MORGAN STANLEY DEAN WITTER SHORT TERM US TREASURY TRUST, 497, 1998-08-06

MORGAN STANLEY DEAN WITTER SHORT TERM US TREASURY TRUST
497, 1998-08-06

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<PAGE>
Filed Pursuant to Rule 497(c)
Registration File No.: 33-41187

PROSPECTUS
JULY 29, 1998

Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust (the
"Fund") is an open-end, diversified management investment company whose
investment objective is current income, preservation of principal and
liquidity. The Fund seeks to achieve its objective by investing all of its
assets in U.S. Treasury securities backed by the full faith and credit of the
U.S. Government. (See "Investment Objective and Policies.") Shares of the Fund
are not issued, insured or guaranteed, as to value or yield, by the U.S.
Government or its agencies or instrumentalities.

Shares of the Fund are sold and redeemed at net asset value
without the imposition of a sales charge. The Fund is authorized to reimburse
specific expenses incurred in promoting the distribution of the Fund's shares,
including personal services to shareholders and maintenance of shareholder
accounts, in accordance with a Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940. Reimbursement may in no event exceed
an amount equal to payments at the annual rate of 0.35% of the average daily
net assets of the Fund.

This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated July 29, 1998, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.

Morgan Stanley Dean Witter
Short-Term U.S. Treasury Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)

TABLE OF CONTENTS

Prospectus Summary/ 2
Summary of Fund Expenses/ 3
Financial Highlights/ 4
The Fund and Its Management/ 5
Investment Objective and Policies/ 5
Purchase of Fund Shares/ 7
Shareholder Services/ 9
Redemptions and Repurchases/ 13
Dividends, Distributions and Taxes/ 16
Performance Information/ 17
Additional Information/ 17

Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.,
DISTRIBUTOR

<PAGE>

<TABLE>
<CAPTION>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
Fund open-end, diversified management investment company investing in U.S. Treasury securities backed
by the full faith and credit of the U.S. Government.
- --------------------------------------------------------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page 17).
Offered
- --------------------------------------------------------------------------------------------------------------------------
Offering The price of the shares offered by this Prospectus is determined once daily as of 4:00 p.m., New York
Price time, on each day that the New York Stock Exchange is open, and is equal to the net asset value per
share without a sales charge (see page 8).
- --------------------------------------------------------------------------------------------------------------------------
Minimum Minimum initial purchase through Distributor, $10,000 ($1,000 if the account is opened through
Purchase EasyInvestSM) although the Fund and Distributor may, from time to time, accept initial purchases of
$5,000; minimum subsequent investment, $100 (see page 8).
- --------------------------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is to provide investors with current income, preservation of
Objective principal and liquidity.
- --------------------------------------------------------------------------------------------------------------------------
Investment In order to maximize the amount of the Fund's dividends which are exempt from state and local
Policies income taxation, the Fund will invest all of its assets in U.S. Treasury securities which are direct
obligations of the U.S. Government (see page 5).
- --------------------------------------------------------------------------------------------------------------------------
Investment Morgan Stanley Dean Witter Advisors Inc., the Investment Manager of the Fund, and its wholly-owned
Manager subsidiary, Morgan Stanley Dean Witter Services Company Inc. serve in various investment
management, advisory, management and administrative capacities to 101 investment companies
and other portfolios with assets of approximately $115.2 billion at June 30, 1998 (see page 5).
- --------------------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.35% of daily net assets (see
Fee page 5).
- --------------------------------------------------------------------------------------------------------------------------
Dividends and Dividends are declared daily and paid monthly. Capital gains distributions, if any, are paid at least
Capital Gains once a year or are retained for reinvestment by the Fund. Dividends and capital gains distributions
Distributions are automatically invested in additional shares at net asset value unless the shareholder elects to
receive cash (see page 16).
- --------------------------------------------------------------------------------------------------------------------------
Distributor Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") (see page 7). The Fund is authorized
and Plan of to reimburse specific expenses incurred in promoting the distribution of the Fund's shares, including
Distribution personal services to shareholders and maintenance of shareholders accounts, in accordance with a
Plan of Distribution with the Distributor pursuant to Rule 12b-1 under the Investment Company Act
of 1940. Reimbursement may in no event exceed an amount equal to payments at an annual rate of
0.35% of average daily net assets of the Fund (see page 9).
- --------------------------------------------------------------------------------------------------------------------------
Redemption At net asset value; account may be involuntarily redeemed if total value of the account is less than
$1,000 or, if the account was opened through EasyInvestSM, if after twelve months the shareholder
has invested less than $10,000 in the account (see pages 13-15).
- --------------------------------------------------------------------------------------------------------------------------
Risks The Fund invests only in U.S. Treasury securities which are subject to minimal risk of loss of income
and principal. It may engage in the purchase of such securities on a when-issued basis. The value
of the Fund's portfolio securities, and therefore the Fund's net asset value per share, may increase
or decrease due to various factors, principally changes in prevailing interest rates. Generally, a rise
in interest rates will result in a decrease in the Fund's net asset value per share, while a drop in
interest rates will result in an increase in the Fund's net asset value per share. A portion of the U.S.
Treasury securities in which the Fund invests may be zero coupon Treasury securities. Such
securities are subject to greater market price fluctuations during periods of changing prevailing
interest rates (see pages 5-7).
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.

2
<PAGE>

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended May 31, 1998.

<TABLE>
<S> <C>
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases ............................ None
Maximum Sales Charge Imposed on Reinvested Dividends ................. None
Deferred Sales Charge ................................................ None
Redemption Fees ...................................................... None
Exchange Fee ......................................................... None

Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
- ----------------------------------------------------------------------
Management Fees ...................................................... 0.35%
12b-1 Fees* .......................................................... 0.34%
Other Expenses ....................................................... 0.13%
Total Fund Operating Expenses ........................................ 0.82%
</TABLE>

- ------------
* A PORTION OF THE 12B-1 FEE, WHICH MAY NOT EXCEED 0.25% OF THE FUND'S AVERAGE
DAILY NET ASSETS, IS CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF
NATIONAL ASSOCIATION OF SECURITIES DEALERS INC. ("NASD") GUIDELINES.

<TABLE>
<CAPTION>
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period: ............................................ $8 $26 $46 $101
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE MORE OR LESS
THAN THOSE SHOWN.

The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management" and "Purchase of Fund Shares--Plan of
Distribution" in this Prospectus.

Long-term shareholders of the Fund may pay more in distribution fees than
the economic equivalent of the maximum front-end sales charges permitted by the
NASD.

3
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by PricewaterhouseCoopers
LLP, independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further unaudited information about the performance of
the Fund is contained in the Fund's Annual Report to Shareholders, which may be
obtained without charge upon request to the Fund.

<TABLE>
<CAPTION>
For the Year Ended May 31
-----------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $ 9.85 $ 9.84 $ 9.98 $ 9.88 $ 10.34 $ 10.21
------- ------- ------- ------- ------- -------
Net investment income .................... 0.53 0.54 0.54 0.49 0.49 0.54
Net realized and unrealized gain
(loss) .................................. 0.11 -- (0.14) 0.10 ( 0.45) 0.13
------- -------- -------- ------- -------- -------
Total from investment operations ......... 0.64 0.54 0.40 0.59 0.04 0.67
------- -------- -------- ------- -------- -------
Less dividends and distributions from:
Net investment income ................... (0.53) (0.53) (0.54) (0.49) ( 0.50) ( 0.53)
Net realized gain ....................... -- -- -- -- -- ( 0.01)
-------- -------- -------- -------- -------- --------
Total dividends and distributions ........ (0.53) (0.53) (0.54) (0.49) ( 0.50) ( 0.54)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ........... $ 9.96 $ 9.85 $ 9.84 $ 9.98 $ 9.88 $ 10.34
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ ................. 6.68% 5.63% 4.09% 6.22% 0.25% 6.75%

RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 0.82% 0.83% 0.84% 0.84% 0.79% 0.80%
Net investment income .................... 5.30% 5.42% 5.33% 4.93% 4.74% 5.18%

SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands ............................... $241,025 $230,267 $258,637 $273,184 $516,017 $584,206
Portfolio turnover rate .................. 95% 149% 63% 30% 49% 21%

<CAPTION>
For the Period
August 13, 1991*
Through
May 31, 1992
- ----------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $ 10.00
--------
Net investment income .................... 0.44
Net realized and unrealized gain
(loss) .................................. 0.20
--------
Total from investment operations ......... 0.64
--------
Less dividends and distributions from:
Net investment income ................... ( 0.43)
Net realized gain ....................... --
--------
Total dividends and distributions ........ ( 0.43)
--------
Net asset value, end of period ........... $ 10.21
========
TOTAL INVESTMENT RETURN+ ................. 6.55%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 0.79%(2)(3)
Net investment income .................... 5.49%(2)(3)

SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands ............................... $523,555
Portfolio turnover rate .................. 12%(1)
</TABLE>

- ----------
* Commencement of operations.

+ Calculated based on the net asset value as of the last business day of
the period.

(1) Not annualized.

(2) Annualized.

(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above annualized expense and net investment
income ratios would have been 0.81% and 5.47%, respectively.

4
<PAGE>

THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust (the "Fund")
(formerly named Dean Witter Short-Term U.S. Treasury Trust) is an open-end
diversified management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of The Commonwealth of Massachusetts on June 4, 1991.

Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors" or the
"Investment Manager"), whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. The Investment Manager 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. The Investment Manager, which was incorporated in July, 1992 under
the name Dean Witter InterCapital Inc., changed its name to Morgan Stanley Dean
Witter Advisors Inc. on June 22, 1998.

MSDW Advisors and its wholly-owned subsidiary, Morgan Stanley Dean
Witter Services Company Inc. ("MSDW Services"), serve in various investment
management, advisory, management and administrative capacities to a total of
101 investment companies, 28 of which are listed on the New York Stock
Exchange, with combined total assets of approximately $110.8 billion as of June
30, 1998. The Investment Manager also manages portfolios of pension plans,
other institutions and individuals which aggregated approximately $4.4 billion
at such date.

The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. MSDW Advisors has retained MSDW Services to perform the
aforementioned administrative services for the Fund. The Fund's Board of
Trustees reviews the various services provided by or under the direction of the
Investment Manager to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.

As full compensation for the services and facilities furnished to the
Fund and for expenses of the Fund assumed by the Investment Manager, the Fund
pays the Investment Manager monthly compensation calculated daily by applying
an annual rate of 0.35% to the Fund's net assets determined as of the close of
each business day. For the fiscal year ended May 31, 1998, the Fund accrued
total compensation to the Investment Manager amounting to 0.35% of the Fund's
average daily net assets and the Fund's total expenses amounted to 0.82% of the
Fund's average daily net assets.

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

The investment objective of the Fund is current income, preservation of
principal and liquidity. The Fund seeks to achieve its investment objective by
investing all of its net assets in U.S. Treasury securities. U.S. Treasury
securities, which presently consist of U.S. Treasury bills, U.S. Treasury notes
and U.S. Treasury bonds, are direct obligations of the U.S. Treasury and are
backed by the "full faith and credit" of the U.S. Government. The investment
objective is a fundamental policy of the Fund and may not be changed without
the approval of the holders of a majority of the Fund's shares. There is no
assurance that the Fund's investment objective will be achieved.

Neither the value nor the yield of the U.S. Treasury securities in which
the Fund invests (or the value or yield of shares of the Fund) are guaranteed
by the U.S. Government. The value of the Fund's portfolio securities and
therefore the net asset value of the Fund's shares may increase or decrease due
to changes in prevailing interest rates and other factors. Generally, as
prevailing interest rates rise, the value of the securities held by the Fund,
and concomitantly, the net asset value of the Fund's shares, will fall. Debt
securities with shorter maturities are generally subject to a lesser degree of
market fluctuation as a result of changes in interest rates than debt
securities with longer maturities.

5
<PAGE>

In an effort to minimize fluctuations in market value of its portfolio
securities the Fund is expected to maintain a portfolio with a dollar-weighted
average maturity of less than 3 years.

Zero Coupon Treasury Securities. A portion of the U.S. Treasury
securities purchased by the Fund may be "zero coupon" Treasury securities.
These are U.S. Treasury notes and bonds which have been stripped of their
unmatured interest coupons and receipts or which are certificates representing
interests in such stripped debt obligations and coupons. Such securities are
purchased at a discount from their face amount, giving the purchaser the right
to receive their full value at maturity. A zero coupon security pays no
interest to its holder during its life. Its value to an investor consists of
the difference between its face value at the time of maturity and the price for
which it was acquired, which is generally an amount significantly less than its
face value (sometimes referred to as a "deep discount" price).

The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant rate
eliminates the risk of receiving lower yields upon reinvestment of interest if
prevailing interest rates decline, the owner of a zero coupon security will be
unable to participate in higher yields upon reinvestment of interest received
if prevailing interest rates rise. For this reason, zero coupon securities are
subject to substantially greater market price fluctuations during periods of
changing prevailing interest rates than are comparable debt securities which
make current distributions of interest. Current federal tax law requires that a
holder (such as the Fund) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each year even though
the Fund receives no interest payments in cash on the security during the year.
See "Dividends, Distributions and Taxes."

Certain banks and brokerage firms have separated ("stripped") the
principal portions ("corpus") from the coupon portions of the U.S. Treasury
bonds and notes and sell them separately in the form of receipts or
certificates representing undivided interests in these instruments (which
instruments are generally held by a bank in a custodial or trust account). The
Fund will not purchase any such receipts or certificates representing stripped
corpus or coupon interests in U.S. Treasury securities sold by banks and
brokerage firms. The Fund will only purchase zero coupon Treasury securities
which have been stripped by the Federal Reserve Bank.

When-Issued and Delayed Delivery Securities and Firm Commitments. From
time to time, in the ordinary course of business, the Fund may purchase U.S.
Treasury securities on a when-issued or delayed delivery basis or may purchase
or sell U.S. Treasury securities on a firm commitment basis. For example, the
Fund may wish to purchase U.S. Treasury notes and bonds sold at periodic U.S.
Treasury auctions prior to a month or more of their issuance ("when-issued").
When such transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery or firm commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the
settlement date, if it is deemed advisable. The securities so purchased or sold
are subject to market fluctuation and no interest accrues to the purchaser
during this period. At the time the Fund makes the commitment to purchase or
sell securities on a when-issued, delayed delivery or firm commitment basis, it
will record the transaction and thereafter reflect the value, each day, of such
security purchased or, if a sale, the proceeds to be received, in determining
its net asset value. At the time of delivery of the securities, their value may
be more or less than the purchase or sale price. The Fund will also establish a
segregated account with its custodian bank in which it will continually
maintain cash or cash equivalents or other portfolio (U.S. Treasury) securities
equal in value to commitments to purchase securities on a when-issued, delayed
delivery or firm commitment basis.

Year 2000. The investment management services provided to the Fund by
the Investment Man--

6
<PAGE>

ager 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.
financial statements. Accordingly, the Fund's investments may be adversely
affected.

PORTFOLIO MANAGEMENT

The Fund's portfolio is actively managed by its Investment Manager with
a view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including Dean Witter
Reynolds Inc., Morgan Stanley & Co. Incorporated and other broker-dealers that
are affiliates of the Investment Manager and others regarding economic
developments and interest rate trends, and the Investment Manager's own
analysis of factors it deems relevant. The Fund's portfolio is managed within
MSDW Advisors' Taxable Fixed Income Group, which manages 23 funds and fund
portfolios, with approximately $13.8 billion in assets as of June 30, 1998.
Rajesh K. Gupta, Senior Vice President of MSDW Advisors and Manager of MSDW
Advisors' Government Fixed-Income Group, has been the primary portfolio manager
of the Fund since its inception and has been a portfolio manager at MSDW
Advisors for over five years.

Brokerage commissions are not normally charged on the purchase or sale
of U.S. Government obligations, but such transactions may involve costs in the
form of spreads between bid and asked prices. Pursuant to an order of the
Securities and Exchange Commission, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds Inc. In addition,
the Fund may incur brokerage commissions on transactions conducted through Dean
Witter Reynolds Inc., Morgan Stanley & Co. Incorporated and other brokers and
dealers that are affiliates of the Investment Manager. Although the Fund does
not intend to engage in short-term trading of portfolio securities as a means
of achieving its investment objective, it may sell portfolio securities without
regard to the length of time they have been held whenever such sale will, in
the opinion of the Investment Manager, strengthen the Fund's position and
contribute to its investment objective. It is not anticipated that the
portfolio trading engaged in by the Fund will result in its portfolio turnover
rate exceeding 200% in any one year. The Fund will incur costs commensurate
with its portfolio turnover rate. Short term gains and losses may result from
such transactions. See "Dividends, Distributions and Taxes" for a full
discussion of the tax implications of the Fund's trading policy.

PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------

The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Morgan Stanley Dean
Witter Distributors Inc. ("MSDW Distributors"

7
<PAGE>

or the "Distributor"), an affiliate of the Investment Manager, shares of the
Fund are distributed by the Distributor and offered by Dean Witter Reynolds
Inc. ("DWR"), a selected dealer and subsidiary of Morgan Stanley Dean Witter &
Co., and others who have entered into Selected Dealer agreements with the
Distributor ("Selected Broker-Dealers"). It is anticipated that DWR will
undergo a change of corporate name which is expected to incorporate the brand
name of "Morgan Stanley Dean Witter," pending approval of various regulatory
authorities. The principal executive office of the Distributor is located at
Two World Trade Center, New York, New York 10048.

The minimum initial purchase is $10,000 (the Fund and the Distributor
may, from time to time accept initial purchases of $5,000). The minimum initial
purchase in the case of investments through EasyInvestSM, an automatic purchase
plan (see "Shareholder Services"), is $1,000, provided that the schedule of
automatic investments will result in investments totalling at least $10,000
within the first twelve months. In the case of investments pursuant to
systematic payroll deduction plans (including Individual Retirement Plans), the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required if the Fund has reason to believe
that additional investments will increase the investment in all accounts under
such plans to at least $10,000. Minimum subsequent purchases of $100 or more
may be made by sending a check, payable to Morgan Stanley Dean Witter
Short-Term U.S. Treasury Trust, directly to Morgan Stanley Dean Witter Trust
FSB (the "Transfer Agent" or "MSDW Trust") at P.O. Box 1040, Jersey City, NJ
07303 or by contacting a Morgan Stanley Dean Witter Financial Advisor or other
Selected Broker-Dealer representative of DWR or another Selected Broker-Dealer.
The offering price will be the net asset value per share next determined (see
"Determination of Net Asset Value" below) following receipt and acceptance by
the Transfer Agent of an order in proper form and accompanied by payment in
Federal funds (i.e., monies of member banks within the Federal Reserve System
held on deposit at a Federal Reserve Bank) available to the Fund for
investment. Orders for the purchase of Fund shares placed by investors through
DWR or another Selected Broker-Dealer will be transmitted to the Transfer Agent
for purchase on that date, with payment in Federal funds transmitted to the
Transfer Agent on the business day following the day the order is placed.
Shares commence earning income on the date following the date of purchase.
Certificates for shares purchased will not be issued unless requested by the
shareholder in writing to the Transfer Agent.

Sales personnel of a Selected Broker-Dealer are compensated for shares
of the Fund sold by them by the Distributor or any of its affiliates and/or by
a Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips to educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of the Fund is determined by taking the
value of all the assets of the Fund, subtracting all liabilities, dividing by
the number of shares outstanding and adjusting the result to the nearest cent.
The net asset value per share is determined by the Investment Manager as of
4:00 p.m. New York 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). The net asset value per share will not be
determined on Good Friday and on such other federal and non-federal holidays as
are observed by the New York Stock Exchange.

In the calculation of the Fund's net asset value: (1) all portfolio
securities for which over-the-counter market quotations are readily available
are valued at the bid price; (2) when market quotations are not readily
available, including circumstances under which it is determined by the
Investment Manager that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at

8
<PAGE>

their fair value as determined in good faith under procedures established by
and under the general supervision of the Fund's Board of Trustees (valuation of
securities for which market quotations are not readily available may be based
upon current market prices of securities which are comparable in coupon, rating
and maturity or an appropriate matrix utilizing similar factors); and (3)
short-term debt instruments having a maturity date of more than 60 days are
valued on a "mark-to-market" basis, that is, at prices based on market
quotations for securities of similar type, yield, quality and maturity, until
60 days prior to maturity and thereafter at amortized cost. Short-term
instruments having a maturity date of 60 days or less at the time of purchase
are valued at amortized cost unless the Board of Trustees determines this
does not represent the securities' market value, in which case these securities
will be valued at their fair value as determined by the Trustees.

Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service.

PLAN OF DISTRIBUTION

The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "Act"), with the
Distributor whereby the expenses of certain activities and services, including
personal services to shareholders and maintenance of shareholder accounts, in
connection with the distribution of the Fund's shares are reimbursed. The
principal activities and services which may be provided by the Distributor and
its affiliates, or any other Selected Broker-Dealer under the Plan include: (1)
compensation to, and expenses of, Morgan Stanley Dean Witter Financial Advisors
and other Selected Broker-Dealer representatives, 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.
Reimbursements for these services will be made in monthly payments by the Fund,
which will in no event exceed an amount equal to a payment at the annual rate
of 0.35% of the Fund's average daily net assets. A portion of the amount
payable pursuant to the Plan, which may not exceed 0.25% of the Fund's average
daily net assets, is characterized as a service fee within the meaning of the
NASD guidelines. The services fee is a payment made for personal services
and/or the maintenance of shareholder accounts. Expenses incurred pursuant to
the Plan in any fiscal year will not be reimbursed by the Fund through payments
accrued in any subsequent fiscal year. The Fund accrued $827,872 to the
Distributor pursuant to the Plan for the fiscal year ended May 31, 1998. This
is an accrual at the annual rate of 0.34% of the Fund's average daily net
assets.

SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

Automatic Investment of Dividends and Distributions. All income
dividends and capital gains distributions are automatically paid in full and
fractional shares of the Fund, unless the shareholder requests that they be
paid in cash. Such dividends and distributions will be paid in shares of the
Fund at net asset value per share. At any time an investor may

request the Transfer Agent in writing to have subsequent dividends and/or
capital gains distributions paid to the investor in cash rather than shares. To
assure sufficient time to process the change, such request should be received
by the Transfer Agent at least five business days prior to the payment date for
which it commences to take effect. In the case of

9
<PAGE>

recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to DWR or other
Selected Broker-Dealer through whom shares were purchased.

Investment of Distributions Received in Cash. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution at the net asset value next determined
after receipt by the Transfer Agent by returning the check or the proceeds to
the Transfer Agent within 30 days after the payment date.

Targeted Dividends(SM). In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of an open-end investment company for which
MSDW Advisors serves as investment manager (collectively, the "Morgan Stanley
Dean Witter Funds"), other than Morgan Stanley Dean Witter Short-Term U.S.
Treasury Trust. Such investment will be made as described above for automatic
investment in shares of the Fund, at the net asset value per share of the
selected Morgan Stanley Dean Witter Fund as of the close of business on the
payment date and will begin to earn dividends, if any, in the selected Morgan
Stanley Dean Witter Fund the next business day. To participate in the Targeted
Dividends program, shareholders should contact their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative or the
Transfer Agent. Shareholders of the Fund must be shareholders of the selected
Class of the Morgan Stanley Dean Witter Fund targeted to receive investments
from dividends at the time they enter the Targeted Dividends program. Investors
should review the prospectus of the targeted Morgan Stanley Dean Witter Fund
before entering the program.

EasyInvest(SM). Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Morgan Stanley Dean Witter money market fund, on a
semi-monthly, monthly or quarterly basis, to the Fund's Transfer Agent for
investment in shares of the Fund (see "Purchase of Fund Shares" and
"Redemptions and Repurchases--Involuntary Redemption"). Shares purchased
through EasyInvest will be added to the shareholder's existing account at the
net asset value calculated the same business day the transfer of funds is
effected. For further information or to subscribe to EasyInvest, shareholders
should contact their Morgan Stanley Dean Witter Financial Advisor or other
Selected Broker-Dealer representative or the Transfer Agent.

Systematic Withdrawal Plan. A systematic withdrawal plan (the
"Withdrawal Plan") is available for shareholders who own or purchase shares of
the Fund having a minimum value of $10,000 based upon the then current offering
price. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any dollar amount, not less than $25, or in
any whole percentage of the account balance, on an annualized basis. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of
the relevant month or quarter and normally a check for the proceeds will be
mailed by the Transfer Agent, or amounts credited to a shareholder's DWR or
other Selected Broker-Dealer brokerage account, within five business days after
the date of redemption. Only shareholders having accounts in which no share
certificates have been issued will be permitted to enroll in the Withdrawal
Plan.

Withdrawal Plan payments should not be considered as dividends, yields
or income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original investment
will be correspondingly reduced and ultimately exhausted.

Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income, and generally, state and local
tax purposes.

Shareholders wishing to enroll in the Withdrawal Plan should make this
election on the Investment Application or contact their Morgan Stanley Dean
Witter Financial Advisor or other Selected Broker-Dealer representative or the
Transfer Agent.

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<PAGE>

Tax Sheltered Retirement Plans. Retirement plans are available through
the Investment Manager for use by the self-employed, eligible Individual
Retirement Accounts and Custodial Accounts under Section 403(b)(7) of the
Internal Revenue Code. Adoption of such plans should be on advice of legal
counsel or tax adviser.

For further information regarding plan administration, custodial fees
and other details, investors should contact their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative or the
Transfer Agent.

EXCHANGE PRIVILEGE

An "Exchange Privilege," that is, the privilege of exchanging shares of
certain Morgan Stanley Dean Witter Funds for shares of the Fund, exists whereby
shares of Morgan Stanley Dean Witter Funds that are multiple class funds
("Morgan Stanley Dean Witter Multi-Class Funds"), shares of Morgan Stanley Dean
Witter Multi-State Municipal Series Trust and Morgan Stanley Dean Witter Hawaii
Municipal Trust, which are Morgan Stanley Dean Witter Funds sold with a
front-end sales charge ("FSC Funds"), and shares of Morgan Stanley Dean Witter
Global Short-Term Income Fund Inc. ("Global Short-Term"), which is a Morgan
Stanley Dean Witter Fund offered with a contingent deferred sales charge
("CDSC"), may be exchanged for shares of the Fund, Morgan Stanley Dean Witter
Limited Term Municipal Trust and Morgan Stanley Dean Witter Short-Term Bond
Fund, and for shares of five Morgan Stanley Dean Witter Funds which are money
market funds: Morgan Stanley Dean Witter Liquid Asset Fund Inc., Morgan Stanley
Dean Witter U.S. Government Money Market Trust, Morgan Stanley Dean Witter
Tax-Free Daily Income Trust, Morgan Stanley Dean Witter California Tax Free
Daily Income Trust and Morgan Stanley Dean Witter New York Municipal Money
Market Trust (which eight funds, including the Fund, are hereinafter
collectively referred to as "Exchange Funds"). Shares of the Exchange Funds
received in an exchange for shares of a Morgan Stanley Dean Witter Multi-Class
Fund may be redeemed and exchanged only for shares of the corresponding Class
of a Morgan Stanley Dean Witter Multi-Class Fund or for shares of one of the
other Exchange Funds, provided that shares of the Exchange Funds received in an
exchange for Class A shares of a Morgan Stanley Dean Witter Multi-Class Fund
may also be redeemed and exchanged for shares of a FSC Fund, and shares of the
Exchange Funds received in an exchange for Class B shares of a Morgan Stanley
Dean Witter Multi-Class Fund may also be redeemed and exchanged for shares of
Global Short-Term. In addition, shares of the Exchange Funds received in an
exchange for shares of a FSC Fund may be redeemed and exchanged for Class A
shares of a Morgan Stanley Dean Witter Multi-Class Fund or for shares of one of
the other Exchange Funds, and shares of the Exchange Funds received in an
exchange for shares of Global Short-Term may be redeemed and exchanged for
Class B shares of a Morgan Stanley Dean Witter Multi-Class Fund or for shares
of one of the other Exchange Funds.

An exchange to an Exchange Fund that is not a money market fund is on
the basis of the next calculated net asset value per share of each fund after
the exchange order is received. When exchanging into a money market fund,
shares of the Multi-Class Fund, the FSC Fund, Global Short-Term or the Exchange
Fund are redeemed at their next calculated net asset value and exchanged for
shares of the money market fund at their net asset value determined the
following business day. Ultimately, any applicable CDSC will have to be paid
upon redemption of shares originally purchased from Global Short-Term or a
Class of a Morgan Stanley Dean Witter Multi-Class Fund that imposes a CDSC. (If
shares of an Exchange Fund received in exchange for shares originally purchased
from Global Short-Term or Class B of a Morgan Stanley Dean Witter Multi-Class
Fund are exchanged for shares of Global Short-Term or another Morgan Stanley
Dean Witter Multi-Class Fund having a different CDSC schedule than that of
Global Short-Term or the Morgan Stanley Dean Witter Multi-Class Fund from which
the Exchange Fund shares were acquired, the shares will be subject to the
higher CDSC schedule.) During the period of time the shares originally
purchased from Global Short-Term or from a Class of a Morgan Stanley Dean
Witter Multi-Class Fund that imposes a CDSC remain in the

11
<PAGE>

Exchange Fund, the holding period (for the purpose of determining the rate of
CDSC) is frozen. If those shares are subsequently re-exchanged for shares of a
Morgan Stanley Dean Witter Multi-Class Fund or shares of Global Short-Term, the
holding period previously frozen when the first exchange was made resumes on
the last day of the month in which shares of a Morgan Stanley Dean Witter
Multi-Class Fund or shares of Global Short-Term are reacquired. Thus, the CDSC
is based upon the time (calculated as described above) the shareholder was
invested in shares of a Morgan Stanley Dean Witter Multi-Class Fund or in
shares of Global Short-Term. In the case of exchanges of Class A shares of a
Morgan Stanley Dean Witter Multi-Class Fund which are subject to a CDSC, the
holding period also includes the time (calculated as described above) the
shareholder was invested in shares of a FSC Fund. In the case of shares
exchanged into an Exchange Fund on or after April 23, 1990, upon a redemption
of shares which results in a CDSC being imposed, a credit (not to exceed the
amount of the CDSC) will be given in an amount equal to the Exchange Fund 12b-1
fees, if any, incurred on or after that date which are attributable to those
shares (see "Purchase of Fund Shares--Plan of Distribution" in the respective
Exchange Fund Prospectus for a description of Exchange Fund distribution fees).
Exchanges may be made after the shares of the fund acquired by purchase (not by
exchange or dividend reinvestment) have been held for thirty days. There is no
waiting period for exchanges of shares acquired by exchange or dividend
reinvestment.

Additional Information Regarding Exchanges. Purchases and exchanges
should be made for investment purposes only. A pattern of frequent exchanges
may be deemed by the Distributor to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Distributor's
discretion, may be limited by the Fund's refusal to accept additional purchases
and/or exchanges from the investor. Although the Fund does not have any
specific definition of what constitutes a pattern of frequent exchanges, and
will consider all relevant factors in determining whether a particular
situation is abusive and contrary to the best interests of the Fund and its
other shareholders, investors should be aware that the Fund and each of the
other Morgan Stanley Dean Witter Funds may in their discretion limit or
otherwise restrict the number of times this Exchange Privilege may be exercised
by any investor. Any such restriction will be made by the Fund on a prospective
basis only, upon notice to the shareholder not later than ten days following
such shareholder's most recent exchange.

The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Morgan Stanley Dean Witter Funds for which shares of
the Fund may be exchanged, upon such notice as may be required by applicable
regulatory agencies (presently sixty days' prior written notice for termination
or material revision), provided that six months' prior written notice of
termination will be given to the shareholders who hold shares of the Exchange
Funds pursuant to this Exchange Privilege, and provided further that the
Exchange Privilege may be terminated or materially revised without notice under
certain unusual circumstances. Shareholders maintaining margin accounts with
DWR or another Selected Broker-Dealer are referred to their Morgan Stanley Dean
Witter Financial Advisor or other Selected Broker-Dealer representative
regarding restrictions on exchange of shares of the Fund pledged in their
margin account.

The current prospectus for each fund describes its investment
objective(s) and policies, and shareholders should obtain one and read it
carefully before investing. Exchanges are subject to the minimum investment
requirement of each Class of shares and any other conditions imposed by each
fund. In the case of any shareholder holding a share certificate or
certificates, no exchanges may be made until all applicable share certificates
have been received by the Transfer Agent and deposited in the shareholder's
account. An exchange will be treated for federal income tax purposes the same
as a repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.

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<PAGE>

If DWR or another Selected Broker-Dealer is the current broker-dealer of
record and its account numbers are part of the account information,
shareholders may initiate an exchange of shares of the Fund for shares of any
of the above Morgan Stanley Dean Witter Funds pursuant to this Exchange
Privilege by contacting their Morgan Stanley Dean Witter Financial Advisor or
other Selected Broker-Dealer representative (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or another Selected Broker-Dealer but who wish to make
exchanges directly by writing or telephoning the Transfer Agent) must complete
and forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Transfer Agent, to initiate an
exchange. If the Authorization Form is used, exchanges may be made by
contacting the Transfer Agent at (800) 869-NEWS (toll-free).

The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR or
other Selected Broker-Dealer account number (if any). Telephone instructions
will also be recorded. If such procedures are not employed, the Fund may be
liable for any losses due to unauthorized or fraudulent instructions.

Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her Morgan Stanley
Dean Witter Financial Advisor or other Selected Broker-Dealer representative,
if appropriate, or make a written exchange request. Shareholders are advised
that during periods of drastic economic or market changes it is possible that
the telephone exchange procedures may be difficult to implement, although this
has not been the experience of the Morgan Stanley Dean Witter Funds in the
past.

For further information regarding the Exchange Privilege, shareholders
should contact their Morgan Stanley Dean Witter Financial Advisor or other
Selected Broker-Dealer representative or the Transfer Agent.

REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------

REDEMPTIONS. Shares of the Fund may be redeemed through the Transfer
Agent (without redemption or other charge) on any day that the New York Stock
Exchange is open (see "Purchase of Fund Shares--Determination of Net Asset
Value"). Redemptions will be effected at the net asset value per share next
determined after the receipt of a redemption request meeting the applicable
requirements described below.

1. BY CHECK

The Transfer Agent will supply blank checks to any shareholder who has
requested them on an Investment Application. The shareholder may make checks
payable to the order of anyone in any amount not less than $500 (checks written
in amounts under $500 will not be honored by the Transfer Agent). Shareholders
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
specifically specified on an Investment Application that all owners are
required to sign checks. Only shareholders having accounts in which no share
certificates have been issued will be permitted to redeem shares by check or
enroll in the Systematic Withdrawal Plan.

Shares will be redeemed at their net asset value next determined (see
"Purchase of Fund Shares--Determination of Net Asset Value") after receipt by
the Transfer Agent of a check which does not exceed the value of the account.
Payment of the proceeds of a check will normally be made on the next business
day after receipt by the Transfer Agent of the 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 receipt
of

13
<PAGE>

the check used for investment by the Transfer Agent. The Transfer Agent will
not honor a check in an amount exceeding the value of the account at the time
the check is presented for payment. Since the dollar value of an account is
constantly changing, it is not possible for a shareholder to determine in
advance the total value of its account so as to write a check for the
redemption of the entire account. For the same reason, a shareholder should not
write a check for substantially all of the current value of the shares in its
account with the Fund.

2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH PAYMENT TO PREDESIGNATED BANK ACCOUNT

A shareholder may redeem shares by telephoning or sending wire
instructions to the Transfer Agent. Payment will be made by the Transfer Agent
to the shareholder's bank account at any commercial bank designated by the
shareholder in an Investment Application, by wire if the amount is $1,000 or
more and the shareholder so requests, and otherwise by mail. Normally, the
Transfer Agent will transmit payment the next business day following receipt of
a request for redemption in proper form. Only shareholders having accounts in
which no share certificates have been issued will be permitted to redeem shares
by wire instructions.

DWR and any other participating Selected Broker-Dealers have informed
the Distributor and the Fund that, on behalf of and as agent for their
customers who are shareholders of the Fund, they will transmit to the Fund
requests for redemption of shares owned by their customers. In such cases, the
Transfer Agent will wire proceeds of redemptions to DWR's or other Selected
Broker-Dealer's bank account for credit to the shareholders' accounts the
following business day. DWR and other participating Selected Broker-Dealers
have also informed the Distributor and the Fund that they do not charge for
this service.

Redemption instructions must include the shareholder's name and account
number and be wired or called to the Transfer Agent at 800-869-NEWS (toll-
free).

3. BY MAIL

A shareholder may redeem shares by sending a letter to Morgan Stanley
Dean Witter Trust FSB, P.O. Box 983, Jersey City, NJ 07303, requesting
redemption and surrendering share certificates if any have been issued.

Redemption proceeds will be mailed to the shareholder at his or her
registered address or mailed or wired to his or her predesignated bank account,
as he or she may request. Proceeds of redemption may also be sent to some other
person, as requested by the shareholder in accordance with the general
redemption requirements listed below.

GENERAL REDEMPTION REQUIREMENTS

Written requests for redemption must be signed by the registered
shareholder(s). If the proceeds are to be paid to anyone other than the
registered shareholder(s) or sent to any address other than the shareholder's
registered address or predesignated bank account, signatures must be guaranteed
by an eligible guarantor acceptable to the Transfer Agent, (shareholders should
contact the Transfer Agent for a determination as to whether a particular
institution is such an eligible guarantor), except in the case of redemption by
check. Additional documentation may be required where shares are held by a
corporation, partnership, trust or other organization. With regard to shares of
the Fund acquired pursuant to the Exchange Privilege, any applicable contingent
deferred sales charge will be imposed upon the redemption of such shares (see
"Purchase of Fund Shares--Exchange Privilege").

If shares to be redeemed are represented by a share certificate, the
request for redemption must be accompanied by the share certificate and a stock
assignment form signed by the registered shareholder(s) exactly as the account
is registered. Signatures must be guaranteed by a commercial bank or member
firm of a domestic stock exchange. Additional documentation may be required
where shares are held by a corporation, partnership, trust or other
organization.

All requests for redemption should be sent to Morgan Stanley Dean Witter
Trust FSB, P.O. Box 983, Jersey City, NJ 07303.

Generally, the Fund will attempt to make payment for all redemptions
within one business day, and in no event later than seven days after receipt of

14
<PAGE>

such redemption request in proper form. However, if the shares being redeemed
were purchased by check (including a certified or bank cashier's check),
payment may be delayed for the minimum time needed to verify that the check
used for investment has been honored (not more than fifteen days from the time
of receipt of the check by the Transfer Agent). In addition, the Fund may
postpone redemptions at certain times when normal trading is not taking place
on the New York Stock Exchange.

Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other
than DWR or any other Selected Broker-Dealer for the account of the
shareholder), partnership, trust or fiduciary, or sent to the shareholder at an
address other than the registered address, signature(s) must be guaranteed by
an eligible guarantor acceptable to the Transfer Agent (shareholders should
contact the Transfer Agent for a determination as to whether a particular
institution is such an eligible guarantor). A stock power may be obtained from
any dealer or commercial bank.

Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the net
asset value next determined (see "Purchase of Fund Shares--Determination of Net
Asset Value") after such repurchase order is received. Payment for shares
repurchased may be made by the Fund to DWR and other Selected Broker-Dealers
for the account of the shareholder. The offers by DWR and other Selected
Broker-Dealers to repurchase shares from shareholders may be suspended by them
at any time. In that event, shareholders may redeem their shares through the
Fund's Transfer Agent as set forth above under "Redemption."

Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been
purchased by check, payment of the redemption proceeds may be delayed for the
minimum time needed to verify that the check used for investment has been
honored (not more than fifteen days from the time of receipt of the check by
the Transfer Agent). Shareholders maintaining margin accounts with DWR or other
Selected Broker-Dealers are referred to their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative regarding
restrictions on redemption of shares of the Fund pledged in the margin account.

Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase
in shares of the Fund at net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent.

Involuntary Redemption. The Fund reserves the right to redeem, on 60
days' notice and at net asset value, the shares of any shareholder whose shares
have a value of less than $1,000 as a result of redemptions or repurchases, or
such lesser amount as may be fixed by the Trustees or, in the case of an
account opened through EasyInvestSM, if after twelve months the shareholder has
invested less than $10,000 in the account. However, before the Fund redeems
such shares and sends the proceeds to the shareholder, it will notify the
shareholder that the value of the shares is less than the applicable amount and
allow him or her 60 days to make an additional investment in an amount which
will increase the value of his or her account to at least the applicable amount
or more before the redemption is processed.

15
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

Dividends and Distributions. The Fund declares dividends from net
investment income on each day the New York Stock Exchange is open for business.
Such dividends are payable monthly. The Fund intends to distribute net capital
gains, if any, at least once each year. The Fund may, however, elect to retain
all or a portion of any such net long-term capital gains in any year.

All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in
writing that all dividends or all dividends and distributions be paid in cash.
(See "Shareholder Services--Automatic Investment of Dividends and
Distributions".)

TAXATION

Federal Taxes. Because the Fund intends to distribute substantially all
of its net investment income and net short-term capital gains to shareholders
and otherwise remain qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code, it is not expected that the Fund
will be required to pay any federal income tax on such income and capital
gains. Shareholders will normally have to pay federal income taxes on the
dividends and capital gains distributions they receive from the Fund.
Distributions of net investment income and net short-term capital gains are
taxable to the shareholder as ordinary dividend income regardless of whether
the shareholder receives such distributions in additional shares or in cash.
Any dividends declared in the last quarter of any calendar year which are paid
in the following year prior to February 1 will be deemed received by the
shareholder in the prior year.

Long-term and short-term capital gains may be generated by the sale of
portfolio securities by the Fund. Distributions of long-term capital gains, if
any, are taxable to shareholders as long-term capital gains regardless of how
long a shareholder has held the Fund's shares and regardless of whether the
distribution is received in additional shares or in cash.

No portion of such distributions will be eligible for the dividends
received deduction for corporations. To avoid being subject to a 31% federal
backup withholding tax on taxable dividends, capital gains distributions and
the proceeds of redemptions and repurchases, shareholders' taxpayer
identification numbers must be furnished and certified as to accuracy.

Current federal law requires that a holder (such as the Fund) of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the Fund receives no interest
payments in cash on the security during the year. Accordingly, the Fund may be
required to pay out as an income distribution each year an amount which is
greater than the total amount of cash receipts of interest the Fund actually
received. Such distributions will be made from the available cash of the Fund
or by liquidation of portfolio securities, if necessary.

The Fund may at times make payments from sources other than income or
net capital gains. Payments from such sources will, in effect, represent a
return of a portion of each shareholder's investment. All, or a portion, of
such payments will not be taxable to shareholders.

After the end of the year, shareholders will receive full information on
their dividends and capital gains distributions for tax purposes, including
information as to the Federal tax status of dividends and distributions paid or
retained by the Fund.

The foregoing discussion relates solely to the Federal income tax
consequences of an investment in the Fund and dividends (where applicable) and
distributions may also be subject to state and local taxes (see "State and
Local Taxes" below); therefore, each shareholder is advised to consult his or
her own tax adviser.

State and Local Taxes. The Fund intends to invest only in U.S. Treasury
obligations that provide interest income exempt from state and local taxes.
Because all states presently allow the pass-through of federal obligation
interest derived from specific

16
<PAGE>

federal obligations, it is anticipated that substantially all of the interest
income generated by the Fund and paid out to shareholders as net investment
income will be exempt from state and local taxation. Such investment income,
however, will not be exempt from federal tax. Furthermore, any capital gains
realized by the Fund will not be exempt from federal, and generally, state and
local taxes. It should be noted that although the Fund intends to invest only
in securities the pass-through income from which is believed exempt from state
and local income taxes, it is possible that a state or local taxing authority
may seek to tax an investor on a portion of the interest income of a particular
government obligation held by the Fund. Shareholders are urged to consult their
tax advisors with respect to specific questions regarding federal, state and
local taxes.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund may quote its "yield" and/or its "total
return" in advertisements and sales literature. Both the yield and the total
return of the Fund are based on historical earnings and are not intended to
indicate future performance. The yield of the Fund is computed by dividing the
net investment income of the Fund over a 30-day period by an average value
(using the average number of shares entitled to receive dividends and the net
asset value per share at the end of the period), all in accordance with
applicable regulatory requirements. Such amount is compounded for six months
and then annualized for a twelve-month period to derive the yield of the Fund.
The Fund may also quote its tax-equivalent yield, which is calculated by
determining the pre-tax yield which after being taxed at a stated rate, would
be equivalent to the yield determined as described above.

The "average annual total return" of the Fund refers to a figure
reflecting the average annualized percentage increase (or decrease) in the
value of an initial investment in the Fund of $1,000 over periods of one, five
and ten years or over the life of the Fund, if less than any of the foregoing.
Average annual total return reflects all income earned by the Fund, any
appreciation or depreciation of the assets of the Fund, and all expenses
incurred by the Fund, for the stated periods. It also assumes reinvestment of
all dividends and distributions paid by the Fund.

The Fund from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by independent
organizations (such as Lipper Analytical Services Inc.).

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

Voting Rights. All shares of beneficial interest of the Fund are of
$0.01 par value and are equal as to earnings, assets and voting privileges.
There are no conversion, pre-emptive or other subscription rights. In the event
of liquidation, each share of beneficial interest of the Fund is entitled to
its portion of all of the Fund's assets after all debts and expenses have been
paid. The shares do not have cumulative voting rights.

The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees and they may at any time lengthen 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. Under certain circumstances the

17
<PAGE>

Trustees may be removed by action of the Trustees. The shareholders also have
the right under certain circumstances to remove the Trustees.

Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the
obligations of the Fund. The Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each instrument entered
into or executed by the Fund. Under the Declaration of Trust, indemnification
shall be made 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 is remote.

Code of Ethics. Directors, officers and employees of MSDW Advisors, MSDW
Services and MSDW Distributors are subject to a strict Code of Ethics adopted
by those companies. The Code of Ethics is intended to ensure that the interests
of shareholders and other clients are placed ahead of any personal interest,
that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by
employees of the companies be subject to an advance clearance process to
monitor that no Morgan Stanley Dean Witter Fund is engaged at the same time in
a purchase or sale of the same security. The Code of Ethics bans the purchase
of securities in an initial public offering, and also prohibits engaging in
futures and options transactions and profiting on short-term trading (that is,
a purchase within sixty days of a sale or a sale within sixty days of a
purchase) of a security. In addition, investment personnel may not purchase or
sell a security for their personal account within thirty days before or after
any transaction in any Morgan Stanley Dean Witter Fund managed by them. Any
violations of the Code of Ethics are subject to sanctions, including reprimand,
demotion or suspension or termination of employment. The Code of Ethics
comports with regulatory requirements and the recommendations in the 1994
report by the Investment Company Institute Advisory Group on Personal
Investing.

Master/Feeder Conversion. The Fund reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objective and policies and substantially the same investment restrictions as
those applicable to the Fund.

Shareholder Inquiries. All inquiries regarding the Fund should be
directed to the Fund at the telephone numbers or address set forth on the front
cover of this Prospectus.

18
<PAGE>

(This page has been left blank intentionally)

<PAGE>

Morgan Stanley Dean Witter
Short-Term U.S. Treasury Trust
Two World Trade Center
New York, New York 10048

TRUSTEES

Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder

OFFICERS

Charles A. Fiumefreddo
Chairman and Chief Executive Officer

Barry Fink
Vice President, Secretary and General Counsel

Rajesh K. Gupta
Vice President

Thomas F. Caloia
Treasurer

CUSTODIAN

The Bank of New York
90 Washington Street
New York, New York 10286

TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT

Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036

INVESTMENT MANAGER

Morgan Stanley Dean Witter Advisors Inc.

MORGAN STANLEY
DEAN WITTER
SHORT-TERM
U.S. TREASURY
TRUST

PROSPECTUS--JULY 29, 1998

<PAGE>

MORGAN STANLEY
DEAN WITTER
SHORT-TERM
STATEMENT OF ADDITIONAL INFORMATION U.S. TREASURY
JULY 29, 1998 TRUST

- --------------------------------------------------------------------------------

Shares of the Fund are sold and redeemed at net asset value without the
imposition of a sales charge. The Fund is authorized to reimburse specific
expenses incurred in promoting the distribution of the Fund's shares, including
personal services to shareholders and maintenance of shareholder accounts, in
accordance with a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Reimbursement may in no event exceed an amount
equal to payments at the annual rate of 0.35% of the average daily net assets
of the Fund.

A Prospectus for the Fund dated July 29, 1998, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below
or from the Fund's Distributor, Morgan Stanley Dean Witter Distributors Inc.,
or from Dean Witter Reynolds Inc., at any of its branch offices. This Statement
of Additional Information is not a Prospectus. It contains information in
addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the Prospectus.

Morgan Stanley Dean Witter
Short-Term U.S. Treasury Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)

<PAGE>

TABLE OF CONTENTS
- ------------------------------------------------------------------------------

The Fund and Its Management ............................................... 3
Trustees and Officers ..................................................... 7
Investment Practices and Policies ......................................... 13
Investment Restrictions ................................................... 14
Portfolio Transactions and Brokerage ...................................... 15
The Distributor ........................................................... 16
Shareholder Services ...................................................... 19
Redemptions and Repurchases ............................................... 24
Dividends, Distributions and Taxes ........................................ 24
Performance Information ................................................... 26
Description of Shares of the Fund ......................................... 26
Custodian and Transfer Agent .............................................. 27
Independent Accountants ................................................... 27
Reports to Shareholders ................................................... 27
Legal Counsel ............................................................. 27
Experts ................................................................... 28
Registration Statement .................................................... 28
Financial Statements--May 31, 1998 ........................................ 29
Report of Independent Accountants ......................................... 37

2
<PAGE>

THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

THE FUND

The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on June 4, 1991 under the name Dean Witter Short-Term U.S.
Treasury Trust. On June 22, 1998, the Trustees of the Fund adopted an Amendment
to the Declaration of Trust of the Fund changing the name of the Fund to Morgan
Stanley Dean Witter Short-Term U.S. Treasury Trust.

THE INVESTMENT MANAGER

Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager" or
"MSDW Advisors"), a Delaware corporation, whose address is Two World Trade
Center, New York, New York 10048, is the Fund's Investment Manager. MSDW
Advisors is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW"), a Delaware corporation. The daily management of the Fund and research
relating to the Fund's portfolio is conducted by or under the direction of
officers of the Fund and of the Investment Manager, subject to review by the
Fund's Board of Trustees. Information as to these Trustees and officers is
contained under the caption "Trustees and Officers."

MSDW Advisors is the investment manager or investment advisor of the
following investment companies, which are collectively referred to as the
"Morgan Stanley Dean Witter Funds":

OPEN-END FUNDS
1 Active Assets California Tax-Free Trust
2 Active Assets Government Securities Trust
3 Active Assets Money Trust
4 Active Assets Tax-Free Trust
5 Morgan Stanley Dean Witter American Value Fund
6 Morgan Stanley Dean Witter Balanced Growth Fund
7 Morgan Stanley Dean Witter Balanced Income Fund
8 Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
9 Morgan Stanley Dean Witter California Tax-Free Income Fund
10 Morgan Stanley Dean Witter Capital Appreciation Fund
11 Morgan Stanley Dean Witter Capital Growth Securities
12 Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas" Portfolio
13 Morgan Stanley Dean Witter Convertible Securities Trust
14 Morgan Stanley Dean Witter Developing Growth Securities Trust
15 Morgan Stanley Dean Witter Diversified Income Trust
16 Morgan Stanley Dean Witter Dividend Growth Securities Inc.
17 Morgan Stanley Dean Witter Equity Fund
18 Morgan Stanley Dean Witter European Growth Fund Inc.
19 Morgan Stanley Dean Witter Federal Securities Trust
20 Morgan Stanley Dean Witter Financial Services Trust
21 Morgan Stanley Dean Witter Fund of Funds
22 Dean Witter Global Asset Allocation Fund
23 Morgan Stanley Dean Witter Global Dividend Growth Securities
24 Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
25 Morgan Stanley Dean Witter Global Utilities Fund
26 Morgan Stanley Dean Witter Growth Fund

3
<PAGE>

27 Morgan Stanley Dean Witter Hawaii Municipal Trust
28 Morgan Stanley Dean Witter Health Sciences Trust
29 Morgan Stanley Dean Witter High Yield Securities Inc.
30 Morgan Stanley Dean Witter Income Builder Fund
31 Morgan Stanley Dean Witter Information Fund
32 Morgan Stanley Dean Witter Intermediate Income Securities
33 Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
34 Morgan Stanley Dean Witter International SmallCap Fund
35 Morgan Stanley Dean Witter Japan Fund
36 Morgan Stanley Dean Witter Limited Term Municipal Trust
37 Morgan Stanley Dean Witter Liquid Asset Fund Inc.
38 Morgan Stanley Dean Witter Market Leader Trust
39 Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
40 Morgan Stanley Dean Witter Mid-Cap Growth Fund
41 Morgan Stanley Dean Witter Multi-State Municipal Series Trust
42 Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
43 Morgan Stanley Dean Witter New York Municipal Money Market Trust
44 Morgan Stanley Dean Witter New York Tax-Free Income Fund
45 Morgan Stanley Dean Witter Pacific Growth Fund Inc.
46 Morgan Stanley Dean Witter Precious Metals and Minerals Trust
47 Dean Witter Retirement Series
48 Morgan Stanley Dean Witter Select Dimensions Investment Series
49 Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
50 Morgan Stanley Dean Witter Short-Term Bond Fund
51 Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
52 Morgan Stanley Dean Witter Special Value Fund
53 Morgan Stanley Dean Witter S&P 500 Index Fund
54 Morgan Stanley Dean Witter Strategist Fund
55 Morgan Stanley Dean Witter Tax-Exempt Securities Trust
56 Morgan Stanley Dean Witter Tax-Free Daily Income Trust
57 Morgan Stanley Dean Witter U.S. Government Money Market Trust
58 Morgan Stanley Dean Witter U.S. Government Securities Trust
59 Morgan Stanley Dean Witter Utilities Fund
60 Morgan Stanley Dean Witter Value-Added Market Series
61 Morgan Stanley Dean Witter Variable Investment Series
62 Morgan Stanley Dean Witter World Wide Income Trust

CLOSED-END FUNDS
1 InterCapital California Insured Municipal Income Trust
2 InterCapital California Quality Municipal Securities
3 Dean Witter Government Income Trust
4 High Income Advantage Trust
5 High Income Advantage Trust II
6 High Income Advantage Trust III
7 InterCapital Income Securities Inc.
8 InterCapital Insured California Municipal Securities

4
<PAGE>

9 InterCapital Insured Municipal Bond Trust
10 InterCapital Insured Municipal Income Trust
11 InterCapital Insured Municipal Securities
12 InterCapital Insured Municipal Trust
13 Municipal Income Opportunities Trust
14 Municipal Income Opportunities Trust II
15 Municipal Income Opportunities Trust III
16 Municipal Income Trust
17 Municipal Income Trust II
18 Municipal Income Trust III
19 Municipal Premium Income Trust
20 InterCapital New York Quality Municipal Securities
21 Morgan Stanley Dean Witter Prime Income Trust
22 InterCapital Quality Municipal Income Trust
23 InterCapital Quality Municipal Investment Trust
24 InterCapital Quality Municipal Securities

In addition, Morgan Stanley Dean Witter Services Company Inc. ("MSDW
Services"), a wholly-owned subsidiary of MSDW Advisors, serves as manager for
the following investment companies for which TCW Funds Management, Inc. is the
investment advisor (the "TCW/DW Funds"):

OPEN-END FUNDS
1 TCW/DW Emerging Markets Opportunities Trust
2 TCW/DW Global Telecom Trust
3 TCW/DW Income and Growth Fund
4 TCW/DW Latin American Growth Fund
5 TCW/DW Mid-Cap Equity Trust
6 TCW/DW North American Government Income Trust
7 TCW/DW Small Cap Growth Fund
8 TCW/DW Total Return Trust

CLOSED-END FUNDS
1 TCW/DW Term Trust 2000
2 TCW/DW Term Trust 2002
3 TCW/DW Term Trust 2003

MSDW Advisors also serves as: (i) administrator of The BlackRock Strategic
Term Trust Inc., a closed-end investment company; (ii) sub-administrator of
Templeton Global Governments Income Trust, a closed-end investment company; and
(iii) investment advisor of Offshore Dividend Growth Fund and Offshore Money
Market Fund, mutual funds established under the laws of the Cayman Islands and
available only to investors who are participants in the International Active
Assets Account program and are neither citizens nor residents of the United
States.

Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage 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 such 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 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, such

5
<PAGE>

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. The Investment Manager
has retained MSDW Services to provide its administrative services under the
Agreement.

Expenses not expressly assumed by the Investment Manager under the
Agreement or by Morgan Stanley Dean Witter Distributors Inc. ("MSDW
Distributors" or the "Distributor"), the Distributor of the Fund's shares (see
"The Distributor"), will be paid by the Fund. Such expenses include, but are
not limited to: fees pursuant to the Fund's Plan of Distribution; 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 and Statements of Additional Information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager;
all expenses incident to any dividend, withdrawal or redemption options;
charges and expenses of any outside service used for pricing of the Fund's
shares; fees and expenses of legal counsel, including counsel to the Trustees
who are not interested persons of the Fund or of the Investment Manager (not
including compensation or expenses of attorneys who are employees of the
Investment Manager) and 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.

As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the annual
rate of 0.35% to the net assets of the Fund, determined as of the close of each
business day. For the fiscal years ended May 31, 1996, May 31, 1997 and 1998,
the Fund accrued to the Investment Manager total compensation under the
Agreement in the amounts of $970,394, $902,158 and $841,955, respectively.

The 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 Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.

The Investment Manager paid the organizational expenses of the Fund in the
amount of approximately $135,000 incurred prior to the offering of the Fund's
shares. The Fund has reimbursed the Investment Manager for such expenses.

The Agreement was initially approved by the Trustees on February 21, 1997
and by the shareholders of the Fund at a Special Meeting of Shareholders held
on May 21, 1997. The Agreement is substantially identical to a prior investment
management agreement which was initially approved by the Trustees on October
30, 1992 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on January 12, 1993. The Agreement took effect on May 31,
1997 upon the consummation of the merger of Dean Witter, Discover & Co. with
Morgan Stanely Group Inc. The Agreement may be terminated at any time, without
penalty, on thirty days' notice by the Board of Trustees

6
<PAGE>

of the Fund, by the holders of a majority, as defined in the Investment Company
Act of 1940 (the "Act"), of the outstanding shares of the Fund, or by the
Investment Manager. The Agreement will automatically terminate in the event of
its assignment (as defined in the Act).

Under its terms, the Agreement has an initial term ending April 30, 1999
and will continue from year to year thereafter, provided such continuance of
the Agreement is approved at least annually by the vote of the holders of a
majority, as defined in the Act, of the outstanding shares of the Fund, or by
the Board of Trustees of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Trustees of
the Fund who are not parties to the Agreement or "interested persons" (as
defined in the Act) of any such party (the "Independent Trustees"), which vote
must be cast in person at a meeting called for the purpose of voting on such
approval.

The Fund has acknowledged that the name "Morgan Stanley Dean Witter" is a
property right of DWR. The Fund has agreed that MSDW, or any corporate
affiliate of MSDW, may use or, at any time, permit others to use, the name
"Morgan Stanley Dean Witter." The Fund has also agreed that in the event the
investment management contract between MSDW Advisors and the Fund is
terminated, or if the affiliation between MSDW Advisors and its parent is
terminated, the Fund will eliminate the name "Morgan Stanley Dean Witter" from
its name if MSDW, or any corporate affiliate of MSDW, shall so request.

TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------

The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
86 Morgan Stanley Dean Witter Funds and the 11 TCW/DW Funds are shown below:

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------- ---------------------------------------------------
<S> <C>
Michael Bozic (57) Chairman and Chief Executive Officer of Levitz
Trustee Furniture Corporation (since November, 1995);
c/o Levitz Furniture Corporation Director or Trustee of the Morgan Stanley Dean
7887 N. Federal Highway Witter Funds; formerly President and Chief
Boca Raton, Florida Executive Officer of Hills Department Stores
(May, 1991-July, 1995); formerly variously
Chairman and 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., the and Weirton Steel Corporation.

Charles A. Fiumefreddo* (65) Chairman, Director or Trustee, President and Chief
Chairman, President, Executive Officer of the Morgan Stanley Dean
Chief Executive Officer Witter Funds; Chairman, Chief Executive Officer
and Trustee and Trustee of the TCW/DW Funds; formerly
Two World Trade Center Chairman, Chief Executive Officer and Director of
New York, New York MSDW Advisors, MSDW Distributors and MSDW
Services, Executive Vice President and Director of
Dean Witter Reynolds Inc. ("DWR"), Chairman
and Director of Morgan Stanley Trust FSB ("MSDW
Trust"), and Director and/or officer of various
MSDW subsidiaries (until June, 1998).
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------- -----------------------------------------------------
<S> <C>
Edwin J. Garn (65) Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds; formerly United States Senator
c/o Huntsman Corporation (R-Utah) (1974-1992) and Chairman, Senate
500 Huntsman Way Banking Committee (1980-1986); formerly Mayor
Salt Lake City, Utah of Salt Lake City, Utah (1971-1974); formerly
Astronaut, Space Shuttle Discovery (April 12-19,
1985); Vice Chairman, Huntsman Corporation
(since January, 1993); Director of Franklin Covey
(time management systems), John Alden Financial
Corp. (health insurance), United States 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.

John R. Haire (73) Chairman of the Audit Committee and Director or
Trustee Trustee of each of the Morgan Stanley Dean Witter
Two World Trade Center Funds; Chairman of the Audit Committee and
New York, New York Trustee of the TCW/DW Funds; formerly Chairman
of the Independent Directors or Trustees of the
Morgan Stanley Dean Witter Funds and the
TCW/DW Funds (until June, 1998); formerly
President, Council for Aid to Education
(1978-1989), and Chairman and Chief Executive
Officer of Anchor Corporation, an Investment
Adviser (1964-1978).

Wayne E. Hedien (64) Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds, Director of the PMI Group, Inc.
c/o Gordon Altman Butowsky (private mortgage insurance); Trustee and Vice
Weitzen Shalov & Wein Chairman of The Field Museum of Natural History;
Counsel to the Independent Trustees formerly associated with the Allstate Companies
114 West 47th Street (1966-1994), most recently as Chairman of The
New York, New York Allstate 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 (49) Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of
c/o Johnson Smick International, Inc. the Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Director or Trustee of the
Washington, D.C. Morgan Stanley Dean Witter Funds; Trustee of the
TCW/DW Funds; Director of NASDAQ (since June,
1995); Director of Greenwich Capital Markets Inc.
(broker-dealer); and NVR, Inc. (home construction);
Chairman and Trustee of the Financial Accounting
Foundation (oversight organization for 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 (1982-1986).
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------- -----------------------------------------------------
<S> <C>
Michael E. Nugent (62) General Partner, Triumph Capital, L.P., a private
Trustee partnership; Director or Trustee of the Morgan
c/o Triumph Capital, L.P. Stanley Dean Witter Funds; Trustee of the
237 Park Avenue TCW/DW Funds; formerly Vice President, Bankers
New York, New York Trust Company and BT Capital Corporation
(1984-1988); director of various business
organizations.

Philip J. Purcell* (54) Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, DWR and Novus
1585 Broadway Credit Services Inc.; Director of MSDW Distributors;
New York, New York Director or Trustee of the Morgan Stanley Dean
Witter Funds; Director and/or officer of various
MSDW subsidiaries.

John L. Schroeder (67) Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Trustee of the TCW/DW Funds;
c/o Gordon Altman Butowsky Director of Citizens Utilities Company; formerly
Weitzen Shalov & Wein Executive Vice President and Chief Investment
Counsel to the Independent Trustees Officer of the Home Insurance Company (August,
114 West 47th Street 1991-September, 1995).
New York, New York

Barry Fink (43) Senior Vice President (since March, 1997) and
Vice President, Secretary and General Counsel (since February,
Secretary and General Counsel 1997) and Director (since July, 1998) of MSDW
Two World Trade Center Advisors and MSDW Services; Senior Vice
New York, New York President (since March, 1997) and Assistant
Secretary and Assistant General Counsel (since
February, 1997) of MSDW Distributors; Assistant
Secretary of DWR (since August, 1996); Vice
President, Secretary and General Counsel of the
Morgan Stanley Dean Witter Funds and the
TCW/DW Funds (since February, 1997); previously
First Vice President (June, 1993-February, 1997),
Vice President (until June, 1993) and Assistant
Secretary and Assistant General Counsel of MSDW
Advisors and MSDW Services and Assistant
Secretary of the Morgan Stanley Dean Witter
Funds and TCW/DW Funds.

Rajesh K. Gupta (38) Senior Vice President of MSDW Advisors; Vice
Vice President President of various Morgan Stanley Dean Witter
Two World Trade Center Funds.
New York, New York

Thomas F. Caloia (52) First Vice President and Assistant Treasurer of
Treasurer MSDW Advisors and MSDW Services; Treasurer
Two World Trade Center of the Morgan Stanley Dean Witter Funds and the
New York, New York TCW/DW Funds.
</TABLE>

- ----------
* Denotes Trustees who are "interested persons" of the Fund, as defined
in the Act.

9
<PAGE>

In addition, Mitchell M. Merin, President, Chief Executive Officer and
Director of MSDW Advisors and MSDW Services, Chairman and Director of MSDW
Distributors and MSDW Trust, Executive Vice President and Director of DWR, and
Director of SPS Transaction Services, Inc. and various other MSDW subsidiaries,
Robert M. Scanlan, President, Chief Operating Officer and Director of MSDW
Advisors and MSDW Services, Executive Vice President of MSDW Distributors and
MSDW Trust and Director of MSDW Trust, Robert S. Giambrone, Senior Vice
President of MSDW Advisors, MSDW Services, MSDW Distributors and MSDW Trust and
Director of MSDW Trust, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of MSDW Advisors and Director of MSDW Trust, and Peter M.
Avelar, James F. Willison and Jonathan R. Page, Senior Vice Presidents of MSDW
Advisors, are Vice Presidents of the Fund, and Marilyn K. Cranney and Carsten
Otto, First Vice Presidents and Assistant General Counsels of MSDW Advisors and
MSDW Services, Frank Bruttomesso, LouAnne D. McInnis and Ruth Rossi, Vice
Presidents and Assistant General Counsels of MSDW Advisors and MSDW Services,
and Todd Lebo, a staff attorney with MSDW Advisors, are Assistant Secretaries
of the Fund.

THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES

The Board of Trustees consists of nine (9) trustees. These same
individuals also serve as directors or trustees for all of the Morgan Stanley
Dean Witter Funds, and are referred to in this section as Trustees. As of the
date of this Statement of Additional Information, there are a total of 86
Morgan Stanley Dean Witter Funds, comprised of 132 portfolios. As of June 30,
1998, the Morgan Stanley Dean Witter Funds had total net assets of
approximately $106 billion and more than six million shareholders.

Seven Trustees (77% of the total number) have no affiliation or business
connection with MSDW Advisors or any of its affiliated persons and do not own
any stock or other securities issued by MSDW Advisors' parent company, MSDW.
These are the "disinterested" or "independent" Trustees. Four of the seven
independent Trustees are also Independent Trustees of the TCW/DW Funds.

Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Morgan Stanley Dean Witter Funds seek as
Independent Trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' Boards, such individuals may reject other
attractive assignments because the Funds make substantial demands on their
time. Indeed, by serving on the Funds' Boards, certain Trustees who would
otherwise be qualified and in demand to serve on bank boards would be
prohibited by law from doing so.

All of the Independent Trustees serve as members of the Audit Committee.
Three of them also serve as members of the Derivatives Committee. During the
calendar year ended December 31, 1997, the Audit Committee, the Derivatives
Committee and the Independent Trustees held a combined total of seventeen
meetings.

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 such a
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 such services; and 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.

10
<PAGE>

Finally, the Board of each Fund has formed 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.

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.

COMPENSATION OF INDEPENDENT TRUSTEES

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). 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 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. Mr. Haire currently
serves as Chairman of the Audit Committee. Prior to June 1, 1998, Mr. Haire
also served as Chairman of the Independent Trustees, for which services the
Fund paid him an additional annual fee of $1,200.

The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended May 31, 1998.

FUND COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- -------------
<S> <C>
Michael Bozic ................. $1,650
Edwin J. Garn ................. $1,800
John R. Haire ................. $3,650
Wayne E. Hedien ............... $1,332
Dr. Manuel H. Johnson ......... $1,750
Michael E. Nugent ............. $1,800
John L. Schroeder ............. $1,800
</TABLE>

The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1997 for services
to the 84 Morgan Stanley Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 14 TCW/DW Funds that were in operation at
December 31, 1997. Mr. Haire serves as Chairman of the Audit Committee of each
Morgan Stanley Dean Witter Fund and each TCW/DW Fund and, prior to June 1,
1998, also served as Chairman of the Independent Directors or Trustees of those
Funds. With respect to Messrs. Haire, 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. Mr. Hedien's term
as Director or Trustee of each Morgan Stanley Dean Witter Fund commenced on
September 1, 1997.

11
<PAGE>

CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS

<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF
FOR SERVICE INDEPENDENT FOR SERVICE AS TOTAL CASH
AS DIRECTOR OR DIRECTORS/ CHAIRMAN OF COMPENSATION
TRUSTEE AND FOR SERVICE AS TRUSTEES AND INDEPENDENT FOR SERVICES TO
COMMITTEE TRUSTEE AND AUDIT TRUSTEES 84 MORGAN STANLEY
MEMBER OF 84 COMMITTEE COMMITTEES OF 84 AND AUDIT DEAN WITTER
NAME OF MORGAN STANLEY MEMBER OF 14 MORGAN STANLEY COMMITTEES OF 14 FUNDS AND 14
INDEPENDENT TRUSTEE DEAN WITTER FUNDS TCW/DW FUNDS DEAN WITTER FUNDS TCW/DW FUNDS TCW/DW FUNDS
- ------------------- ----------------- ------------ ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Michael Bozic ............. $133,602 -- -- -- $133,602
Edwin J. Garn ............. 149,702 -- -- -- 149,702
John R. Haire ............. 149,702 $73,725 $157,463 $25,350 406,240
Wayne E. Hedien ........... 39,010 -- -- -- 39,010
Dr. Manuel H. Johnson 145,702 71,125 -- -- 216,827
Michael E. Nugent ......... 149,702 73,725 -- -- 223,427
John L. Schroeder ......... 149,702 73,725 -- -- 223,427
</TABLE>

As of the date of this Statement of Additional Information, 57 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 29.41% of his or her Eligible Compensation plus
0.4901667% 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 58.82% after ten years of service. The foregoing percentages
may be changed by the Board.(1) "Eligible Compensation" is one-fifth of the
total compensation earned by such Eligible Trustee for service to the Adopting
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are not secured or funded by
the Adopting Funds.

The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended May 31, 1998
and by the 57 Morgan Stanley Dean Witter Funds (including the Fund) for the
year ended December 31, 1997, and the estimated retirement benefits for the
Fund's Independent Trustees, to commence upon their retirement, from the Fund
as of May 31, 1997 and from the 57 Morgan Stanley Dean Witter Funds as of
December 31, 1997.

- --------------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement.
The amount estimated to be payable under this method, through the
remainder of the later of the lives of such Eligible Trustee and spouse,
will be the actuarial equivalent of the Regular Benefit. In addition, the
Eligible Trustee may elect that the surviving spouse's periodic payment
of benefits will be equal to either 50% or 100% of the previous periodic
amount, an election that, respectively, increases or decreases the
previous periodic amount so that the resulting payments will be the
actuarial equivalent of the Regular Benefit.

12
<PAGE>

RETIREMENT BENEFITS FROM THE FUND AND ALL MORGAN STANLEY DEAN WITTER FUNDS

<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
--------------------------------- ESTIMATED ANNUAL
ESTIMATED RETIREMENT BENEFITS BENEFITS
CREDITED ACCRUEDAS EXPENSES UPON RETIREMENT(2)
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 58.82% $ 391 $ 20,499 $1,029 $55,026
Edwin J. Garn ................. 10 58.82 $ 662 30,878 $1,029 55,026
John R. Haire ................. 10 58.82 $ (111) (19,823)(3) $2,418 132,002
Wayne E. Hedien ............... 9 50.00 $ 327 0 $ 875 46,772
Dr. Manuel H. Johnson ......... 10 58.82 $ 262 12,832 $1,029 55,026
Michael E. Nugent ............. 10 58.82 $ 496 22,546 $1,029 55,026
John L. Schroeder ............. 8 49.02 $ 769 39,350 $ 861 46,123
</TABLE>

- --------------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.

(3) This number reflects the effect of the extension of Mr. Haire's term as
Director or Trustee until May 1, 1999.

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 percent of the Fund's shares
of beneficial interest outstanding.

INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------

As stated in the Prospectus, the Fund will invest all of its assets in
U.S. Treasury securities backed by the full faith and credit of the U.S.
Government.

U.S. Treasury securities presently consist of U.S. Treasury bills
(maturities of one year or less), U.S. Treasury notes (maturities of one to ten
years) and U.S. Treasury bonds (generally maturities of greater than ten
years), all of which are direct obligations of the U.S. Government and, as
such, are backed by the "full faith and credit" of the United States.

Zero Coupon Treasury Securities. A portion of the U.S. Treasury securities
purchased by the Fund may be "zero coupon" Treasury securities. These are U.S.
Treasury notes and bonds which have been stripped of their unmatured interest
coupons and receipts or which are certificates representing interests in such
stripped debt obligations and coupons. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. A zero coupon security pays no interest to its
holder during its life. Its value to an investor consists of the difference
between its face value at the time of maturity and the price for which it was
acquired, which is generally an amount significantly less than its face value
(sometimes referred to as a "deep discount" price).

13
<PAGE>

In the last few years a number of banks and brokerage firms have separated
("stripped") the principal portions ("corpus") from the coupon portions of the
U.S. Treasury bonds and notes and sold them separately in the form of receipts
or certificates representing undivided interests in these instruments (which
instruments are generally held by a bank in a custodial or trust account). The
Fund will not purchase any such receipts or certificates representing stripped
corpus interests in U.S. Treasury securities sold by banks and brokerage firms.
The Fund will only purchase zero coupon Treasury Securities which have been
stripped by the Federal Reserve Bank.

When-Issued and Delayed Delivery Securities and Firm Commitments. From
time to time, in the ordinary course of business, the Fund may purchase U.S.
Treasury securities on a when-issued or delayed delivery basis or may purchase
or sell U.S. Treasury securities on a firm commitment basis. For example, the
Fund may wish to purchase U.S. Treasury notes and bonds sold at periodic U.S.
Treasury auctions prior to their issuance ("when-issued"). When such
transactions are negotiated, the price is fixed at the time of the commitment,
but delivery and payment can take place a month or more after the date of the
commitment. While the Fund will only purchase securities on a when-issued,
delayed delivery or firm commitment basis with the intention of acquiring the
securities, the Fund may sell the securities before the settlement date, if it
is deemed advisable. The securities so purchased or sold are subject to market
fluctuation and no interest accrues to the purchaser during this period. At the
time the Fund makes the commitment to purchase or sell securities on a
when-issued, delayed delivery or firm commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. The Fund will also establish a
segregated account with its custodian bank in which it will continually
maintain cash or cash equivalents or other portfolio (U.S. Treasury) securities
equal in value to commitments to purchase securities on a when-issued, delayed
delivery or firm commitment basis.

INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

The Fund has adopted certain investment restrictions as fundamental
policies which cannot be changed without the approval of the holders of a
"majority" of the outstanding shares of the Fund, as defined in the Act.
Majority is defined in the Act as the lesser of (a) 67% or more of the shares
present at a meeting of shareholders, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (b) more
than 50% of the outstanding shares.

These restrictions provide that the Fund may not:

1. Invest more than 5% of the value of its total assets in the
securities of any one issuer (other than obligations issued or guaranteed
by the United States Government, its agencies or instrumentalities).

2. Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds, municipal bonds or industrial revenue bonds;

3. Borrow money, except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require
the untimely disposition of securities. Borrowing in the aggregate may not
exceed 20%, and borrowing for purposes other than meeting redemptions may
not exceed 5% of the value of the Fund's total assets (including the
amount borrowed), less liabilities (not including the amount borrowed) at
the time the borrowing is made. Borrowings in excess of 5% will be repaid
before additional investments are made;

4. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 10% of the value of its net assets, but only to
secure borrowings for temporary or emergency purposes;

5. Sell securities short or purchase securities on margin;

6. Write or purchase put or call options;

7. Underwrite the securities of other issuers or purchase restricted
securities;

14
<PAGE>

8. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts or oil and gas interests;

9. Make loans to others except through the purchase of qualified debt
obligations in accordance with the Fund's investment objectives and
policies;

10. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of: (a)
borrowing money in accordance with restrictions described above or (b) by
purchasing securities on a when-issued or delayed delivery basis or
purchasing or selling securities on a forward commitment basis;

11. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, acquisition of assets
or plan of reorganization.

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.

If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not constitute a
violation of any of the foregoing restrictions.

PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------

Subject to the general supervision of the Board of 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. Purchases and sales of
portfolio securities are normally transacted through issuers, underwriters or
major dealers in U.S. Government securities acting as principals. Such
transactions are made on a net basis and do not involve payment of brokerage
commissions. The cost of securities purchased from an underwriter usually
includes a commission paid by the issuer to the underwriters; transactions with
dealers normally reflect the spread between bid and asked prices. During the
fiscal years ended May 31, 1996, May 31, 1997 and May 31, 1998, the Fund did
not pay any brokerage commissions.

The Investment Manager currently serves as investment manager or advisor
to a number of clients, including other investment companies, and may in the
future act as investment manager or adviser 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 a 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 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.

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 such 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. Such 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.

15
<PAGE>

During the fiscal year ended May 31, 1998, the Fund paid no brokerage
commissions in connection with transactions to brokers because of research
services provided.

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 management fee paid to the
Investment Manager is not reduced by any amount that may be attributable to the
value of such services.

Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with DWR.
The Fund will limit its transactions with DWR to U.S. Treasury securities. Such
transactions will be effected with DWR only when the price available from DWR
is better than that available from other dealers.

Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR, Morgan Stanley & Co. Incorporated ("MS & Co.") and
other brokers and dealers that are affiliates of the Investment Manager. In
order for an affiliated broker or dealer to effect any portfolio transactions
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 of the Fund,
including a majority of the Trustees who are not "interested" 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. During the fiscal years ended May
31, 1996, May 31, 1997 and May 31, 1998, the Fund did not pay any brokerage
commissions to DWR.

Portfolio turnover rate is defined as the lesser of the value of the
securities purchased or securities sold, excluding all securities whose
maturities at time of acquisition were one year or less, divided by the average
monthly value of such securities owned during the year. However, because of the
short-term nature of the Fund's portfolio securities, it is anticipated that
the number of purchases and sales or maturities of such securities will be
substantial. Nevertheless, as brokerage commissions are not normally charged on
purchases and sales of such securities, the large number of these transactions
does not have an adverse effect upon the net yield and net asset value of the
shares of the Fund. For the fiscal years ended May 31, 1996, 1997 and 1998, the
Fund's portfolio turnover rates were 63%, 149%, and 95% respectively.

THE DISTRIBUTOR
- --------------------------------------------------------------------------------

As discussed in the Prospectus, shares of the Fund are distributed by
Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") and are
offered for sale to the public on a continuous basis at an offering price equal
to the net asset value per share next determined following a receipt of an
order. The Distributor has entered into a Selected Dealer Agreement with DWR,
which through its own sales organization sells shares of the Fund, and may
enter into selected dealer agreements with other selected broker-dealers. The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of MSDW. As
part of an internal reorganization that took place in December, 1992, the
Distributor assumed the investment company share distribution activities
previously performed by DWR. The current Distribution Agreement appointing the
Distributor exclusive distributor of the Fund's shares and providing for the
Distributor to bear distribution expenses not borne by the Fund was approved by
the Board of Trustees, including all of the Independent Trustees, on April 24,
1997. By its terms, the current Distribution Agreement had an initial term
ending April 30, 1998, and will remain in effect from year to year thereafter
if approved by the Trustees. The current Distribution Agreement took effect on
May 31, 1997 upon the consummation of the

16
<PAGE>

merger of Dean Witter, Discover & Co. with Morgan Stanley Group Inc. and is
substantially identical to the Fund's prior Distribution Agreement except for
its dates of effectiveness and termination.

The Distributor has agreed to pay certain expenses of the offering of the
Fund's shares, including 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 will bear the costs of initial typesetting, printing
and distribution to shareholders. The Fund and the Distributor have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.

PLAN OF DISTRIBUTION

As discussed in the Prospectus, the Fund has entered into a Plan of
Distribution pursuant to Rule 12b-1 under the Act with the Distributor whereby
the expenses of certain activities in connection with the distribution of
shares of the Fund are reimbursed. The Plan was initially approved by the
Trustees of the Fund on July 18, 1991, by DWR, the then sole shareholder of the
Fund on July 19, 1991, and by the Fund's shareholders at a Special Meeting of
Shareholders on October 14, 1992. The vote of the Trustees included a majority
of the Trustees who are not and were not at the time of their votes interested
persons of the Fund and who have and had at the time of their votes no direct
or indirect financial interest in the operation of the Plan (the "Independent
Trustees"), cast in person at a meeting called for the purpose of voting on
such Plan. In determining to approve the Plan, the Trustees, including the
Independent Trustees, concluded that, in their judgment, there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.

The Plan provides that the Distributor will bear the expense of all
promotional and distribution related activities on behalf of the Fund,
including personal services to shareholders and maintenance of shareholder
accounts, except for expenses that the Trustees determine to reimburse, as
described below. The Distributor, DWR, its affiliates and any other selected
broker-dealer may be reimbursed for the following expenses and services under
the Plan: (1) compensation to and expenses of account executives and other
employees of DWR, its affiliates and other selected broker-dealers, 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.

The Fund is authorized to reimburse specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares and in servicing
shareholder accounts. 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 0.35 of 1% of the Fund's average daily
net assets during the month. No interest or other financing charges, if any,
incurred on any distribution expenses will be reimbursable under the Plan. In
the case of all expenses other than expenses representing a residual to account
executives, 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 account executives may be
reimbursed without prior determination. In the event that the Distributor
proposes that monies shall be reimbursed for other than such expenses, then in
making quarterly determinations of the amounts that may be expended by the
Fund, the Distributor will provide and the Trustees will review a quarterly
budget of projected distribution expenses to be incurred on behalf of the Fund,
together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Trustees will determine which particular expenses,
and the portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's shares.

The Distributor has informed the Fund that a portion of the fees payable
by the Fund each year pursuant to the Plan equal to 0.25% of the Fund's average
daily net assets is characterized as a "service fee" under the Rules of the
Association of the National Association of Securities Dealers (of which the

17
<PAGE>

Distributor is a member). Such portion of the fee is a payment made for
personal service and/or maintenance of shareholder accounts. The remaining
portion of the Plan fees payable by the Fund is characterized as an
"asset-based sales charge" as defined by the aforementioned Rules of the
Association.

At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments to
the Plan which took effect in January, 1993 and were designed to reflect the
fact that upon an internal reorganization, the share distribution and
shareholder service activities theretofore performed for the Fund by DWR were
assumed by the Distributor and DWR's sales activities are now being performed
pursuant to the terms of a selected dealer agreement between the Distributor
and DWR. The amendments provide that payments under the Plan will be made to
the Distributor rather than to DWR as before the amendment, and that the
Distributor in turn is authorized to make payments to DWR, its affiliates or
other selected broker-dealers (or direct that the Fund pay such entities
directly). The Distributor is also authorized to retain part of such fee as
compensation for its own distribution-related expenses, including personal
services to shareholders and maintenance of shareholder accounts. At their
meeting held on April 28, 1993, the Trustees of the Fund, including all of the
Independent 12b-1 Trustees, approved certain technical amendments to the Plan
in connection with recent amendments adopted by the National Association of
Securities Dealers, Inc. to its Rules of the Association. At their meeting held
on July 23, 1997, the Trustees of the Fund, including all of the Independent
12b-1 Trustees, approved amendments to the Plan to change the provisions
regarding quarterly budgets.

DWR's Financial Advisors are credited with an annual residual commission,
currently a residual of up to 0.35% 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 DWR to its Financial
Advisors and expenses of DWR associated with the sale and promotion of Fund
shares and the servicing of shareholders' accounts, including the expenses of
operating 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 servicing of shareholder accounts. The
portion of the annual residual commission allocated to servicing of
shareholders' accounts does not exceed 0.25% of the average annual net asset
value of shares sold by the Financial Advisor.

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.

The Fund accrued $827,872 to DWR and the Distributor pursuant to the Plan
for the fiscal year ended May 31, 1998, amounting to an annual rate of 0.35 of
1% of the Fund's average daily net assets for the fiscal year. Based upon the
total amounts spent by the Distributor during the period, it is estimated that
the amount paid by the Fund to the Distributor for distribution was spent in
approximately the following ways: (i) advertising--$-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 payments
to DWR for expenses substantially all of which relate to compensation of sales
personnel (including compensation for servicing shareholder accounts) and
associated overhead expenses--$827,872.

The Plan had an initial term ending April 30, 1993 and provides that it
will continue from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees, including a majority of the
Independent 12b-1 Trustees. The most recent continuance of the Plan for one
year, until April 30, 1999, was approved by the Board of Trustees, including a
majority of the Independent 12b-1 Trustees, at their meeting held on April 30,
1998. Any amendment to increase materially the maximum amount authorized to be
spent under the Plan must be approved by the shareholders of the Fund, and all
material amendments to the Plan must 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

18
<PAGE>

Independent Trustees or by a vote of the holders of a majority of the
outstanding voting securities of the Trust (as defined in the 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 selection or nomination of the Independent Trustees is
committed to the discretion of the Independent 12b-1 Trustees.

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 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 therefor; (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 Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor, MSDW Advisors, MSDW Services, DWR or certain of its
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.

DETERMINATION OF NET ASSET VALUE

As discussed in the Prospectus, the net asset value per share of the Fund
is determined at 4:00 p.m., New York time, on each day 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), by taking the value of all the assets of the
Fund, subtracting all liabilities, dividing by the number of shares outstanding
and adjusting the result to the nearest cent. The New York Stock Exchange
currently observes the following holidays: New Year's Day, Reverend Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.

SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

Shareholder Investment Account. Upon purchase of shares of the Fund, a
Shareholder Investment Account is opened for the investor on the books of the
Fund, maintained by Morgan Stanley Dean Witter Trust FSB (the "Transfer
Agent"), in full and fractional shares of the Fund (rounded to the nearest
1/100 of a share). This is an open account in which shares owned by the
investor are credited by the Transfer Agent in lieu of issuance of a share
certificate. If a share certificate is desired, it must be requested in writing
for each transaction. Certificates are issued only for full shares and may be
redeposited in the account at any time. There is no charge to the investor for
issuance of a certificate. No certificates will be issued for fractional shares
or to shareholders who have elected the pre-designated bank account method,
Systematic Withdrawal Plan or check writing privilege of withdrawing cash from
their accounts. Whenever a shareholder instituted transaction takes place in
the Shareholder Investment Account, the shareholder will be mailed a written
confirmation of the transaction from the Fund or from DWR or other selected
broker-dealer.

Automatic Investment of Dividends and Distributions. All dividends and
capital gains distributions are automatically paid in full and fractional
shares of the Fund, unless the shareholder requests that they be paid in cash.
Each purchase of shares of the Fund is made upon the condition that the
Transfer Agent is thereby automatically appointed as agent of the investor to
receive all dividends and capital gains distributions on shares owned by the
investor. Such dividends and distributions will be paid in shares of the Fund
at the net asset value per share as of the close of business on the record
date. An investor may terminate such agency at any time and may request the
Transfer Agent in writing to have subsequent dividends and/or capital gains
distributions paid in cash rather than shares. Such request must be received by
the Transfer Agent at least five (5) business days prior to the record date for
which it commences to take effect. In case of recently purchased shares for
which registration instructions have not been received on the record date, cash
payments will be made to DWR or other selected broker-dealer and will be
forwarded to the shareholders upon receipt of proper instructions. It has been
and remains the Fund's policy and practice that, if checks for dividends or
distributions paid in cash remain uncashed, no interest will accrue on amounts
represented by such uncashed checks.

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<PAGE>

Investment of Distributions Received in Cash. As discussed in the
Prospectus, any shareholder who receives a cash payment representing a dividend
or capital gains distribution may invest such dividend or distribution at net
asset value (without sales charge) by returning the check or the proceeds to
the Transfer Agent within 30 days after the payment date. If the shareholder
returns the proceeds of a dividend or distribution, such funds must be
accompanied by a signed statement indicating that the proceeds constitute a
dividend or distribution to be invested. Such investment will be made at the
net asset value per share next determined after receipt of the check or the
proceeds by the Transfer Agent.

Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Morgan Stanley
Dean Witter Short-Term U.S. Treasury Trust, directly to the Transfer Agent.
Such amounts will be applied to the purchase of Fund shares at the net asset
value per share next computed after receipt of the check or purchase payment by
the Transfer Agent. The shares so purchased will be credited to the investor's
account.

EasyInvest(SM). Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for investment
in shares of the Fund. Shares purchased through EasyInvest will be added to the
shareholder's existing account at the net asset value calculated the same
business day the transfer of funds is effected. For further information or to
subscribe to EasyInvest, shareholders should contact their Morgan Stanley Dean
Witter Financial Advisor or other or other selected broker-dealer
representative or the Transfer Agent.

Targeted Dividends(SM). In states where it is legally permissible to do so,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of an open-end Morgan Stanley Dean Witter Fund
other than Morgan Stanley Dean Witter Short Term U.S. Treasury Trust. Such
investment will be made as described above for automatic investment in shares
of the Fund, at the net asset value per share of the selected Morgan Stanley
Dean Witter Fund as of the close of business on the payment date of the
dividend or distribution, and will begin to earn dividends, if any, in the
selected Morgan Stanley Dean Witter Fund the next business day. To participate
in the Targeted Dividends program, shareholders should contact their Morgan
Stanley Dean Witter Financial Advisor or other selected broker-dealer
representative or the Transfer Agent. Shareholders of the Fund must be
shareholders of the Morgan Stanley Dean Witter Fund targeted to receive
investments from dividends at the time they enter the Targeted Dividends
program. Investors should review the prospectus of the targeted Morgan Stanley
Dean Witter Fund before entering the program.

Systematic Withdrawal Plan. As discussed in the Prospectus, a withdrawal
plan is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current offering price.
The plan provides for monthly or quarterly (March, June, September and
December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis.

Dividends and capital gains distributions on shares held under the
Systematic Withdrawal Plan will be invested in additional full and fractional
shares at net asset value (without a sales charge). Shares will be credited to
an open account for the investor by the Transfer Agent; no share certificates
will be issued. A shareholder is entitled to a share certificate upon written
request to the Transfer Agent, although in that event the shareholder's
Systematic Withdrawal Plan will be terminated.

The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of
the relevant month or quarter and normally a check for the proceeds will be
mailed by the Transfer Agent within five business days after the date of
redemption. The Withdrawal Plan may be terminated at any time by the Fund.

Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to

20
<PAGE>

the Transfer Agent to enroll in the Withdrawal Plan. The shareholder's
signature on such instructions must be guaranteed by an eligible guarantor
acceptable to the Transfer Agent (shareholders should contact the Transfer
Agent for a determination as to whether a particular institution is such an
eligible guarantor). A shareholder may, at any time, change the amount and
interval of withdrawal payments and the address to which checks are mailed by
written notification to the Transfer Agent. The shareholder's signature on such
notification must be guaranteed in the manner described above. The shareholder
may also terminate the Systematic Withdrawal Plan at any time by written notice
to the Transfer Agent. In the event of such termination, the account will be
continued as a Shareholder Investment Account. The shareholder may also redeem
all or part of the shares held in the Systematic Withdrawal Plan account (see
"Redemptions and Repurchases" in the Prospectus) at any time. The Systematic
Withdrawal Plan is not available for shares held in an Exchange Privilege
Account.

EXCHANGE PRIVILEGE

As discussed in the Prospectus under the caption "Exchange Privilege," an
Exchange Privilege exists whereby investors who have purchased shares of any of
the Morgan Stanley Dean Witter Funds that are multiple class funds ("Morgan
Stanley Dean Witter Multi-Class Funds"), shares of Morgan Stanley Dean Witter
Multi-State Municipal Series Trust and Morgan Stanley Dean Witter Hawaii
Municipal Trust, which are Morgan Stanley Dean Witter Funds sold with a
front-end sales charge ("FSC Funds"), and shares of Morgan Stanley Dean Witter
Global Short-Term Income Fund Inc. ("Global Short-Term"), which is a Morgan
Stanley Dean Witter Fund offered with a contingent deferred sales charge
("CDSC"), will be permitted, after the shares of the fund acquired by purchase
(not by exchange or dividend reinvestment) have been held for thirty days, to
redeem all or part of their shares in that fund, have the proceeds invested in
shares of the Fund, Morgan Stanley Dean Witter Limited Term Municipal Trust and
Morgan Stanley Dean Witter Short-Term Bond Fund, and in shares of five money
market funds: Morgan Stanley Dean Witter Liquid Asset Fund Inc., Morgan Stanley
Dean Witter Tax-Free Daily Income Trust, Morgan Stanley Dean Witter California
Tax-Free Daily Income Trust, Morgan Stanley Dean Witter New York Municipal
Money Market Trust, or Morgan Stanley Dean Witter U.S. Government Money Market
Trust (these eight funds, including the Fund, are hereinafter collectively
referred to as "Exchange Funds"). There is no waiting period for exchanges of
shares acquired by exchange or dividend reinvestment. Shares of the Exchange
Funds received in an exchange for shares of a Morgan Stanley Dean Witter
Multi-Class Fund may be redeemed and exchanged only for shares of the
corresponding Class of a Morgan Stanley Dean Witter Multi-Class Fund or for
shares of one of the other Exchange Funds, provided that shares of the Exchange
Funds received in an exchange for Class A shares of a Morgan Stanley Dean
Witter Multi-Class Fund may also be redeemed and exchanged for shares of a FSC
fund, and shares of the Exchange Funds received in an exchange for Class B
shares of a Morgan Stanley Dean Witter Multi-Class Fund may also be redeemed
and exchanged for shares of Global Short-Term. In addition, shares of the
Exchange Funds received in an exchange for shares of a FSC fund may be redeemed
and exchanged for Class A shares of a Morgan Stanley Dean Witter Multi-Class
Fund or for shares of one of the other Exchange Funds, and shares of the
Exchange Funds received in an exchange for shares of Global Short-Term may be
redeemed and exchanged for Class B shares of a Morgan Stanley Dean Witter
Multi-Class Fund or for shares of one of the other Exchange Funds. Ultimately,
any applicable CDSC will have to be paid upon redemption of shares originally
purchased from Global Short-Term or a Class of a Morgan Stanley Dean Witter
Multi-Class Fund that imposes a CDSC. An exchange will be treated for federal
income tax purposes the same as a repurchase or redemption of shares, on which
the shareholder may realize a capital gain or loss.

Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.

Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)

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<PAGE>

When shares of a Morgan Stanley Dean Witter Multi-Class Fund or Global
Short-Term are exchanged for shares of any Exchange Fund, the exchange is
executed at no charge to the shareholder, without the imposition of the CDSC at
the time of the exchange. During the period of time the shareholder remains in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired), the holding period or "year since purchase
payment made" is frozen. When shares are redeemed out of the Exchange Fund,
they will be subject to a CDSC which would be based upon the period of time the
shareholder held shares in a Morgan Stanley Dean Witter Multi-Class Fund or in
Global Short-Term. However, in the case of shares exchanged into the Exchange
Fund on or after April 23, 1990, upon redemption of shares which results in a
CDSC being imposed, a credit (not to exceed the amount of the CDSC) will be
given in an amount equal to the Exchange Fund 12b-1 distribution fees, if any,
incurred on or after that date which are attributable to those shares.
Shareholders acquiring shares of an Exchange Fund pursuant to this exchange
privilege may exchange those shares back into a Morgan Stanley Dean Witter
Multi-Class Fund or Global Short-Term from the Exchange Fund, with no CDSC
being imposed on such exchange. The holding period previously frozen when
shares were first exchanged for shares of the Exchange Fund resumes on the last
day of the month in which shares of a Morgan Stanley Dean Witter Multi-Class
Fund or of Global Short-Term are reacquired. Thus, a CDSC is imposed only upon
an ultimate redemption, based upon the time (calculated as described above) the
shareholder was invested in a Morgan Stanley Dean Witter Multi-Class Fund or in
Global Short-Term. In the case of exchanges of Class A shares of a Morgan
Stanley Dean Witter Multi-Class Fund which are subject to a CDSC, the holding
period also includes the time (calculated as described above) the shareholder
was invested in a FSC Fund.

When shares initially purchased in a Morgan Stanley Dean Witter
Multi-Class Fund or in Global Short-Term are exchanged for shares of a Morgan
Stanley Dean Witter Multi-Class Fund, shares of Global Short-Term, shares of a
FSC Fund, or shares of an Exchange Fund, the date of purchase of the shares of
the fund exchanged into, for purposes of the CDSC upon redemption, will be the
last day of the month in which the shares being exchanged were originally
purchased. In allocating the purchase payments between funds for purposes of
the CDSC, the amount which represents the current net asset value of shares at
the time of the exchange which were (i) purchased more than one, three or six
years (depending on the CDSC schedule applicable to the shares) prior to the
exchange, (ii) originally acquired through reinvestment of dividends or
distributions and (iii) acquired in exchange for shares of FSC Funds, or for
shares of other Morgan Stanley Dean Witter Funds for which shares of FSC Funds
have been exchanged (all such shares called "Free Shares"), will be exchanged
first. After an exchange, all dividends earned on shares in the Exchange Fund
will be considered Free Shares. If the exchanged amount exceeds the value of
such Free Shares, an exchange is made, on a block-by-block basis, of non-Free
Shares held for the longest period of time (except that if shares held for
identical periods of time but subject to different CDSC schedules are held in
the same Exchange Privilege account, the shares of that block that are subject
to a lower CDSC rate will be exchanged prior to the shares of that block that
are subject to a higher CDSC rate). Shares equal to any appreciation in the
value of non-Free Shares exchanged will be treated as Free Shares, and the
amount of the purchase payments for the non-Free Shares of the fund exchanged
into will be equal to the lesser of (a) the purchase payments for, or (b) the
current net asset value of, the exchanged non-Free Shares. If an exchange
between funds would result in exchange of only part of a particular block of
non-Free Shares, then shares equal to any appreciation in the value of the
block (up to the amount of the exchange) will be treated as Free Shares and
exchanged first, and the purchase payment for that block will be allocated on a
pro rata basis between the non-Free Shares of that block to be retained and the
non-Free Shares to be exchanged. The prorated amount of such purchase payment
attributable to the retained non-Free Shares will remain as the purchase
payment for such shares, and the amount of purchase payment for the exchanged
non-Free Shares will be equal to the lesser of (a) the prorated amount of the
purchase payment for, or (b) the current net asset value of, those exchanged
non-Free Shares. Based upon the procedures described in the Morgan Stanley Dean
Witter Multi-Class Fund Prospectus under the caption "Purchase of Fund Shares"
and in the Global Short-Term Prospectus under the caption "Contingent Deferred
Sales Charge," any applicable CDSC will be imposed upon the ultimate redemption
of shares of any fund, regardless of the number of exchanges since those shares
were originally purchased.

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<PAGE>

With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected 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 selected
broker-dealer.

The Distributor and any selected broker-dealer have authorized and
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 the
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.

Shares of the Fund acquired pursuant to the Exchange Privilege will be
held by the Fund's Transfer Agent in an Exchange Privilege account distinct
from any account of the same shareholder who may have acquired shares of the
Fund directly. A shareholder of the Fund will not be permitted to make
additional investments in such Exchange Privilege account, except through the
exchange of additional shares of the fund in which the shareholder had
initially invested, and the proceeds of any shares redeemed from such Exchange
Privilege account may not thereafter be placed back into that Exchange
Privilege account, except by utilizing the Reinstatement Privilege (see
"Redemptions and Repurchases--Reinstatement Privilege"). If such a shareholder
desires to make any additional investments in the Fund, a separate account will
be maintained for receipt of such investments. The Fund will have additional
costs for account maintenance if a shareholder has more than one account with
the Fund.

Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege account of each Class is $10,000 for the Fund (although the
Fund, in its discretion, may accept initial investments of as low as $5,000)
and $5,000 for Morgan Stanley Dean Witter Liquid Asset Fund Inc., Morgan
Stanley Dean Witter Tax-Free Daily Income Trust, Morgan Stanley Dean Witter
California Tax-Free Daily Income Trust, and Morgan Stanley Dean Witter New York
Municipal Money Market Trust, although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum initial investment
for the Exchange Privilege account of each Class is $5,000 for Morgan Stanley
Dean Witter Special Value Fund. The minimum initial investment for the Exchange
Privilege account of each Class of all other Morgan Stanley Dean Witter Funds
for which the Exchange Privilege is available is $1,000.) Upon exchange into an
Exchange Fund, the shares of that fund will be held in a special Exchange
Privilege account separately from accounts of those shareholders who have
acquired their shares directly from that fund. As a result, certain services
normally available to shareholders of the Fund or of money market funds,
including the check writing feature, will not be available for funds held in
that account.

The Fund and each of the other Morgan Stanley Dean Witter Funds may limit
the number of times this Exchange Privilege may be exercised by any investor
within a specified period of time. Also, the Exchange Privilege may be
terminated or revised at any time by any of the Morgan Stanley Dean Witter
Funds, upon such notice as may be required by applicable regulatory agencies
(presently sixty days' prior written notice for termination or material
revision), provided that six months' prior written notice of termination will
be given to the shareholders who hold shares of Exchange Funds pursuant to this
Exchange Privilege, and provided further that the Exchange Privilege may be
terminated or materially revised at times (a) when the New York Stock Exchange
is closed for other than customary weekends and holidays, (b) when trading on
that Exchange is restricted, (c) when an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to determine the value of
its net assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and regulations
of the Securities and Exchange Commission shall govern as to whether the
conditions prescribed in (b) or (c) exist), or (e), if the Fund would be unable
to invest amounts effectively in accordance with its investment objective(s),
policies and restrictions.

23
<PAGE>

REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------

As discussed in the Prospectus, shares of the Fund may be redeemed at net
asset value on any day the New York Stock Exchange is open (see "Determination
of Net Asset Value"). Redemptions will be effected at the net asset value per
share next determined after the receipt of a redemption request meeting the
applicable requirements discussed in the Prospectus. When a redemption is made
by check and a check is presented to the Transfer Agent for payment, the
Transfer Agent will redeem a sufficient number of full and fractional shares in
the shareholder's account to cover the amount of the check. This enables the
shareholder to continue earning daily income dividends until the check has
cleared.

A check drawn by a shareholder against his or her other 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 of a
check 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.

The Prospectus describes redemption procedures by check, telephone or wire
instructions with payment to a predesignated bank account, or by mail.

Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares presented for repurchase or redemption will be
ordinarily made by check within seven days after receipt by the Transfer Agent
of the certificate and/or written request in good order. Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund to
fairly determine the value of its net assets, or (d) during any other period
when the Securities and Exchange Commission by order so permits; provided that
applicable rules and regulations of the Securities and Exchange Commission
shall govern as to whether the conditions prescribed in (b) or (c) exist. If
the shares to be redeemed have recently been purchased by check (including a
certified or bank cashier's check), payment of redemption proceeds may be
delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
receipt of the check by the Transfer Agent).

Involuntary Redemption. As discussed in the Prospectus, due to the
relatively high cost of handling small investments, the Fund reserves the right
to redeem, at net asset value, the shares of any shareholders whose shares have
a value of less than $1,000 or such lesser amounts as may be fixed by the
Trustees. However, before the Trust redeems such shares and sends the proceeds
to the shareholder, it will notify the shareholder that the value of its shares
is less than $1,000 and allow the shareholder 60 days to make an additional
investment in an amount which will increase the value of the account to $1,000
or more before the redemption is processed.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

Because the Fund intends to distribute all of its net investment income
and capital gains to shareholders and intends to otherwise comply with all the
provisions of Subchapter M of the Internal Revenue Code of 1986, it is not
expected that the Fund will be required to pay any federal income tax on such
income and capital gains. If however, any such capital gains are retained, the
Fund will pay federal income tax thereon. In such a case, shareholders will
have to include such retained gains in their income but will be able to claim
their share of the tax paid by the Fund as a credit against their individual
federal income tax. The Fund intends to distribute to its shareholders each
calendar year a sufficient amount of ordinary income and capital gains to avoid
the imposition of the 4% excise tax.

Shareholders will normally have to pay federal income taxes on the
dividends and capital gains distributions they receive from the Fund. Such
dividends and distributions derived from net investment

24
<PAGE>

income or short-term capital gains are taxable to the shareholder as ordinary
dividend income regardless of how long a shareholder has held the Fund's shares
and whether the shareholder receives such dividends or distributions in
additional shares or in cash. Distributions of long-term capital gains, if any,
are taxable to shareholders as long-term capital gains regardless of how long a
shareholder has held the Fund's shares and regardless of whether the
distribution is received in additional shares or in cash. The Treasury
Department intends to issue regulations to permit shareholders to take into
account their proportionate share of the Fund's capital gains distributions
that will be subject to a reduced rate under the Taxpayer Relief Act of 1997.
The Taxpayer Relief Act reduced the maximum tax rate on long-term capital gains
from 28% to 20%; however, it also lengthened the required holding period to
obtain this lower rate from more than 12 months to more than 18 months.
However, the IRS Restructuring and Reform Act of 1998 reduces the holding
period requirement for the lower capital gain rate to more than 12 months for
transactions occurring after January 1, 1998. These lower rates do not apply to
collectibles and certain other assets. Additionally, the maximum capital gain
rate for assets that are held more than 5 years and that are acquired after
December 31, 2000 is 18%.

Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized long-term capital gains, such
payment or distribution would be in part a return of the shareholder's
investment to the extent of such reduction below the shareholder's cost, but
nonetheless would be fully taxable at either ordinary or capital gain rates.
Therefore, an investor should consider the tax implications of purchasing Fund
shares immediately prior to a dividend or distribution record date.

Under current federal tax law, the Fund will receive net investment income
in the form of interest by virtue of holding Treasury bills, notes and bonds,
and will recognize income attributable to it from holding zero coupon Treasury
securities. Current federal tax law requires that a holder (such as the Fund)
of a zero coupon security accrue a portion of the discount at which the
security was purchased as income each year even though the Fund receives no
interest payment in cash on the security during the year. As an investment
company, the Fund must pay out substantially all of its net investment income
each year. Accordingly, the Fund may be required to pay out as an income
distribution each year an amount which is greater than the total amount of cash
receipts of interest the Fund actually received. Such distributions will be
made from the available cash of the Fund or by liquidation of portfolio
securities, if necessary. If a distribution of cash necessitates the
liquidation of portfolio securities, the Investment Manager will select which
securities to sell. The Fund may realize a gain or loss from such sales. In the
event the Trust realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution, if any, than they
would in the absence of such transactions.

State and Local Taxes. The Fund intends to invest only in the obligations
of the U.S. Government that provide interest income exempt from most state and
local taxes. Because all States presently allow the pass-through of federal
obligation interest derived from specific federal obligations, it is
anticipated that substantially all of the interest income generated by the Fund
and paid out to shareholders as net investment income will be exempt from the
taxation of most state and local jurisdictions. Such investment income,
however, will not be exempt from federal tax. Furthermore, any capital gains
realized by the Fund will not be exempt from federal, and generally, state and
local taxes. It should be noted that although the Fund intends to invest only
in securities the pass-through income from which is believed exempt from state
and local income taxes, except as noted above, it is possible that a state or
local taxing authority may seek to tax an investor on a portion of the interest
income of a particular government obligation held by the Fund.

Shareholders are urged to consult their own tax advisers regarding
specific questions as to federal, state or local taxes.

25
<PAGE>

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. Yield
is calculated for any 30-day period as follows: the amount of interest and/or
dividend income for each security in the Fund's portfolio is determined in
accordance with regulatory requirements; the total for the entire portfolio
constitutes the Fund's gross income for the period. Expenses accrued during the
period are subtracted to arrive at "net investment income". The resulting
amount is divided by the product of the net asset value per share on the last
day of the period multiplied by the average number of Fund shares outstanding
during the period that were entitled to dividends. This amount is added to 1
and raised to the sixth power. 1 is then subtracted from the result and the
difference is multiplied by 2 to arrive at the annualized yield. The Fund's
yield for the 30-day period ended May 31, 1998 was 4.87%.

The Fund's "average annual total return" represents an annualization of
the Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment, taking a root of the quotient (where the root is equivalent to the
number of years in the period) and subtracting 1 from the result.

The average annual total returns for the Fund for the fiscal year ended
May 31, 1998 and for the five year period ended May 31, 1998, and for the
period August 13, 1991 (commencement of operations) through May 31, 1998 were
6.68%, 4.55% and 5.30%, respectively.

In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. The Fund may compute its aggregate total return
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value by the initial $1,000 investment and subtracting 1 from the result. The
Fund's total returns for the year ended May 31, 1998, for the five year period
ended May 31, 1998, and for the period August 13, 1991 (commencement of
operations) through May 31, 1998 were 6.68%, 24.90% and 42.05% respectively.

The Fund may also advertise the growth of a hypothetical investment of
$10,000, $50,000 or $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return and multiplying by $10,000, $50,000 or $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 $14,205, $71,025 and $142,050, respectively, at
May 31, 1998.

The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.

DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------

The shareholders of the Fund are entitled to a full vote for each full
share held. 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, and they may at any time lengthen 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. Under certain circumstances the Trustees may be
removed by action of the Trustees. The shareholders also have the right under
certain circumstances to remove the Trustees. The voting rights of shareholders
are not cumulative, so that holders of more than 50 percent of the shares
voting can, if they choose, elect all Trustees being selected, while the
holders of the remaining shares would be unable to elect any Trustees.

26
<PAGE>

The 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 (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). The Trustees have not presently
authorized any such additional series or classes of shares.

The Declaration of Trust further 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 or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of his duties. It also provides that all third persons shall
look solely to the Fund's 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.

The Fund is authorized to issue an unlimited number of shares of
beneficial interest. The Fund shall be of unlimited duration, subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders.

CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------

The Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any Fund cash balances with the Custodian
in excess of $100,000 are unprotected by Federal deposit insurance. Such
amounts may, at times, be substantial.

Morgan Stanley Dean Witter Trust FSB, ("MSDW Trust") Harborside Financial
Center, Plaza Two, Jersey City, New Jersey 07311 is the Transfer Agent of the
Trust's shares and Dividend Disbursing Agent for payment of dividends and
distributions on Trust shares and Agent for shareholders under various
investment plans described herein. MSDW Trust is an affiliate of Morgan Stanley
Dean Witter Advisors Inc., the Fund's Investment Manager, and of Morgan Stanley
Dean Witter Distributors Inc., the Fund's Distributor. As Transfer Agent and
Dividend Disbursing Agent, MSDW Trust'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 MSDW Trust receives a per shareholder account fee
from the Fund.

INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

PricewaterhouseCoopers LLP serves as the independent accountants of the
Fund. The independent accountants are responsible for auditing the annual
financial statements of the Fund.

REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------

The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent accountants, will be
sent to shareholders each year.

The Fund's fiscal year ends on May 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.

LEGAL COUNSEL
- --------------------------------------------------------------------------------

Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.

27
<PAGE>

EXPERTS
- --------------------------------------------------------------------------------

The financial statements of the Fund 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.

REGISTRATION STATEMENT
- --------------------------------------------------------------------------------

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 Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.

28
<PAGE>

MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998

<TABLE>
<CAPTION>
PRINICIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (99.3%)
U.S. Treasury Notes (82.3%)
$ 1,900 03/31/00 ...................................... 5.50% $ 1,898,613
400 02/28/01 ...................................... 5.625 400,684
3,300 11/15/00 ...................................... 5.75 3,314,520
12,600 10/31/02 ...................................... 5.75 12,667,536
19,000 11/30/02 ...................................... 5.75 19,100,320
800 09/30/98 ...................................... 6.00 801,704
9,400 06/30/99 ...................................... 6.00 9,450,102
14,700 07/31/02 ...................................... 6.00 14,911,386
26,930 09/30/00 ...................................... 6.125 27,264,471
17,100 12/31/01 ...................................... 6.125 17,387,793
1,750 07/31/98 ...................................... 6.25 1,753,377
1,000 03/31/99 ...................................... 6.25 1,006,060
13,500 04/30/01 ...................................... 6.25 13,742,055
18,000 10/31/01 ...................................... 6.25 18,361,800
3,500 02/28/02 ...................................... 6.25 3,574,970
2,200 06/30/02 ...................................... 6.25 2,250,072
10,000 05/15/99 ...................................... 6.375 10,074,900
1,600 01/15/00 ...................................... 6.375 1,619,824
8,000 04/30/00 ...................................... 6.75 8,171,040
20,000 02/29/00 ...................................... 7.125 20,513,400
10,000 07/15/98 ...................................... 8.25 10,038,500
------------
198,303,127
------------
U.S. Treasury Strips (17.0%)
25,600 05/15/99 (Coupon) ............................. 0.00 24,302,080
1,100 08/15/00 (Principal) .......................... 0.00 974,897
6,100 11/15/01 (Principal) .......................... 0.00 5,041,345
13,000 02/15/02 (Principal) .......................... 0.00 10,605,920
------------
40,924,242
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $236,713,024) (a)............. 99.3 % 239,227,369
OTHER ASSETS IN EXCESS OF LIABLITIES .......... 0.7 1,797,171
------------
NET ASSETS .................................... 100.0 % $241,024,540
============
</TABLE>

- --------------
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$3,558,734 and the aggregate gross unrealized depreciation is
$1,044,389, resulting in net unrealized appreciation of $2,514,345.

SEE NOTES TO FINANCIAL STATEMENTS

29
<PAGE>

MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
May 31, 1998

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $236,713,024) ............... $239,227,369
Receivable for:
Interest ................................... 3,022,057
Shares of beneficial interest sold ......... 2,331,376
Prepaid expenses and other assets ............... 37,843
------------
TOTAL ASSETS ............................... 244,618,645
------------
LIABILITIES:
Payable for:
Shares of beneficial interest
repurchased ............................. 3,208,007
Plan of distribution fee ................... 71,331
Investment management fee .................. 71,331
Dividends to shareholders .................. 70,555
Accrued expenses and other payables ............. 172,881
------------
TOTAL LIABILITIES .......................... 3,594,105
------------
NET ASSETS ................................. $241,024,540
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................. $256,769,712
Net unrealized appreciation ..................... 2,514,345
Accumulated undistributed net investment
income ....................................... 205,261
Accumulated net realized loss ................... (18,464,778)
------------
NET ASSETS ................................. $241,024,540
============
NET ASSET VALUE PER SHARE,
24,192,405 shares outstanding (unlimited
shares authorized of $.01 par value).......... $ 9.96
============
</TABLE>

STATEMENT OF OPERATIONS
For the year ended May 31, 1998

<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $ 14,715,707
------------
EXPENSES
Investment management fee ..................... 841,955
Plan of distribution fee ...................... 827,872
Transfer agent fees and expenses .............. 113,907
Registration fees ............................. 64,175
Professional fees ............................. 44,016
Shareholder reports and notices ............... 40,837
Trustees' fees and expenses ................... 16,417
Custodian fees ................................ 8,333
Other ......................................... 12,948
------------
TOTAL EXPENSES ............................ 1,970,460
------------
NET INVESTMENT INCOME ..................... 12,745,247
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ............................. (250,683)
Net change in unrealized depreciation ......... 3,306,205
------------
NET GAIN .................................. 3,055,522
------------
NET INCREASE .................................. $ 15,800,769
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS

30
<PAGE>

MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
FINANCIAL STATEMENTS, continued

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1998 MAY 31, 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 12,745,247 $ 13,978,300
Net realized loss .................................... (250,683) (293,887)
Net change in unrealized depreciation ................ 3,306,205 112,927
------------- -------------
NET INCREASE ...................................... 15,800,769 13,797,340
Dividends from net investment income ................. (12,934,573) (13,860,110)
Net increase (decrease) from transactions in shares of
beneficial interest ................................ 7,891,155 (28,307,309)
------------- -------------
NET INCREASE (DECREASE) ........................... 10,757,351 (28,370,079)
NET ASSETS:
Beginning of period .................................. 230,267,189 258,637,268
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$205,261 and $394,587, respectively) .............. $ 241,024,540 $ 230,267,189
============= =============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

31
<PAGE>

MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998

1. ORGANIZATION AND ACCOUNTING POLICIES

Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust (the "Fund") is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
a diversified, open-end management investment company. The Fund's investment
objective is current income, preservation of principal and liquidity. The Fund
seeks to achieve its objective by investing its assets in U.S. Treasury
securities backed by the full faith and credit of the U.S. Government. The Fund
was organized as a Massachusetts business trust on June 4, 1991 and commenced
operations on August 13, 1991.

Effective June 22, 1998, the following entities have changed their name:

<TABLE>
<CAPTION>
OLD NAME NEW NAME
- -------- --------
<S> <C>
Dean Witter Short-Term Morgan Stanley Dean Witter Short-Term U.S.
U.S. Treasury Trust Treasury Trust
Dean Witter InterCapital Inc. Morgan Stanley Dean Witter Advisors Inc.
Dean Witter Distributors Inc. Morgan Stanley Dean Witter Distributors Inc.
</TABLE>

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.

The following is a summary of significant accounting policies:

A. VALUATION OF INVESTMENTS -- (1) portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (2) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision of
the Trustees (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); and (3) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.

32
<PAGE>

MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued

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 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 its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.

2. INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the annual rate of 0.35% to the net assets of the Fund
determined as of the close of each business day.

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 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 with the distribution of
shares of
the Fund.

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

33
<PAGE>

MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued

following activities and services may be provided by the Distributor under the
Plan: (1) compensation to, and expenses of, Morgan Stanley Dean Witter
Financial Advisors, other employees and 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 0.35% of the Fund's
average daily net assets during the month. For the year ended May 31, 1998, the
distribution fee was accrued at the annual rate of 0.34%.

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales/maturities of portfolio
securities for the year ended May 31, 1998 aggregated $211,152,327 and
$219,696,301, respectively.

Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At May 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $4,200.

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 May 31, 1998 included in
Trustees' fees and expenses in the Statement of Operations amounted to $2,990.
At May 31, 1998, the Fund had an accrued pension liability of $38,431 which is
included in accrued expenses in the Statement of Assets and Liabilities.

34
<PAGE>

MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued

5. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1998 MAY 31, 1997
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 28,646,260 $ 285,059,941 25,650,127 $ 253,738,691
Shares issued in reinvestment of dividends ......... 1,058,231 10,524,484 1,132,124 11,170,571
---------- -------------- ---------- --------------
29,704,491 295,584,425 26,782,251 264,909,262
Shares repurchased ................................. (28,891,924) (287,693,270) (29,680,876) (293,216,571)
----------- -------------- ----------- --------------
Net increase (decrease) ............................ 812,567 $ 7,891,155 (2,898,625) $ (28,307,309)
=========== ============== =========== ==============
</TABLE>

6. FEDERAL INCOME TAX STATUS

At May 31, 1998, the Fund had a net capital loss carryover of approximately
$18,356,000, which may be used to offset future capital gains to the extent
provided by regulations, which is available through May 31 of the following
years:

<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
-----------------------------------------
2003 2004 2005 2006
---- ---- ---- ----
<S> <C> <C> <C>
$11,507 $6,271 $333 $245
======= ====== ==== ====
</TABLE>

Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $108,000 during fiscal 1998.

As of May 31, 1998, the Fund had temporary book/tax differences primarily
attributable to post-October losses.

7. RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS

The Fund may invest a portion of its assets in zero coupon U.S. Treasury
securities. Zero coupon securities are subject to substantially greater market
fluctuations during periods of changing prevailing interest rates than are
comparable debt securities.

35
<PAGE>

MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31
--------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........ $ 9.85 $ 9.84 $ 9.98
---------- ---------- ----------
Net investment income ....................... 0.53 0.54 0.54
Net realized and unrealized gain (loss) ..... 0.11 -- (0.14)
---------- ---------- ----------
Total from investment operations ............ 0.64 0.54 0.40
---------- ---------- ----------
Less dividends and distributions from:
Net investment income ...................... (0.53) (0.53) (0.54)
Net realized gain .......................... -- -- --
---------- ---------- ----------
Total dividends and distributions ........... (0.53) (0.53) (0.54)
---------- ---------- ----------
Net asset value, end of period .............. $ 9.96 $ 9.85 $ 9.84
========== ========== ==========
TOTAL INVESTMENT RETURN+ .................... 6.68% 5.63% 4.09%

RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... 0.82% 0.83% 0.84%
Net investment income ....................... 5.30% 5.42% 5.33%

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ..... $241,025 $230,267 $258,637
Portfolio turnover rate ..................... 95% 149% 63%

FOR THE PERIOD
FOR THE YEAR ENDED MAY 31 AUGUST 31, 1991*
-------------------------------------------- THROUGH
1995 1994 1993 MAY 31, 1992
-------------- -------------- -------------- ----------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........ $ 9.88 $ 10.34 $ 10.21 $ 10.00
---------- ---------- ---------- -----------
Net investment income ....................... 0.49 0.49 0.54 0.44
Net realized and unrealized gain (loss) ..... 0.10 (0.45) 0.13 0.20
---------- ---------- ---------- -----------
Total from investment operations ............ 0.59 0.04 0.67 0.64
---------- ---------- ---------- -----------
Less dividends and distributions from:
Net investment income ...................... (0.49) (0.50) (0.53) (0.43)
Net realized gain .......................... -- -- (0.01) --
---------- ---------- ---------- -----------
Total dividends and distributions ........... (0.49) (0.50) (0.54) (0.43)
---------- ---------- ---------- -----------
Net asset value, end of period .............. $ 9.98 $ 9.88 $ 10.34 $ 10.21
========== ========== ========== ===========
TOTAL INVESTMENT RETURN+ .................... 6.22% 0.25% 6.75% 6.55%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... 0.84% 0.79% 0.80% 0.79%(2)(3)
Net investment income ....................... 4.93% 4.74% 5.18% 5.49%(2)(3)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ..... $273,184 $516,017 $584,206 $ 523,555
Portfolio turnover rate ..................... 30% 49% 21% 12%(1)
</TABLE>

- -------------
* Commencement of operations.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above annualized expense and net investment
income ratios would have been 0.81% and 5.47%, respectively.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY 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
Short-Term U.S. Treasury Trust (the "Fund"), formerly Dean Witter Short-Term
U.S. Treasury Trust, at May 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 six years in the
period then ended and for the period August 13, 1991 (commencement of
operations) through May 31, 1992, 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 May 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
July 10, 1998