slower than in the
nation. Although the State has added approximately
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400,000 jobs since late 1992, employment growth in the State has been hindered
during recent years by significant cutbacks in the computer and instrument
manufacturing, utility, defense and banking industries. Government downsizing
has also moderated these job gains.
The forecast of the State's economy shows continued expansion during the
1998 calendar year, with employment growth gradually slowing as the year
progresses. The financial and business service sectors are expected to continue
to do well, while employment in the manufacturing and government sectors will
post only small, if any, declines. On an average annual basis, the employment
growth rate in the State is expected to be higher than in 1997 and the
unemployment rate is expected to drop further to 6.1%. Personal income is
expected to record moderate gains in 1998. Wage growth in 1998 is expected to be
slower than in the previous year as the recent robust growth in bonus payments
moderates.
The forecast for continued growth, and any resultant impact on the 1997-1998
New York State Financial Plan (the "State Plan"), contains some uncertainties.
Stronger-than-expected gains in employment and wages could lead to surprisingly
strong growth in consumer spending. Investments could also remain robust.
Conversely, net exports could plunge even more sharply than expected, with
adverse impacts on the growth of both consumer spending and investment. The
inflation rate may differ significantly from expectations due to the upward
pressure of a tight labor market and the downward pressure of price reductions
emanating from the economic weakness in Asia. In addition, the State economic
forecast could over- or under-estimate the level of future bonus payments or
inflation growth, resulting in forecasted average wage growth that could differ
significantly from actual growth. Similarly, the State forecast could fail to
correctly account for declines in banking employment and the direction of
employment change that is likely to accompany telecommunications and energy
deregulation.
THE 1998-99 FISCAL YEAR. The State's General Fund (the major operating fund
of the State) was projected in the State Plan to be balanced on a cash basis for
the 1998-99 fiscal year. Total receipts and transfers from other funds are
projected to reach $37.84 billion, an increase of over $3 billion from the prior
fiscal year, and disbursements and transfers to other funds are projected to be
$36.78 billion, an increase of $2.43 billion from the total disbursed in the
prior fiscal year.
Projections of total State receipts in the State Plan are based on the State
structure in effect during the fiscal year and on assumptions relating to basic
economic factors and their historical relationships to State tax receipts. In
preparing projections of State receipts, economic forecasts relating to personal
income, wages, consumption, profits and employment have been particularly
important. The projection of receipts from most tax or revenue sources is
generally made by estimating the change in yield of such tax or revenue source
caused by economic and other factors, rather than by estimating the total yield
of such tax or revenue source from its estimated tax base. The forecasting
methodology, however, ensures that State fiscal year collection estimates for
taxes that are based on a computation of annual liability, such as the business
and personal income taxes, are consistent with estimates of total liability
under such taxes.
Projections of total State disbursements are based on assumptions relating
to economic and demographic factors, levels of disbursements for various
services provided by local governments (where the cost is partially reimbursed
by the State), and the results of various administrative and statutory
mechanisms in controlling disbursements for State operations. Factors that may
affect the level of disbursements in the fiscal year include uncertainties
relating to the economy of the nation and the State, the policies of the federal
government and changes in the demand for and use of State services.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy and
actions of the federal government have helped to create projected structural
budget gaps for the State. These gaps result from a significant disparity
between recurring revenues and the costs of maintaining or increasing the level
of support for State programs. To address a potential imbalance in any given
fiscal year, the State would be required to take actions to increase receipts
and/or reduce disbursements as it enacts the budget for that year, and under the
State Constitution, the Governor is required to propose a balanced budget each
year. There can be no
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assurance, however, that the Legislature will enact the Governor's proposals or
that the State's actions will be sufficient to preserve budgetary balance in a
given fiscal year or to align recurring receipts and disbursements in future
fiscal years.
NEW YORK LOCAL GOVERNMENT ASSISTANCE CORPORATION. In 1990, as part of a
State fiscal reform program, legislation was enacted creating the New York Loan
Government Assistance Corporation ("LGAC"), a public benefit corporation
empowered to issue long-term obligations to fund certain payments to local
governments traditionally funded through the State's annual seasonal borrowing.
The legislation empowered LGAC to issue bonds and notes in an amount not in
excess of $4.7 billion (exclusive of certain refunding bonds). Over a period of
years, the issuance of those long-term obligations, which will be amortized over
no more than 30 years, is expected to result in eliminating the need for
continuing short-term seasonal borrowing. The legislation also dedicated
revenues equal to one-quarter of the four cent State sales and use tax to pay
debt service on these bonds. The legislation also imposed a cap on the annual
seasonal borrowing of the State at $4.7 billion, less net proceeds of bonds
issued by LGAC and bonds issued to provide for capitalized interest, except in
cases where the Governor and the legislative leaders have certified both the
need for additional borrowing and provided a schedule for reducing it to the
cap. If borrowing above the cap is thus permitted in any fiscal year, it is
required by law to be reduced to the cap by the fourth fiscal year after the
limit was first exceeded. This provision capping the seasonal borrowing was
included as a covenant with LGAC's bondholders in the resolution authorizing
such bonds.
As of June 1995, LGAC has issued bonds and notes to provide net proceeds of
$4.7 billion completing the program. The impact of LGAC's borrowing, as well as
other changes in revenue and spending patterns, is that the State has been able
to meet its cash flow needs throughout the fiscal year without relying on
short-term seasonal borrowings.
COMPOSITION OF STATE GOVERNMENTAL FUNDS GROUP. Substantially all State
non-pension financial operations are accounted for in the State's governmental
funds group. Governmental funds include: (i) the General Fund, which receives
all income not required by law to be deposited in another fund; (ii) Special
Revenue Funds, which receive the preponderance of moneys received by the State
from the Federal government and other income the use of which is legally
restricted to certain purposes; (iii) Capital Projects Funds, used to finance
the acquisition and construction of major capital facilities by the State and to
aid in certain of such projects conducted by local governments or public
authorities; and (iv) Debt Service Funds, which are used for the accumulation of
moneys for the payment of principal of and interest on long-term debt and to
meet lease-purchase and other contractual-obligation commitments.
AUTHORITIES. The fiscal stability of the State is related to the fiscal
stability of its public Authorities. Authorities have various responsibilities,
including those which finance, construct and/or operate revenue-producing public
facilities. Authorities are not subject to the constitutional restrictions on
the incurrence of debt which apply to the State itself, and may issue bonds and
notes within the amounts and restrictions set forth in their legislative
authorization. As of December 31, 1997, there were 17 Authorities that had
outstanding debt of $100 million or more and the aggregate outstanding debt,
including refunding bonds, of all Authorities was $84 billion, only a portion of
which constitutes State-supported or State-related debt.
Authorities are generally supported by revenues generated by the projects
financed or operated, such as tolls charged for use of highways, bridges or
tunnels, charges for electric power, electric and gas utility services, rentals
charged for housing units and charges for occupancy at medical care facilities.
In addition, State legislation authorizes several financing techniques for
Authorities. Also, there are statutory arrangements providing for State local
assistance payments otherwise payable to localities to be made under certain
circumstances to Authorities. Although the State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid to Authorities under
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these arrangements, if local assistance payments are diverted the affected
localities could seek additional State assistance. Some Authorities also receive
moneys from State appropriations to pay for the operating costs of certain of
their programs.
RATINGS. S&P rates the State's general obligation bonds A, and Moody's
rates the State's general obligation bonds A2.
Ratings reflect only the respective views of such organizations, and an
explanation of the significance of such ratings must be obtained from the rating
agency furnishing the same. There is no assurance that a particular rating will
continue for any given period of time or that any such rating will not be
revised downward or withdrawn entirely if, in the judgment of the agency
originally establishing the rating, circumstances so warrant. A downward
revision or withdrawal of such ratings, or either of them, may have an effect on
the market price of the State Municipal Obligations in which the Fund invests.
GENERAL OBLIGATION DEBT. As of March 31, 1998, the State had outstanding
approximately $5.03 billion in general obligation bonds, including $294 million
in bond anticipation notes outstanding. Principal and interest due on general
obligation bonds and interest due on bond anticipation notes were $749.6 million
for the 1998-99 fiscal years, and are estimated to be $695 million for the
State's 1999-2000 fiscal year.
LITIGATION. The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal laws.
These proceedings could affect adversely the financial condition of the State in
the 1998-1999 fiscal year or thereafter.
The State believes that the State Plan includes sufficient reserves for the
payment of judgments that may be required during the 1998-1999 fiscal year.
There can be no assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount of all potential State Plan reserves
available for the payment of judgements and, therefore, could affect the ability
of the State to maintain a balanced 1998-1999 State Plan. The General Purpose
Financial Statements for the 1997-1998 fiscal year report estimated probable
awarded and anticipated unfavorable judgements of $872 million, of which $90
million is expected to be paid during the 1998-1999 fiscal year.
In addition, the State is party to other claims and litigation which its
legal counsel has advised are not probable of adverse court decisions or are not
deemed adverse and material. Although the amounts of potential losses, if any,
are not presently determinable, it is the State's opinion that its ultimate
liability in these cases is not expected to have a material and adverse effect
on the State's financial position in the 1998-1999 fiscal year or thereafter.
OTHER LOCALITIES. Certain localities in addition to the City could have
financial problems leading to requests for additional State assistance during
the State's current fiscal year and thereafter. The potential impact on the
State of such actions by localities is not included in the projections of the
State receipts and disbursements in the State's 1998-99 fiscal year.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund.
The Investment Company Act defines a majority as the lesser of (a) 67% or more
of the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions: (i) all percentage limitations apply immediately after a purchase
or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.
12
<PAGE>
The Fund will:
1. Seek to provide as high a level of daily income exempt from federal
and New York income tax as is consistent with stability of principal and
liquidity.
In addition, for purposes of the following restrictions: (a) an "issuer" of
a security is the entity whose assets and revenues are committed to the payment
of interest and principal on that particular security, provided that the
guarantee of a security will be considered a separate security and provided
further that a guarantee of a security shall not be deemed a security issued by
the guarantor if the value of all securities guaranteed by the guarantor and
owned by the Fund does not exceed 10% of the value of the total assets of the
Fund; (b) a "taxable security" is any security the interest on which is subject
to federal income tax; and (c) all percentage limitations apply immediately
after a purchase or initial investment, and any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest in common stock.
2. Write, purchase or sell puts, calls, or combinations thereof,
except that it may acquire rights to resell Municipal Obligations at an
agreed upon price and at or within an agreed upon time.
3. Invest 25% or more of the value of its total assets in taxable
securities of issuers in any one industry (industrial development and
pollution control bonds are grouped into industries based upon the business
in which the issuers of such obligations are engaged). This restriction does
not apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities or to Municipal Obligations,
including those issued by the State of New York or its political
subdivisions, or to domestic bank obligations.
4. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or trustee of the Fund or of the Investment Manager owns
more than 1/2 of 1% of the outstanding securities of the issuer, and the
officers and trustees who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of the issuer.
5. Purchase or sell real estate or interests therein, although the
Fund may purchase securities secured by real estate or interests therein.
6. Purchase or sell commodities or commodity futures contracts.
7. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of the value of its total assets (not
including the amount borrowed).
8. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. To meet the requirements of regulations in
certain states, the Fund, as a matter of operating policy but not as a
fundamental policy, will limit any pledge of its assets to 10% of its net
assets so long as shares of the Fund are being sold in those states.
9. Issue senior securities as defined in the Investment Company Act
except insofar as the Fund may be deemed to have issued a senior security by
reason of: (a) purchasing any securities on a when-issued or delayed
delivery basis; or (b) borrowing money.
10. Make loans of money or securities, except: (a) by the purchase of
debt obligations; and (b) by investment in repurchase agreements.
11. Make short sales of securities.
12. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of purchases of portfolio securities.
13. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act in disposing of a
portfolio security.
13
<PAGE>
14. Invest for the purpose of exercising control or management of any
other issuer.
15. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs.
16. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided to
the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as a
duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's own
interest or the interest of another person or organization. A Trustee satisfies
his or her duty of care by acting in good faith with the care of an ordinarily
prudent person and in a manner the Trustee reasonably believes to be in the best
interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any of
its affiliated persons and do not own any stock or other securities issued by
the Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other two Trustees (the "management Trustees") are
affiliated with the Investment Manager. All of the Independent Trustees also
serve as Independent Trustees of "Discover Brokerage Index Series," a mutual
fund for which the Investment Manager is the investment advisor. Three of the
six Independent Trustees are also Independent Trustees of certain other mutual
funds, referred to as the "TCW/DW Funds," for which MSDW Services Company is the
manager and TCW Funds Management, Inc. is the investment advisor.
14
<PAGE>
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the 85 Morgan Stanley Dean Witter Funds, the 11
TCW/DW Funds and Discover Brokerage Index Series, are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Michael Bozic (58) ................................... Vice Chairman of Kmart Corporation (since December, 1998);
Trustee Director or Trustee of the Morgan Stanley Dean Witter
c/o Kmart Corporation Funds, and Discover Brokerage Index Series; formerly
3100 West Big Beaver Road Chairman and Chief Executive Officer of Levitz Furniture
Troy, Michigan Corporation (November, 1995-November, 1998) and President
and Chief Executive Officer of Hills Department Stores
(May, 1991-July, 1995); formerly variously Chairman, Chief
Executive Officer, President and Chief Operating Officer
(1987-1991) of the Sears Merchandise Group of Sears,
Roebuck and Co.; Director of Eaglemark Financial Services,
Inc. and Weirton Steel Corporation.
Charles A. Fiumefreddo* (65) ......................... Chairman, Director or Trustee and Chief Executive Officer
Chairman of the Board, of the Morgan Stanley Dean Witter Funds, the TCW/DW Funds
Chief Executive Officer and Trustee and Discover Brokerage Index Series; formerly Chairman,
Two World Trade Center Chief Executive Officer and Director of the Investment
New York, New York Manager, the Distributor and MSDW Services Company;
Executive Vice President and Director of Dean Witter
Reynolds; Chairman and Director of the Transfer Agent;
formerly Director and/or officer of various MSDW sub-
sidiaries (until June, 1998).
Edwin J. Garn (66) ................................... Director or Trustee of the Morgan Stanley Dean Witter
Trustee Funds and Discover Brokerage Index Series; formerly United
c/o Huntsman Corporation States Senator (R-Utah)(1974-1992) and Chairman, Senate
500 Huntsman Way Banking Committee (1980-1986); formerly Mayor of Salt Lake
Salt Lake City, Utah City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Discovery (April 12-19, 1985); Vice Chairman, Huntsman
Corporation; Director of Franklin Covey (time management
systems), BMW Bank of North America, Inc. (industrial loan
corporation), United Space Alliance (joint venture between
Lockheed Martin and the Boeing Company) and Nuskin Asia
Pacific (multilevel marketing); member of the board of
various civic and charitable organizations.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Wayne E. Hedien (65) ................................. Retired; Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds and Discover Brokerage Index Series; Director
c/o Gordon Altman Butowsky of The PMI Group, Inc. (private mortgage insurance);
Weitzen Shalov & Wein Trustee and Vice Chairman of The Field Museum of Natural
Counsel to the Independent Trustees History; formerly associated with the Allstate Companies
114 West 47th Street (1966-1994), most recently as Chairman of The Allstate
New York, New York Corporation (March, 1993-December, 1994) and Chairman and
Chief Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July, 1989-December, 1994);
director of various other business and charitable
organizations.
Dr. Manuel H. Johnson (50) ........................... Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Co-Chairman and a founder of the Group of
c/o Johnson Smick International, Inc. Seven Council (G7C), an international economic commission;
1133 Connecticut Avenue, N.W. Chairman of the Audit Committee and Director or Trustee of
Washington, D.C. the Morgan Stanley Dean Witter Funds, the TCW/DW Funds and
Discover Brokerage Index Series; Director of Greenwich
Capital Markets, Inc. (broker-dealer) and NVR, Inc. (home
construction); Chairman and Trustee of the Financial
Accounting Foundation (oversight organization of the
Financial Accounting Standards Board); formerly Vice
Chairman of the Board of Governors of the Federal Reserve
System (1986-1990) and Assistant Secretary of the U.S.
Treasury.
Michael E. Nugent (62) ............................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan Stanley
237 Park Avenue Dean Witter Funds, the TCW/DW Funds and Discover Brokerage
New York, New York Index Series; formerly Vice President, Bankers Trust
Company and BT Capital Corporation (1984-1988); director
of various business organizations.
Philip J. Purcell* (55) .............................. Chairman of the Board of Directors and Chief Executive
Trustee Officer of MSDW, Dean Witter Reynolds and Novus Credit
1585 Broadway Services Inc.; Director of the Distributor; Director or
New York, New York Trustee of the Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series; Director and/or officer
of various MSDW subsidiaries.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
John L. Schroeder (68) ............................... Retired; Chairman of the Derivatives Committee and
Trustee Director or Trustee of the Morgan Stanley Dean Witter
c/o Gordon Altman Butowsky Funds, the TCW/DW Funds and Discover Brokerage Index
Weitzen Shalov & Wein Series; Director of Citizens Utilities Company; formerly
Counsel to the Independent Trustees Executive Vice President and Chief Investment Officer of
114 West 47th Street the Home Insurance Company (August, 1991-September, 1995).
New York, New York
Mitchell M. Merin (45) ............................... President and Chief Operating Officer of Asset Management
President of MSDW (since December, 1998); President and Director
Two World Trade Center (since April, 1997) and Chief Executive Officer (since
New York, New York June, 1998) of the Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and Director of
the Distributor (since June, 1998); Chairman and Chief
Executive Officer (since June, 1998) and Director (since
January, 1998) of the Transfer Agent; Director of various
MSDW subsidiaries; President of the Morgan Stanley Dean
Witter Funds, the TCW/DW Funds and Discover Brokerage
Index Series (since May, 1999); previously Chief Strategic
Officer of the Investment Manager and MSDW Services
Company and Executive Vice President of the Distributor
(April, 1997-June, 1998), Vice President of the Morgan
Stanley Dean Witter Funds, the TCW/DW Funds and Discover
Brokerage Index Series (May, 1997-April, 1999), and
Executive Vice President of Dean Witter, Discover & Co.
Barry Fink (44) ...................................... Senior Vice President (since March, 1997) and Secretary
Vice President, and General Counsel (since February, 1997) and Director
Secretary and General Counsel (since July, 1998) of the Investment Manager and MSDW
Two World Trade Center Services Company; Senior Vice President (since March,
New York, New York 1997) and Assistant Secretary and Assistant General
Counsel (since February, 1997) of the Distributor;
Assistant Secretary of Dean Witter Reynolds (since August,
1996); Vice President, Secretary and General Counsel of
the Morgan Stanley Dean Witter Funds and the TCW/DW Funds
(since February, 1997); Vice President, Secretary and
General Counsel of Discover Brokerage Index Series;
previously First Vice President (June, 1993-February,
1997), Vice President and Assistant Secretary and
Assistant General Counsel of the Investment Manager and
MSDW Services Company and Assistant Secretary of the Mor-
gan Stanley Dean Witter Funds and the TCW/DW Funds.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Katherine H. Stromberg (50) .......................... Vice President of the Investment Manager; Vice President
Vice President of various Morgan Stanley Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (53) ................................ First Vice President and Assistant Treasurer of the
Treasurer Investment Manager and MSDW Services Company; Treasurer of
Two World Trade Center the Morgan Stanley Dean Witter Funds, the TCW/DW Funds and
New York, New York Discover Brokerage Index Series.
</TABLE>
- ------------------------
*Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
In addition, RONALD E. ROBISON, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, ROBERT S. GIAMBRONE, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, JOSEPH J. MCALINDEN, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer Agent,
and PETER M. AVELAR, JONATHAN R. PAGE and JAMES F. WILLISON, Senior Vice
Presidents of the Investment Manager, and JOSEPH R. ARCIERI and GERARD J. LIAN,
Vice Presidents of the Investment Manager, are Vice Presidents of the Fund.
In addition, FRANK BRUTTOMESSO, MARILYN K. CRANNEY, LOUANNE D. MCINNIS,
CARSTEN OTTO and RUTH ROSSI, First Vice Presidents and Assistant General
Counsels of the Investment Manager and MSDW Services Company and TODD LEBO, Vice
President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Fund.
INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The Morgan
Stanley Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; these are people whose advice and counsel are in demand by others and
for whom there is often competition. To accept a position on the Funds' Boards,
such individuals may reject other attractive assignments because the Funds make
substantial demands on their time. All of the Independent Trustees serve as
members of the Audit Committee. In addition, three of the Trustees, including
two Independent Trustees, serve as members of the Derivatives Committee and the
Insurance Committee.
The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill any
Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1 plan
of distribution. Most of the Morgan Stanley Dean Witter Funds have a Rule 12b-1
plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
18
<PAGE>
The Board of each Fund has a Derivatives Committee to approve parameters for
and monitor the activities of the Fund with respect to derivative investments,
if any, made by the Fund.
Finally, the Board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL MORGAN
STANLEY DEAN WITTER FUNDS. The Independent Trustees and the Funds' management
believe that having the same Independent Trustees for each of the Morgan Stanley
Dean Witter Funds avoids the duplication of effort that would arise from having
different groups of individuals serving as Independent Trustees for each of the
Funds or even of sub-groups of Funds. They believe that having the same
individuals serve as Independent Trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent Trustees
serve on all Fund Boards enhances the ability of each Fund to obtain, at modest
cost to each separate Fund, the services of Independent Trustees, of the
caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Morgan Stanley Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties. It
also provides that all third persons shall look solely to the Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Trustees are paid a single
meeting fee by the Fund. The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by the
Investment Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund for their services as Trustee.
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended December 31, 1998.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,450
Edwin J. Garn................................................. 1,600
Wayne E. Hedien............................................... 1,550
Dr. Manuel H. Johnson......................................... 1,550
Michael E. Nugent............................................. 1,600
John L. Schroeder............................................. 1,600
</TABLE>
19
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 85 Morgan Stanley Dean Witter Funds and, in the case of Messrs. Johnson,
Nugent and Schroeder, the 11 TCW/DW Funds that were in operation at December 31,
1998. With respect to Messrs. Johnson, Nugent and Schroeder, the TCW/DW Funds
are included solely because of a limited exchange privilege between those Funds
and five Morgan Stanley Dean Witter Money Market Funds. No compensation was paid
to the Fund's Independent Trustees by Discover Brokerage Index Series for the
calendar year ended December 31, 1998
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICE FOR SERVICES
AS DIRECTOR OR TO
TRUSTEE AND 85 MORGAN
COMMITTEE MEMBER FOR SERVICE AS STANLEY
OF 85 MORGAN TRUSTEE AND DEAN WITTER
STANLEY COMMITTEE MEMBER FUNDS AND
NAME OF DEAN WITTER OF 11 TCW/DW 11 TCW/DW
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------
<S> <C> <C> <C>
Michael Bozic.............. $120,150 -- $120,150
Edwin J. Garn.............. 132,450 -- 132,450
Wayne E. Hedien............ 132,350 -- 132,350
Dr. Manuel H. Johnson...... 128,400 62,331 190,731
Michael E. Nugent.......... 132,450 62,131 194,581
John L. Schroeder.......... 132,450 64,731 197,181
</TABLE>
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, 55 of the Morgan
Stanley Dean Witter Funds, including the Fund, have adopted a retirement program
under which an Independent Trustee who retires after serving for at least five
years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Morgan Stanley Dean Witter Fund that has
adopted the retirement program (each such Fund referred to as an "Adopting Fund"
and each such Trustee referred to as an "Eligible Trustee") is entitled to
retirement payments upon reaching the eligible retirement age (normally, after
attaining age 72). Annual payments are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years up
to a maximum of 60.44% after ten years of service. The foregoing percentages may
be changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are not secured or funded by the Adopting
Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the year fiscal ended December 31,
1998 and by the 55 Morgan Stanley Dean Witter Funds (including the Fund) for the
year ended December 31, 1998, and the estimated retirement benefits for the
Independent Trustees, to commence upon their retirement, from the Fund as of
December 31, 1998 and from the 55 Morgan Stanley Dean Witter Funds as of
December 31, 1998.
- ------------------------
1 An Eligible Trustee may elect alternative payments of his or her retirement
benefits based upon the combined life expectancy of the Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. In
addition, the Eligible Trustee may elect that the surviving spouse's
periodic payment of benefits will be equal to a lower percentage of the
periodic amount when both spouses were alive. The amount estimated to be
payable under this method, through the remainder of the later of the lives
of the Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit.
20
<PAGE>
RETIREMENT BENEFITS FROM THE FUND AND ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS RETIREMENT BENEFITS ESTIMATED ANNUAL
--------------------------------- ACCRUED AS EXPENSES BENEFITS
ESTIMATED UPON RETIREMENT(2)
CREDITED YEARS ESTIMATED --------------------- -------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- ----------------------------------- --------------- --------------- ------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic...................... 10 60.44 $ 396 $ 22,377 $ 997 $ 52,250
Edwin J. Garn...................... 10 60.44 599 35,225 997 52,250
Wayne E. Hedien.................... 9 51.37 740 41,979 848 44,413
Dr. Manuel H. Johnson.............. 10 60.44 240 14,047 997 52,250
Michael E. Nugent.................. 10 60.44 421 25,336 997 52,250
John L. Schroeder.................. 8 50.37 807 45,117 838 44,343
</TABLE>
- ------------------------
1 Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) on
page 20.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
The following owned more than 5% of the outstanding shares of the Fund on
April 6, 1999: Success Ventures Limited Partnership, Attn: Joseph Kelner, One
Lake Road, Great Neck, NY 11020 - 5.6%.
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1% of the Fund's shares of beneficial
interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------
A. INVESTMENT MANAGER
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New York,
New York 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the Investment Manager to
provide administrative services and manage the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Fund pays the Investment Manager monthly compensation calculated
daily by applying the following annual rates to the net assets of the Fund,
determined as of the close of business on every business day: 0.50% of the
portion of the daily net assets not exceeding $500 million; 0.425% of the
portion of the daily net assets exceeding $500 million but not exceeding $750
million; 0.375% of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.35% of the portion of the daily net assets
exceeding $1 billion but not exceeding $1.5 billion; 0.325% of the portion of
the daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.30%
of the portion of the daily net assets exceeding $2 billion but not exceeding
$2.5 billion; 0.275% of the portion of the daily net assets exceeding $2.5
billion but not exceeding $3 billion; and 0.25% of the portion of the daily net
assets exceeding $3 billion.
For the fiscal years ended December 31, 1996, 1997 and 1998, the Investment
Manager accrued total compensation under the Management Agreement in the amounts
of $212,463, $221,429 and $308,510, respectively.
The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.
21
<PAGE>
B. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. The Distributor also pays certain expenses in
connection with the distribution of the Fund's shares, including the costs of
preparing, printing and distributing advertising or promotional materials, and
the costs of printing and distributing prospectuses and supplements thereto used
in connection with the offering and sale of the Fund's shares. The Fund bears
the costs of initial typesetting, printing and distribution of prospectuses and
supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws and
pays filing fees in accordance with state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER AND FUND EXPENSES PAID BY THIRD
PARTIES
The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.
Under the terms of the Management Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's books
and records and furnishes, at its own expense, the office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund may
reasonably require in the conduct of its business, including the preparation of
prospectuses, proxy statements and reports required to be filed with federal and
state securities commissions (except insofar as the participation or assistance
of independent accountants and attorneys is, in the opinion of the Investment
Manager, necessary or desirable). In addition, the Investment Manager pays the
salaries of all personnel, including officers of the Fund, who are employees of
the Investment Manager. The Investment Manager also bears the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses include, but are not limited to: expenses of the Plan of Distribution
pursuant to Rule 12b-1; charges and expenses of any registrar, custodian, stock
transfer and dividend disbursing agent; brokerage commissions; taxes; engraving
and printing share certificates; registration costs of the Fund and its shares
under federal and state securities laws; the cost and expense of printing,
including typesetting, and distributing prospectuses of the Fund and supplements
thereto to the Fund's shareholders; all expenses of shareholders' and Trustees'
meetings and of preparing, printing and mailing of proxy statements and reports
to shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any outside
service used for pricing of the Fund's shares; fees and expenses of legal
counsel, including counsel to the Trustees who are not interested persons of the
Fund or of the Investment Manager (not including compensation or
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expenses of attorneys who are employees of the Investment Manager); fees and
expenses of the Fund's independent accountants; membership dues of industry
associations; interest on Fund borrowings; postage; insurance premiums on
property or personnel (including officers and Trustees) of the Fund which inure
to its benefit; extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification relating
thereto); and all other costs of the Fund's operation.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees.
D. RULE 12b-1 PLAN
In accordance with a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act between the Fund and the Distributor, the Distributor
provides certain services in connection with the promotion of sales of Fund
shares (the "Plan").
The Plan provides that the Distributor bears the expense of all promotional
and distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor under the Plan: (1)
compensation to and expenses of Dean Witter Reynolds' and other selected
Broker-Dealers' Financial Advisors and other employees, including overhead and
telephone expenses; (2) sales incentives and bonuses to sales representatives
and to marketing personnel in connection with promoting sales of the Fund's
shares; (3) expenses incurred in connection with promoting sales of the Fund's
shares; (4) preparing and distributing sales literature; and (5) providing
advertising and promotional activities, including direct mail solicitation and
television, radio, newspaper, magazine and other media advertisements.
Dean Witter Reynolds Financial Advisors are paid an annual residual
commission, currently a residual of up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record. The
residual is a charge which reflects residual commissions paid by Dean Witter
Reynolds to its Financial Advisors and Dean Witter Reynolds' expenses associated
with the servicing of shareholders' accounts, including the expenses of
operating Dean Witter Reynolds' branch offices in connection with the servicing
of shareholders' accounts, which expenses include lease costs, the salaries and
employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies and other expenses
relating to branch office serving of shareholder accounts.
The Fund is authorized to reimburse specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares. Reimbursement is
made through payments at the end of each month. The amount of each monthly
payment may in no event exceed an amount equal to a payment at the annual rate
of 0.15 of 1% of the Fund's average daily net assets during the month. No
interest or other financing charges will be incurred for which reimbursement
payments under the Plan will be made. In addition, no interest charges, if any,
incurred on any distribution expense incurred by the Distributor or other
selected dealers pursuant to the Plan, will be reimbursable under the Plan. In
the case of all expenses other than expenses representing a residual to
Financial Advisors, such amounts shall be determined at the beginning of each
calendar quarter by the Trustees, including a majority of the Independent 12b-1
Trustees. Expenses representing a residual to Financial Advisors may be
reimbursed without prior determination. In the event that the Distributor
proposes that monies shall be reimbursed
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for other than such expenses, then in making quarterly determinations of the
amounts that may be expended by the Fund, the Investment Manager provides and
the Trustees review a quarterly budget of projected incremental distribution
expenses to be incurred on behalf of the Fund, together with a report explaining
the purposes and anticipated benefits of incurring such expenses. The Trustees
determine which particular expenses, and the portions thereof, that may be borne
by the Fund, and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's shares.
The Fund reimbursed $59,613 to the Distributor pursuant to the Plan which
amounted to 0.10 of 1% of the Fund's average daily net assets for the fiscal
year ended December 31, 1998. Based upon the total amounts spent by the
Distributor during the period, it is estimated that the amount paid by the Fund
to the Distributor for distribution was spent in approximately the following
ways: (i) advertising--$0; (ii) printing and mailing PROSPECTUSES to other than
current shareholders--$0; (iii) compensation to underwriters--$0; (iv)
compensation to dealers--$0; (v) compensation to sales personnel--$0; and (vi)
other, which includes payment to Dean Witter Reynolds for expenses substantially
all of which relate to compensation of sales personnel and associated overhead
expenses--$59,613. No payments under the Plan were made for interest, carrying
or other financing charges.
Under the Plan, the Distributor uses its best efforts in rendering services
to the Fund, but in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations, the Distributor is not
liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each calendar
quarter, a written report regarding the incremental distribution expenses
incurred on behalf of the Fund during such calendar quarter, which report
includes (1) an itemization of the types of expenses and the purposes therefore;
(2) the amounts of such expenses; and (3) a description of the benefits derived
by the Fund. In the Trustees' quarterly review of the Plan they consider its
continued appropriateness and the level of compensation provided therein.
No interested person of the Fund nor any Independent Trustee has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, the Investment Manager, Dean Witter Reynolds, MSDW Services Company
or certain of their employees may be deemed to have such an interest as a result
of benefits derived from the successful operation of the Plan or as a result of
receiving a portion of the amounts expended thereunder by the Fund.
On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtaining and would be likely to obtain
under the Plan, including that: (a) the Plan is essential in order to implement
the Fund's method and to enable the Fund to continue to grow and avoid a pattern
of net redemptions which, in turn, are essential for effective investment
management; and (b) without the reimbursement of distribution and account
maintenance expenses of Dean Witter Reynolds's branch offices made possible by
the 12b-1 fees, Dean Witter Reynolds could not establish and maintain an
effective system for distribution, servicing of Fund shareholders and
maintenance of shareholder accounts; and (3) what services had been provided and
were continuing to be provided under the Plan to the Fund and its shareholders.
Based upon their review, the Trustees, including each of the Independent
Trustees, determined that continuation of the Plan would be in the best interest
of the Fund and would have a reasonable likelihood of continuing to benefit the
Fund and its shareholders. In the Trustees' quarterly review of the Plan, they
will consider its continued appropriateness and the level of compensation
provided therein.
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The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
Fund, and all material amendments to the Plan must also be approved by the
Trustees in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Investment Company Act) on not more than thirty days'
written notice to any other party to the Plan. So long as the Plan is in effect,
the election and nomination of Independent Trustees shall be committed to the
discretion of the Independent Trustees.
E. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans. The principal business address of the Transfer Agent is Harborside
Financial Center, Plaza Two, Jersey City, New Jersey 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian for the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036 serves as the independent accountants of the Fund. The independent
accountants are responsible for auditing the annual financial statements of the
Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these services,
the Transfer Agent receives a per shareholder account fee from the Fund.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
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A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
is responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the negotiation
of brokerage commissions, if any. The Fund expects that the primary market for
the securities in which it intends to invest will generally be the
over-the-counter market. Securities are generally traded in the over-the-counter
market on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually includes
a profit to the dealer. The Fund also expects that securities will be purchased
at times in underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or discount.
On occasion the Fund may also purchase certain money market instruments directly
from an issuer, in which case no commissions or discounts are paid.
During the fiscal years ended December 31, 1996, 1997 and 1998, the Fund
paid no such brokerage commissions or concessions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds. The Fund will
limit its transactions with Dean Witter Reynolds to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e. Certificates of
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Deposit and Bankers' Acceptances) and Commercial Paper (not including Tax-Exempt
Municipal Paper). The transactions will be effected with Dean Witter Reynolds
only when the price available from Dean Witter Reynolds is better than that
available from other dealers.
During the fiscal years ended December 31, 1996, 1997 and 1998, the Fund did
not effect any principal transactions with Dean Witter Reynolds.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through Dean Witter Reynolds, Morgan Stanley & Co. and other affiliated
brokers and dealers. In order for an affiliated broker or dealer to effect any
portfolio transactions on an exchange for the Fund, the commissions, fees or
other remuneration received by the affiliated broker or dealer must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow the affiliated broker or dealer to receive no
more than the remuneration which would be expected to be received by an
unaffiliated broker in a commensurate arm's-length transaction. Furthermore, the
Trustees, including the Independent Trustees, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to an affiliated broker or dealer are consistent with the foregoing
standard. The Fund does not reduce the management fee it pays to the Investment
Manager by any amount of the brokerage commissions it may pay to an affiliated
broker or dealer.
During the fiscal years ended December 31, 1996, 1997 and 1998, the Fund
paid no brokerage commissions to an affiliated broker or dealer.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions.
In seeking to implement the Fund's policies, the Investment Manager effects
transactions with those brokers and dealers who the Investment Manager believes
provide the most favorable prices and are capable of providing efficient
executions. If the Investment Manager believes the prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager. The services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the Fund does not reduce the management fee it
pays to the Investment Manager by any amount that may be attributable to the
value of such services.
Subject to the principle of obtaining best price and execution, the
Investment Manager may consider a broker-dealer's sales of shares of the Fund as
a factor in selecting from among those broker-dealers qualified to provide
comparable prices and execution on the Fund's portfolio transactions. The Fund
does not, however, require a broker-dealer to sell shares of the Fund in order
for it to be considered to execute portfolio transactions, and will not enter
into any arrangement whereby a specific amount or percentage of the Fund's
transactions will be directed to a broker which sells shares of the Fund to
customers. The Trustees review, periodically, the allocation of brokerage orders
to monitor the operation of these policies.
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The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain initial
and secondary public offerings, the Investment Manager utilizes a pro rata
allocation process based on the size of the Morgan Stanley Dean Witter Funds
involved and the number of shares available from the public offering.
D. DIRECTED BROKERAGE
During the fiscal year ended December 31, 1998, the Fund did not pay any
brokerage commissions to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the fiscal year ended December 31, 1998, the Fund did not purchase
securities issued by brokers or dealers that were among the ten brokers or the
ten dealers which executed transactions for or with the Fund in the largest
dollar amounts during the year. At December 31, 1998, the Fund did not own any
securities issued by any of such issuers.
VII. CAPITAL STOCK AND OTHER SECURITIES
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The shareholders of the Fund are entitled to a full vote for each full share
of beneficial interest held. The Fund is authorized to issue an unlimited number
of shares of beneficial interest. All shares of beneficial interest of the Fund
are of $0.01 par value and are equal as to earnings, assets and voting
privileges.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
PROSPECTUS.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by action of the
Trustees or by the shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for the obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that notice
of such Fund obligations include such disclaimer, and provides for
indemnification out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Given the above limitations on shareholder personal liability, and the nature of
the Fund's assets and operations, the possibility of the Fund being unable to
meet its obligations is remote and thus, in the opinion of Massachusetts counsel
to the Fund, the risk to Fund shareholders of personal liability is remote.
All of the Trustees have been elected by the shareholders of the Fund, most
recently at a Special Meeting of Shareholders held on May 21, 1997. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees (as provided for in the Declaration of Trust), and they may
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at any time lengthen or shorten their own terms or make their terms of unlimited
duration and appoint their own successors, provided that always at least a
majority of the Trustees has been elected by the shareholders of the Fund.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
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A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's PROSPECTUS.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the Transfer
Agent to act as their agent in connection with the application of proceeds of
any redemption of Fund shares to the purchase of shares of any other Morgan
Stanley Dean Witter Fund and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transaction pursuant to the exchange privilege.
REDEMPTIONS. A check drawn by a shareholder against his or her account in
the Fund constitutes a request for redemption of a number of shares sufficient
to provide proceeds equal to the amount of the check. Payment of the proceeds
will normally be made on the next business day after receipt by the Transfer
Agent of the check in proper form. If a check is presented for payment to the
Transfer Agent by a shareholder or payee in person, the Transfer Agent will make
payment by means of a check drawn on the Fund's account or, in the case of a
shareholder payee, to the shareholder's predesignated bank account, but will not
make payment in cash.
B. OFFERING PRICE
The price of Fund shares, called "net asset value," is based on the value of
the Fund's portfolio securities.
The Fund utilizes the amortized cost method in valuing its portfolio
securities for purposes of determining the net asset value of its shares. The
Fund utilizes the amortized cost method in valuing its portfolio securities even
though the portfolio securities may increase or decrease in market value,
generally in connection with changes in interest rates. The amortized cost
method of valuation involves valuing a security at its cost at the time of
purchase adjusted by a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the investment.
During such periods, the yield to investors in the Fund may differ somewhat from
that obtained in a similar company which uses market-to-market values for all of
its portfolio securities. For example, if the use of amortized cost resulted in
a lower (higher) aggregate portfolio value on a particular day, a prospective
investor in the Fund would be able to obtain a somewhat higher (lower) yield
than would result from investment in such a similar company and existing
investors would receive less (more) investment income. The purpose of this
method of calculation is to facilitate the maintenance of a constant net asset
value per share of $1.00.
The use of the amortized cost method to value the portfolio securities of
the Fund and the maintenance of the per share net asset value of $1.00 is
permitted pursuant to Rule 2a-7 of the Act (the "Rule") and is conditioned on
its compliance with various conditions contained in the Rule including: (a) the
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Trustees are obligated, as a particular responsibility within the overall duty
of care owed to the Fund's shareholders, to establish procedures reasonably
designed, taking into account current market conditions and the Fund's
investment objectives, to stabilize the net asset value per share as computed
for the purpose of distribution and redemption at $1.00 per share; (b) the
procedures include (i) calculation, at such intervals as the Trustees determine
are appropriate and as are reasonable in light of current market conditions, of
the deviation, if any, between net asset value per share using amortized cost to
value portfolio securities and net asset value per share based upon available
market quotations with respect to such portfolio securities; (ii) periodic
review by the Trustees of the amount of deviation as well as methods used to
calculate it; and (iii) maintenance of written records of the procedures, and
the Trustees' considerations made pursuant to them and any actions taken upon
such consideration; (c) the Trustees should consider what steps should be taken,
if any, in the event of a difference of more than 1/2 of 1% between the two
methods of valuation; and (d) the Trustees should take such action as they deem
appropriate (such as shortening the average portfolio maturity, realizing gains
or losses, withholding dividends or, as provided by the Declaration of Trust,
reducing the number of outstanding shares of the Fund) to eliminate or reduce to
the extent reasonably practicable material dilution or other unfair results to
investors or existing shareholders which might arise from differences between
the two method of valuation.
Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio security is deemed to be the period remaining
(calculated from the trade date or such other date on which the Fund's interest
in the instrument is subject to market action) until the date on which in
accordance with the terms of the security the principal amount must
unconditionally be paid, or in the case of a security called for redemption, the
date on which the redemption payment must be made.
A variable rate security that is subject to a demand feature is deemed to
have a maturity equal to the period remaining until the principal amount can be
recovered through demand. A floating rate security that is subject to a demand
feature is deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
An "NRSRO" is a nationally recognized statistical rating organization. The
term "Requisite NRSROs" means (i) any two NRSROs that have issued a rating with
respect to a security or class of debt obligations of an issuer, or (ii) if only
one NRSRO has issued a rating with respect to such security or issuer at the
time a fund purchases or rolls over the security, that NRSRO.
An Eligible Security is generally defined in the Rule to mean (i) a rated
security with a remaining maturity of 397 calendar days or less that has
received a rating from the Requisite NRSROs in one of the two highest short-term
rating categories (within which there may be sub-categories or gradations
indicating relative standing); or (ii) An Unrated Security that is of comparable
quality to a security meeting the requirements of (1) above, as determined by
Trustees; (iii) In addition, in the case of a security that is subject to a
Demand Feature or Guarantee: (A) The Guarantee has received a rating from an
NRSRO or the Guarantee is issued by a guarantor that has received a rating from
an NRSRO with respect to a class of debt obligations (or any debt obligation
within that class) that is comparable in priority and security to the Guarantee,
unless: (1) the Guarantee is issued by a person that directly or indirectly,
controls, is controlled by or is under a common control with the issuer of the
security subject to the Guarantee (other than a sponsor or a Special Purpose
Entity with respect to an Asset Backed Security: (2) the security subject to the
Guarantee is a repurchase agreement that is Collateralized Fully; or (3) the
Guarantee itself is a Government Security and (B) the issuer of the Demand
Feature, or another institution, has undertaken promptly to notify the holder of
the security in the event the Demand Feature or Guarantee is substituted with
another Demand Feature or Guarantee (if such substitution is permissible under
the terms of the Demand Feature or Guarantee). The Fund will limit its
investments to securities that meet the requirements for Eligible Securities.
As permitted by the Rule, the Trustees have delegated to the Fund's
Investment Manager the authority to determine which securities present minimal
credit risks and which unrated securities are comparable in quality to rated
securities.
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Also, as required by the Rule, the Fund will limit its investments in
securities, other than Government securities, so that, at the time of purchase:
(a) except as further limited in (b) below with regard to certain securities,
with respect to 75% of its total assets, no more than 5% of its total assets
will be invested in the securities of any one issuer; and (b) with respect to
Eligible Securities that have received a rating in less than the highest
category by any one of the NRSROs whose ratings are used to qualify the security
as an Eligible Security, or that have been determined to be of comparable
quality: (i) no more than 5% in the aggregate of the Fund's total assets in all
such securities, and (ii) no more than the greater of 1% of total assets, or $1
million, in the securities on any one issuer.
The presence of a line of credit or other credit facility offered by a bank
or other financial institution which guarantees the payment obligation of the
issuer, in the event of a default in the payment of principal or interest of an
obligation, may be taken into account in determining whether an investment is an
Eligible Security, provided that the guarantee itself is an Eligible Security.
The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Trustees determine present minimal
credit risks and which are Eligible Securities. The Rule also requires the Fund
to maintain a dollar-weighted average portfolio maturity (not more than 90 days)
appropriate to its objective of maintaining a stable net asset value of $1.00
per share and precludes the purchase of any instrument with a remaining maturity
of more than 397 days. Should the disposition of a portfolio security result in
a dollar-weighted average portfolio maturity of more than 90 days, the Fund will
invest its available cash in such a manner as to reduce such maturity to 90 days
or less a soon as is reasonably practicable.
If the Trustees determine that it is no longer in the best interests of the
Fund and its shareholders to maintain a stable price of $1 per share or if the
Trustees believe that maintaining such price no longer reflects a market-based
net asset value per share, the Trustees have the right to change from an
amortized cost basis of valuation to valuation based on market quotations. The
Fund will notify shareholders of the Fund of any such change.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund generally will make three basic types of distributions: tax exempt
dividends, ordinary dividends and long-term capital gain distributions. These
types of distributions are reported differently on a shareholder's income tax
return and they are also subject to different rates of tax. The tax treatment of
the investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Shareholders are urged to
consult their own tax professionals regarding specific questions as to federal,
state or local taxes.
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so that
the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any ordinary income or capital gains in any year for reinvestment. In
such event, the Fund will pay federal income tax (and possibly excise tax) on
such retained gains.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have a tax holding period of more than one
year. Gains or losses on the sale of securities with a tax holding period of one
year or less will be short-term gains or losses.
In computing net investment income, the Fund will amortize any premiums and
original issue discounts on securities owned, if applicable. Capital gains or
losses realized upon sale or maturity of such securities will be based on their
amortized cost.
30
<PAGE>
All or a portion of any of the Fund's gain from tax-exempt obligations
purchased at a market discount may be treated as ordinary income rather than
capital gain.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be affected. In that event, the Fund
would re-evaluate its investment objective and policies.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. The Fund intends to qualify to pay
"exempt-interest dividends" to its shareholders by maintaining, as of the close
of each of its taxable years, at least 50% of the value of its assets in
tax-exempt securities. An exempt-interest dividend is that part of the dividend
distributions made by the Fund which consists of interest received by the Fund
on tax-exempt securities upon which the shareholder incurs no federal income
taxes. Exempt-interest dividends are included, however, in determining what
portion, if any, of a person's Social Security benefits are subject to federal
income tax.
The Fund intends to invest a portion of its assets in certain "private
activity bonds". As a result, a portion of the exempt-interest dividends paid by
the Fund will be an item of tax preference to shareholders subject to the
alternative minimum tax. Certain corporations which are subject to the
alternative minimum tax may also have to include exempt-interest dividends in
calculating their alternative minimum taxable income in situations where the
"adjusted current earnings" of the corporation exceeds its alternative minimum
taxable income.
Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of net
short-term capital gains. Such dividends and distributions are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Distributions of
long-term capital gains, if any, are taxable as long-term capital gains,
regardless of how long the shareholder has held the Fund shares and regardless
of whether the distribution is received in additional shares or in cash. Since
the Fund's income is expected to be derived entirely from interest rather than
dividends, it is anticipated that no portion of such dividend distributions will
be eligible for the federal dividends received deduction available to
corporations.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of any taxable interest income and short term
capital gains.
After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the percentage of any distributions which constitute
an item of tax preference for purposes of the alternative minimum tax.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from the Fund will have the
effect of reducing the net asset value of the shareholder's stock in the Fund by
the exact amount of the dividend or capital gains distribution. Furthermore,
capital gains distributions and some portion of the dividends may be subject to
federal income taxes. If the net asset value of the shares should be reduced
below a shareholder's cost as a result of the payment of dividends or the
distribution of realized long-term capital gains, such payment or
31
<PAGE>
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Any loss realized by shareholders upon a redemption of shares within
six months of the date of their purchase will be treated as a long-term capital
loss to the extent of any distributions of net long-term capital gains with
respect to such shares during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured by
the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the tax
basis of their shares. Under certain circumstances a shareholder may compute and
use an average cost basis in determining the gain or loss on the sale or
redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund is not deductible. Furthermore, entities or persons who are
"substantial users" (or related persons) of facilities financed by industrial
development bonds should consult their tax advisers before purchasing shares of
the Fund. "Substantial user" is defined generally by Income Tax Regulation
1.103-11(b) as including a "non-exempt person" who regularly uses in a trade or
business a part of a facility financed from the proceeds of industrial
development bonds.
NEW YORK STATE AND CITY TAX
To the extent that dividends are derived from interest on New York
tax-exempt securities, such dividends will also be exempt from New York State
and City personal income taxes. Interest on indebtedness incurred or continued
to purchase or carry shares of an investment company paying exempt-interest
dividends, such as the Fund, may not be deductible by the investor for State or
City personal income tax purposes.
The foregoing relates to federal income taxation and to New York State and
City personal income taxation as in effect as of the date of the PROSPECTUS.
Distributions from investment income and capital gains, including
exempt-interest dividends, may be subject to New York franchise taxes if
received by a corporation doing business in New York, to state taxes in states
other than New York and to local taxes.
X. UNDERWRITERS
- --------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plans."
32
<PAGE>
XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------
The Fund's current yield for the seven days ending December 31, 1998 was
2.64%. The effective annual yield on December 31, 1998, was 2.68% assuming daily
compounding.
The Fund's annualized current yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential investors,
is computed by determining, for a stated seven-day period, the net change,
exclusive of capital changes and including the value of additional shares
purchased with dividends and any dividends declared therefrom (which reflect
deductions of all expenses of the Fund such as management fees), in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7).
The Fund's annualized effective yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential investors,
is computed by determining (for the same stated seven-day period as for the
current yield), the net change, exclusive of capital changes and including the
value of additional shares purchased with dividends and any dividends declared
therefrom (which reflect deductions of all expenses of the Fund such as
management fees), in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, and dividing the difference
by the value of the account at the beginning of the base period to obtain the
base period return, and then compounding the base period return by adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result.
The yields quoted in any advertisement or other communication should not be
considered a representation of the yields of the Fund in the future since the
yield is not fixed. Actual yields will depend not only on the type, quality and
maturities of the investments held by the Fund and changes in interest rates on
such investments, but also on changes in the Fund's expenses during the period.
Yield information may be useful in reviewing the performance of the Fund and
for providing a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments which typically pay a fixed
yield for a stated period of time, the Fund's yield fluctuates.
Based upon a combined Federal and New York personal income tax bracket of
43.74%, the Fund's tax-equivalent yield for the seven days ending December 31,
1998, was 4.69%.
Tax-equivalent yield is computed by dividing that portion of the current
yield (calculated as described above) which is tax-exempt by 1 minus a stated
tax rate and adding the quotient to that portion, if any, of the yield of the
Fund that is not tax-exempt. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund
by adding the sum of all distributions on 10,000, 50,000 or 100,000 shares of
the Fund since inception to $10,000, $50,000 and $100,000, as the case may be.
Investments of $10,000, $50,000 and $100,000 in the Fund at inception would have
grown to $12,649, $63,245 and $126,490, respectively, at December 31, 1998.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
December 31, 1998 included in this STATEMENT OF ADDITIONAL INFORMATION and
incorporated by reference in the PROSPECTUS have been so included and
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
*****
This STATEMENT OF ADDITIONAL INFORMATION and the PROSPECTUS do not contain
all of the information set forth in the REGISTRATION STATEMENT the Fund has
filed with the SEC. The complete REGISTRATION STATEMENT may be obtained from the
SEC.
33
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK TAX-EXEMPT SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (64.3%)
$ 800 Babylon Industrial Development Agency, OFS Equity of Babylon Ser 1989 (AMT)... 4.85% 01/04/99 $ 800,000
2,000 Municipal Assistance Corporation for the City of New York, Ser K Subser K-3... 3.80 01/08/99 2,000,000
New York City Cultural Resources Trust,
1,200 Museum of Broadcasting Ser 1989............................................. 4.00 01/08/99 1,200,000
400 Salomon R Guggenheim Foundation 1990 Ser B.................................. 5.00 01/04/99 400,000
2,700 New York City Housing Development Corporation, James Tower 1994 Ser A......... 3.80 01/08/99 2,700,000
New York City Industrial Development Agency,
1,100 National Audubon Society Inc Ser 1989....................................... 5.00 01/04/99 1,100,000
800 The Calhoun School Inc Ser 1990............................................. 3.75 01/08/99 800,000
950 The Columbia Grammar & Preparatory School Ser 1994.......................... 3.75 01/08/99 950,000
2,000 New York City Transitional Finance Authority, Fiscal 1999 Ser A, Subser A-1... 4.05 01/08/99 2,000,000
2,200 New York Local Government Assistance Corporation, Ser 1994B................... 3.85 01/08/99 2,200,000
New York State Dormitory Authority,
2,600 Cornell University Ser 1990B................................................ 5.00 01/04/99 2,600,000
1,000 Oxford University Press Inc Ser 1993........................................ 5.10 01/04/99 1,000,000
1,000 The Metropolitan Museum of Art Ser 1993A.................................... 3.85 01/08/99 1,000,000
New York State Energy Research & Development Authority,
1,900 Brooklyn Union Gas Co Ser A-2 (MBIA)........................................ 3.80 01/08/99 1,900,000
3,000 Central Hudson Gas & Electric Corp Ser 1985 B............................... 4.00 01/08/99 3,000,000
1,500 Long Island Lighting Co 1985 Ser A.......................................... 3.58 03/01/99 1,500,000
480 Long Island Lighting Co 1993 Ser B (AMT).................................... 4.10 01/08/99 480,000
3,600 New York State Electric & Gas Corp 1994 Ser D............................... 4.80 01/04/99 3,600,000
New York State Housing Finance Agency,
3,000 East 84th Street Ser A (AMT)................................................ 3.85 01/08/99 3,000,000
2,000 Normandie Court II 1987 Ser A (AMT)......................................... 4.10 01/08/99 2,000,000
3,000 Service Contract 1998 Ser A................................................. 3.90 01/08/99 3,000,000
1,300 New York State Medical Care Facilities Finance Agency, Lenox Hill Hospital
1990 Ser A.................................................................. 3.80 01/08/99 1,300,000
3,500 Port Authority of New York & New Jersey, Ser 2................................ 5.05 01/04/99 3,500,000
2,000 St Lawrence County Industrial Development Agency, Reynolds Metals Co Ser 1995
(AMT)....................................................................... 3.85 01/08/99 2,000,000
2,500 Syracuse Industrial Developmental Agency, Syracuse University Eggers Hall Ser
1993........................................................................ 5.00 01/04/99 2,500,000
1,000 Yonkers Industrial Development Agency, Sarah Lawrence College Ser 1997
(MBIA)...................................................................... 3.85 01/08/99 1,000,000
PUERTO RICO
2,000 Puerto Rico Highway & Transportation Authority, Transportation 1998 Ser A
(AMBAC)..................................................................... 3.50 01/08/99 2,000,000
-----------
TOTAL NEW YORK TAX-EXEMPT SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS
(AMORTIZED COST $49,530,000)................................................................... 49,530,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998, CONTINUED
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
NEW YORK TAX-EXEMPT COMMERCIAL PAPER (27.0%)
Long Island Power Authority,
$ 1,000 Electric System Subser 3.......................................... 3.00% 03/18/99 3.00 % $ 1,000,000
1,000 Electric System Subser 3.......................................... 2.95 04/08/99 2.95 1,000,000
Metropolitan Transportation Authority,
1,000 Transit Facilities Ser CP-1 Subser B BANs......................... 2.90 02/18/99 2.90 1,000,000
1,000 Transit Facilities Ser CP-1 Subser B BANs......................... 2.90 02/24/99 2.90 1,000,000
New York City,
1,000 1994 Ser H Subser H-3 (FSA)....................................... 2.85 01/21/99 2.85 1,000,000
1,000 1994 Ser H Subser H-3 (FSA)....................................... 2.85 01/26/99 2.85 1,000,000
1,000 1996 Ser J Subser J-2............................................. 2.90 02/11/99 2.90 1,000,000
New York State,
1,300 Ser U BANs........................................................ 3.00 02/17/99 3.00 1,300,000
1,000 Ser U BANs........................................................ 3.00 03/10/99 3.00 1,000,000
New York State Dormitory Authority,
1,000 Columbia University 1997 Issue.................................... 3.10 01/14/99 3.10 1,000,000
1,000 Columbia University 1997 Issue.................................... 3.10 01/20/99 3.10 1,000,000
1,000 Columbia University 1997 Issue.................................... 3.00 02/09/99 3.00 1,000,000
1,000 Memorial Sloan-Kettering Cancer Center Ser 1989C.................. 3.30 01/12/99 3.30 1,000,000
500 Memorial Sloan-Kettering Cancer Center Ser 1989C.................. 3.30 01/28/99 3.30 500,000
1,000 Memorial Sloan-Kettering Cancer Center Ser 1989C.................. 2.85 03/11/99 2.85 1,000,000
New York State Environmental Quality,
1,000 Ser 1998 A........................................................ 2.90 02/10/99 2.90 1,000,000
1,000 Ser 1998 A........................................................ 2.90 03/08/99 2.90 1,000,000
New York State Power Authority,
1,000 Ser 2............................................................. 3.00 02/08/99 3.00 1,000,000
1,000 Ser 2............................................................. 2.80 03/09/99 2.80 1,000,000
PUERTO RICO
Puerto Rico Government Development Bank,
1,000 Ser 1996.......................................................... 2.80 02/22/99 2.80 1,000,000
1,000 Ser 1996.......................................................... 2.85 03/05/99 2.85 1,000,000
-----------
TOTAL NEW YORK TAX-EXEMPT COMMERCIAL PAPER
(AMORTIZED COST $20,800,000)..................................................................... 20,800,000
-----------
NEW YORK TAX-EXEMPT SHORT-TERM MUNICIPAL NOTES (8.4%)
1,000 Half Hollow Hills Central School District, 1998-1999 TANs,
dtd 07/09/98...................................................... 3.90 06/25/99 3.55 1,001,620
1,000 Mamaroneck Union Free School District, 1998 TANs,
dtd 07/09/98...................................................... 3.90 02/05/99 3.50 1,000,372
1,500 Massapequa Union Free School District, 1998-1999 TANs,
dtd 07/09/98...................................................... 3.80 06/30/99 3.60 1,501,426
1,000 Monroe County, 1998 BANs, dtd 07/24/98.............................. 4.00 07/23/99 3.60 1,002,147
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998, CONTINUED
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
$ 1,000 Smithtown Central School District, 1998-1999 TANs,
dtd 07/08/98...................................................... 3.90% 06/25/99 3.60 % $ 1,001,387
1,000 Three Village Central School District, Ser 1998-1999 TANs,
dtd 07/15/98...................................................... 3.90 06/30/99 3.60 1,001,425
-----------
TOTAL NEW YORK TAX-EXEMPT SHORT-TERM MUNICIPAL NOTES
(AMORTIZED COST $6,508,377)...................................................................... 6,508,377
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(AMORTIZED COST $76,838,377) (a)........................................................... 99.7 % 76,838,377
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................. 0.3 241,475
------ ------------
NET ASSETS................................................................................. 100.0 % $ 77,079,852
------ ------------
------ ------------
</TABLE>
- ---------------------
AMT Alternative Minimum Tax.
BANs Bond Anticipation Notes.
TANs Tax Anticipation Notes.
+ Rate shown is the rate in effect at December 31, 1998.
* Date on which the principal amount can be recovered through demand.
(a) Cost is the same for federal income tax purposes.
BOND INSURANCE:
AMBAC AMBAC Indemnity Corporation.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $76,838,377)................................................................. $76,838,377
Cash........................................................................................... 147,430
Interest receivable............................................................................ 369,303
Prepaid expenses............................................................................... 8,729
-----------
TOTAL ASSETS.............................................................................. 77,363,839
-----------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased.................................................. 158,074
Investment management fee.................................................................. 32,223
Plan of distribution fee................................................................... 6,444
Accrued expenses............................................................................... 87,246
-----------
TOTAL LIABILITIES......................................................................... 283,987
-----------
NET ASSETS................................................................................ $77,079,852
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in-capital................................................................................ $77,079,783
Accumulated undistributed net investment income................................................ 69
-----------
NET ASSETS................................................................................ $77,079,852
-----------
-----------
NET ASSET VALUE PER SHARE,
77,079,783 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED OF
$.01 PAR VALUE)............................................................................ $1.00
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME................................................................................. $2,060,533
----------
EXPENSES
Investment management fee....................................................................... 308,510
Plan of distribution fee........................................................................ 59,613
Professional fees............................................................................... 44,232
Transfer agent fees and expenses................................................................ 42,804
Shareholder reports and notices................................................................. 35,495
Trustees' fees and expenses..................................................................... 18,570
Registration fees............................................................................... 12,919
Custodian fees.................................................................................. 6,949
Other........................................................................................... 8,249
----------
TOTAL EXPENSES............................................................................. 537,341
Less: expense offset............................................................................ (6,949)
----------
NET EXPENSES............................................................................... 530,392
----------
NET INVESTMENT INCOME...................................................................... 1,530,141
NET REALIZED GAIN.......................................................................... 421
----------
NET INCREASE.................................................................................... $1,530,562
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................. $ 1,530,141 $ 1,169,478
Net realized gain..................................................... 421 --
----------------- -----------------
NET INCREASE..................................................... 1,530,562 1,169,478
Dividends from net investment income.................................. (1,530,092 ) (1,169,485 )
Net increase from transactions in shares of beneficial interest....... 27,743,794 8,577,349
----------------- -----------------
NET INCREASE..................................................... 27,744,264 8,577,342
NET ASSETS:
Beginning of period................................................... 49,335,588 40,758,246
----------------- -----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $69 AND $20,
RESPECTIVELY)..................................................... $ 77,079,852 $ 49,335,588
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter New York Municipal Money Market Trust (the "Fund"),
formerly Dean Witter New York Municipal Money Market 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 investment
objective is to provide a high level of daily income which is exempt from
federal and New York income tax, consistent with stability of principal and
liquidity. The Fund was organized as a Massachusetts business trust on December
28, 1989 and commenced operations on March 20, 1990.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued at amortized
cost, which approximates market value.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined on the identified cost method.
The Fund amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to shareholders as of the close of each business day.
2. INVESTMENT MANAGEMENT
Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), formerly Dean Witter InterCapital
Inc., the Fund pays the Investment Manager a management fee, accrued daily and
payable monthly, by applying the following annual rates to the net assets of the
Fund determined as of the close of each business day: 0.50% to the portion of
daily net assets not exceeding $500 million; 0.425% to the portion of daily net
assets
40
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
exceeding $500 million but not exceeding $750 million; 0.375% to the portion of
daily net assets exceeding $750 million but not exceeding $1 billion; 0.35% to
the portion of daily net assets exceeding $1 billion but not exceeding $1.5
billion; 0.325% to the portion of daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.30% to the portion of daily net assets exceeding $2
billion but not exceeding $2.5 billion; 0.275% to the portion of daily net
assets exceeding $2.5 billion but not exceeding $3 billion; and 0.25% to the
portion of daily net assets exceeding $3 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Morgan Stanley Dean Witter Distributors Inc. (the "Distributor"), an affiliate
of the Investment Manager, is the distributor of the Fund's shares and, in
accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under
the Act, finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses that
the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor and other
broker-dealers under the Plan: (1) compensation to, and expenses of, Morgan
Stanley Dean Witter Financial Advisors and other selected broker-dealers; (2)
sales incentives and bonuses to sales representatives and to marketing personnel
in connection with promoting sales of the Fund's shares; (3) expenses incurred
in connection with promoting sales of the Fund's shares; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio, newspaper,
magazine and other media advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the Fund's
shares. The amount of each monthly reimbursement payment may in no event exceed
an amount equal to a payment at the annual rate of 0.15% of the Fund's average
daily net assets during the month. Expenses incurred by the Distributor
41
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
pursuant to the Plan in any fiscal year will not be reimbursed by the Fund
through payments accrued in any subsequent fiscal year. For the year ended
December 31, 1998, the distribution fee was accrued at the annual rate of 0.10%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended December 31, 1998 aggregated $239,829,112 and $214,031,360,
respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $2,100.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended December 31, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,632. At December 31, 1998, the Fund had an accrued pension liability of
$48,731 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest, at $1.00 per share, were as
follows:
<TABLE>
<CAPTION>
FOR THE
YEAR FOR THE YEAR
ENDED ENDED
DECEMBER DECEMBER 31,
31, 1998 1997
----------- --------------
<S> <C> <C>
Shares sold...................................................... 177,790,665 108,032,544
Shares issued in reinvestment of dividends....................... 1,530,092 1,169,485
----------- --------------
179,320,757 109,202,029
Shares repurchased............................................... (151,576,963) (100,624,680)
----------- --------------
Net increase in shares outstanding............................... 27,743,794 8,577,349
----------- --------------
----------- --------------
</TABLE>
42
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Net investment income....................................... 0.025 0.026 0.025 0.028 0.018
Less dividends from net investment income................... (0.025) (0.026) (0.025) (0.028) (0.018)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN................................................ 2.53% 2.68% 2.53% 2.84% 1.78%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.87%(1) 0.96%(1) 0.95%(1) 1.01%(1) 1.03%
Net investment income....................................... 2.48% 2.64% 2.48% 2.79% 1.75%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $77,080 $49,336 $40,758 $39,108 $39,629
</TABLE>
- ---------------------
(1) Does not reflect the effect of the expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL
MONEY MARKET TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER NEW YORK MUNICIPAL MONEY MARKET 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 New York
Municipal Money Market Trust (the "Fund"), formerly Dean Witter New York
Municipal Money Market Trust, at December 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 5, 1999
1998 FEDERAL TAX NOTICE (UNAUDITED)
For the year ended December 31, 1998, all of the Fund's dividends
from net investment income were exempt interest dividends,
excludable from gross income for Federal income tax purposes.
44
