<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 2000
REGISTRATION NOS.: 33-62158
811-7700
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 9 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 10 [X]
----------------
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
STUART M. STRAUSS, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 30, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of rule 485.
----------------
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
================================================================================
<PAGE>
PROSPECTUS - MAY 30, 2000
MORGAN STANLEY DEAN WITTER
----------------------------------------------------------------
LIMITED TERM MUNICIPAL TRUST
[GRAPHIC OMITTED]
A MUTUAL FUND THAT SEEKS TO PROVIDE A
HIGH LEVEL OF CURRENT INCOME THAT IS EXEMPT FROM
FEDERAL INCOME TAX, CONSISTENT WITH THE PRESERVATION OF
CAPITAL AND PRESCRIBED STANDARDS OF QUALITY AND MATURITY
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
The Fund Investment Objective .............................1
Principal Investment Strategies ..................1
Principal Risks ..................................2
Past Performance .................................4
Fees and Expenses ................................5
Additional Investment Strategy Information .......5
Additional Risk Information ......................6
Fund Management ..................................7
Shareholder Information Pricing Fund Shares ..............................8
How to Buy Shares ................................8
How to Exchange Shares ..........................10
How to Sell Shares ..............................12
Distributions ...................................13
Tax Consequences ................................14
Financial Highlights .................................................16
Our Family of Funds ...................................Inside Back Cover
This Prospectus contains important information about
the Fund. Please read it carefully and keep it for
future reference.
</TABLE>
<PAGE>
THE FUND
[GRAPHIC OMITTED]
INVESTMENT OBJECTIVE
--------------------
Morgan Stanley Dean Witter Limited Term Municipal Trust seeks to provide a high
level of current income that is exempt from Federal income tax, consistent with
the preservation of capital and prescribed standards of quality and maturity.
[GRAPHIC OMITTED]
PRINCIPAL INVESTMENT STRATEGIES
-------------------------------
(sidebar)
INCOME
An investment objective having the goal of selecting securities to pay out
income rather than rise in price.
(end sidebar)
The Fund will invest predominately in intermediate term securities that pay
interest exempt from federal income taxes. The Fund's "Investment Manager,"
Morgan Stanley Dean Witter Advisors Inc., generally invests the Fund's assets in
municipal obligations. Municipal obligations are bonds, notes or short-term
commercial paper issued by state governments, local governments and their
respective agencies. In deciding which securities to buy, hold or sell, the
Investment Manager considers market, economic and political conditions. At least
75% of the Fund's assets will be invested in municipal obligations with the
following ratings at the time of purchase:
o municipal bonds - within the four highest grades by Moody's Investors
Service Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), or Fitch IBCA, Inc. ("Fitch");
o municipal notes - within the two highest grades or, if not rated, have
outstanding bonds within the four highest grades by
Moody's, S&P or Fitch; and
o municipal
commercial paper - within the highest grade by Moody's, S&P or Fitch.
The Fund also may invest up to 25% of its assets in municipal securities rated
within the fourth highest grade by Moody's, S&P or Fitch.
The municipal obligations in the Fund's portfolio will have an anticipated
average dollar-weighted maturity range of 7 to 10 years, with a maximum average
dollar-weighted maturity of 12 years. At least 80% of the Fund's assets will
have a maturity of 15 years or less.
The Fund may invest up to 10% of its assets in inverse floating rate municipal
obligations. The interest rates on these obligations generally move in the
reverse direction of market interest rates. If market interest rates fall, the
interest rate on the obligations will increase and if market interest rates
increase, the interest rate on the obligations will fall.
The Fund may invest any amount of its assets in securities that pay interest
income subject to the "alternative minimum tax," and some taxpayers may have to
pay tax on a
1
<PAGE>
Fund distribution of this income. The Fund therefore may not be a suitable
investment for these investors. See the "Tax Consequences" section for more
details.
Municipal obligations typically are "general obligation" or "revenue" bonds,
notes or commercial paper. General obligation securities are secured by the
issuer's faith and credit, including its taxing power for payment of principal
and interest. Revenue securities, however, are generally payable from a specific
revenue source. They are issued to fund a wide variety of public and private
projects in sectors such as public utilities, hospitals, housing, airports and
highways, and educational facilities. The Fund's municipal obligation
investments may include zero coupon securities, which are purchased at a
discount and accrue interest, but make no payments until maturity.
In addition, the Fund may invest in private activity bonds, including industrial
development and pollution control bonds and lease obligations.
In pursuing the Fund's investment objective, the Investment Manager has
considerable leeway in deciding which investments it buys, holds or sells on a
day-to-day basis -- and which investment strategies it uses. For example, the
Investment Manager in its discretion may determine to use some permitted
investment strategies while not using others.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
---------------
There is no assurance that the Fund will achieve its investment objective. The
Fund's share price and yield will fluctuate with changes in the market value of
the Fund's portfolio securities. When you sell Fund shares, they may be worth
less than what you paid for them and, accordingly, you can lose money investing
in this Fund.
Credit and Interest Rate Risks. A principal risk of investing in the Fund is
associated with its municipal investments. Municipal obligations, like other
debt securities, are subject to two types of risks: credit risk and interest
rate risk.
Credit risk refers to the possibility that the issuer of a security will be
unable to make interest payments and/or repay the principal on its debt. In the
case of revenue bonds, notes or commercial paper, for example, the credit risk
is the possibility that the user fees from a project or other specified revenue
sources are insufficient to meet interest and/or principal payment obligations.
The issuers of private activity bonds, used to finance such projects as
industrial development and pollution control facilities, also may be negatively
impacted by the general credit of the user of the project. In addition, the Fund
may invest in securities with the lowest investment grade rating. These
securities may have speculative characteristics.
Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When the
general level of interest
2
<PAGE>
rates goes up, the prices of most fixed-income securities go down. When the
general level of interest rates goes down, the prices of most fixed-income
securities go up. As a general illustration of the relationship between
fixed-income securities and interest rates, the following table shows how
interest rates affect bond prices.
<TABLE>
<CAPTION>
HOW INTEREST RATES AFFECT BOND PRICES
--------------------------------------------------------------------------------
PRICE PER $1,000 OF A MUNICIPAL BOND IF
INTEREST RATES:
-----------------------------------------
INCREASE* DECREASE**
----------------- ---------------------
YEARS TO BOND
MATURITY MATURITY COUPON 1% 2% 1% 2%
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 2000 3.95% $990 $981 $1,010 $1,020
--------------------------------------------------------------------------------
5 2004 4.70% $957 $916 $1,045 $1,093
--------------------------------------------------------------------------------
10 2009 5.05% $926 $858 $1,082 $1,171
--------------------------------------------------------------------------------
20 2019 5.80% $892 $799 $1,128 $1,278
--------------------------------------------------------------------------------
30 2029 5.95% $875 $773 $1,155 $1,350
--------------------------------------------------------------------------------
</TABLE>
Source: Municipal Market Data (a division of Thomson Financial Municipal Group):
"Aaa" yield curve as of 12/31/99. The table is not representative of price
changes for inverse floating rate municipal obligations which typically respond
to changes in interest rates to a greater extent than comparable obligations.
* Assumes no effect from market discount calculation.
** Assumes bonds are non-callable.
In addition, the table is an illustration and does not represent expected yields
or share price changes of any Morgan Stanley Dean Witter mutual fund.
Inverse Floating Rate Municipal Obligations. The inverse floating rate municipal
obligations in which the Fund may invest are typically created through a
division of a fixed rate municipal obligation into two separate instruments, a
short-term obligation and a long-term obligation. The interest rate on the
short-term obligation is set at periodic auctions. The interest rate on the
long-term obligation is the rate the issuer would have paid on the fixed income
obligation: (i) plus the difference between such fixed rate and the rate on the
short-term obligation, if the short-term rate is lower than the fixed rate; or
(ii) minus such difference if the interest rate on the short-term obligation is
higher than the fixed rate. Inverse floating rate municipal obligations offer
the potential for higher income than is available from fixed rate obligations of
comparable maturity and credit rating. They also carry greater risks. In
particular, the prices of inverse floating rate municipal obligations are more
volatile, i.e., they increase and decrease in response to changes in interest
rates to a greater extent than comparable fixed rate obligations.
Other Risks. The performance of the Fund also will depend on whether the
Investment Manager is successful in pursuing the Fund's investment strategy. The
Fund is also
3
<PAGE>
subject to other risks from its permissible investments, including private
activity bonds and lease obligations. For more information about these risks,
see the "Additional Risk Information" section.
Shares of the Fund are not bank deposits and are not guaranteed or insured by
the FDIC or any other government agency.
[GRAPHIC OMITTED]
PAST PERFORMANCE
----------------
The bar chart and table below provide some indication of the risks of investing
in the Fund. The Fund's past performance does not indicate how the Fund will
perform in the future.
(sidebar)
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's shares has varied from year
to year over the past 6 calendar years.
(end sidebar)
ANNUAL TOTAL RETURNS -- CALENDAR YEARS
-7.95% 16.72% 3.17% 6.46% 5.10% -1.06%
----- ----- ----- ----- ----- -----
1994 '95 '96 '97 '98 '99
Year-to-date total return as of March 31, 2000 was 1.56%.
During the periods shown in the bar chart, the highest return for a calendar
quarter was 6.78% (quarter ended March 31, 1995) and the lowest return for a
calendar quarter was -5.50% (quarter ended March 31, 1994).
(sidebar)
AVERAGE ANNUAL TOTAL RETURNS
This table compares the Fund's average annual total returns with those of a
broad measure of market performance over time.
(end sidbar)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
--------------------------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR PAST 5 YEARS (SINCE 7/12/93)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited Term Municipal Trust -1.06% 5.92% 3.94%
--------------------------------------------------------------------------------
Lehman Brothers 10-Year
Municipal Bond Index(1) -1.25% 7.12% 5.48%(2)
--------------------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers 10-year Municipal Bond Index measures the performance
of municipal bonds rated at least Baa+ by Moody's Investors Service, Inc.
with maturities ranging between 9 and 12 years. The performance of the
Index does not include any expenses, fees or charges. The Index is
unmanaged and should not be considered an investment.
(2) For the period July 31, 1993 to December 31, 1999.
4
<PAGE>
[GRAPHIC OMITTED]
FEES AND EXPENSES
-----------------
The table below briefly describes the fees and expenses that you may pay if you
buy and hold shares of the Fund. The Fund is a no-load fund. The Fund does not
impose any sales charges and does not impose account or exchange fees.
(sidebar)
ANNUAL FUND OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended March 31, 2000.
(end sidebar)
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------
<S> <C>
Management fee 0.50%
-------------------------------------------------------
Distribution and service (12b-1) fees None
-------------------------------------------------------
Other expenses 0.41%
-------------------------------------------------------
Total annual Fund operating expenses 0.91%
-------------------------------------------------------
</TABLE>
Example
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, the table below shows your costs at
the end of each period based on these assumptions.
<TABLE>
<CAPTION>
Expenses Over Time
------------------------------------------
1 YEAR 3 Years 5 Years 10 Years
------------------------------------------
<S> <C> <C> <C>
$93 $290 $504 $1,120
------------------------------------------
</TABLE>
[GRAPHIC OMITTED]
ADDITIONAL INVESTMENT STRATEGY INFORMATION
------------------------------------------
This section provides additional information relating to the Fund's principal
investment strategies.
Private Activity Bonds. The Fund may invest more than 25% of its assets in
municipal obligations known as private activity bonds. These securities include,
for example, housing, industrial development and pollution control revenue,
electric, utility, manufacturing, and transportation facilities.
Lease Obligations. Included within the revenue bonds category are participations
in lease obligations or installment purchase contracts of municipalities.
Generally, state and local agencies or authorities issue lease obligations to
acquire equipment and facilities for public and private purposes.
5
<PAGE>
Defensive Investing. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its assets in taxable money market instruments when the Investment
Manager believes it is advisable to do so. Although taking a defensive posture
is designed to protect the Fund from an anticipated market downturn, it could
have the effect of reducing the Fund's ability to provide tax-exempt income and
reducing the benefit from any upswing in the market. When the Fund takes a
defensive position, it may not achieve its investment objective.
The percentage limitations relating to the composition of the Fund's portfolio
apply at the time the Fund acquires an investment and refer to the Fund's net
assets unless otherwise noted. Subsequent percentage changes that result from
market fluctuations will not require the Fund to sell any portfolio security.
The Fund may change its principal investment strategies without shareholder
approval; however, you would be notified of such changes.
[GRAPHIC OMITTED]
ADDITIONAL RISK INFORMATION
---------------------------
This section provides additional information relating to the principal risks of
investing in the Fund.
Bond Insurance Risk. Many of the municipal obligations the Fund invests in will
be covered by insurance at the time of issuance or at a later date. Such
insurance covers the remaining term of the security. Insured municipal
obligations would generally be assigned a lower rating if the rating were based
primarily on the credit quality of the issuer without regard to the insurance
feature. If the claims-paying ability of the insurer were downgraded, the
ratings on the municipal obligations it insures may also be downgraded.
Private Activity Bonds. The issuers of private activity bonds in which the Fund
may invest may be negatively impacted by conditions affecting either the general
credit of the user of the private activity project or the project itself.
Conditions such as regulatory and environmental restrictions and economic
downturns may lower the need for these facilities and the ability of users of
the project to pay for the facilities. This could cause a decline in the Fund's
value. The Fund's private activity bond holdings also may pay interest subject
to the alternative minimum tax. See the "Tax Consequences" section for more
details.
Lease Obligations. Lease obligations may have risks not normally associated with
general obligation or other revenue bonds. Leases and installment purchase or
conditional sale contracts (which may provide for title to the leased asset to
pass eventually to the issuer) have developed as a means for governmental
issuers to acquire property and equipment without the necessity of complying
with the constitutional and
6
<PAGE>
statutory requirements generally applicable for the issuance of debt. Certain
lease obligations contain "non-appropriation" clauses that provide that the
governmental issuer has no obligation to make future payments under the lease or
contract unless money is appropriated for that purpose by the appropriate
legislative body on an annual or other periodic basis. Consequently, continued
lease payments on those lease obligations containing "non-appropriation" clauses
are dependent on future legislative actions. If these legislative actions do not
occur, the holders of the lease obligation, such as the Fund, may experience
difficulty in exercising their rights, including disposition of the property.
[GRAPHIC OMITTED]
FUND MANAGEMENT
---------------
(sidebar)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc., its
wholly-owned subsidiary, had approximately $150 billion in assets under
management as of April 30, 2000.
(end sidebar)
The Fund has retained the Investment Manager -- Morgan Stanley Dean Witter
Advisors Inc. -- to provide administrative services, manage its business affairs
and invest its assets, including the placing of orders for the purchase and sale
of portfolio securities. The Investment Manager is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services. Its main business office is
located at Two World Trade Center, New York, NY 10048.
The Fund's portfolio is managed within the Investment Manager's Tax-Exempt
Group. Katherine H. Stromberg is the Fund's portfolio manager. Ms. Stromberg has
been a portfolio manager at the Investment Manager for over five years.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund, and for Fund
expenses assumed by the Investment Manager. The fee is based on the Fund's
average daily net assets. For the fiscal year ended March 31, 2000, the Fund
accrued total compensation to the Investment Manager amounting to 0.50% of the
Fund's average daily net assets.
7
<PAGE>
SHAREHOLDER INFORMATION
[GRAPHIC OMITTED]
PRICING FUND SHARES
-------------------
The price of Fund shares, called "net asset value," is based on the value of the
Fund's portfolio securities.
The net asset value per share of the Fund is determined once daily at 4:00 p.m.
Eastern time on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York Stock Exchange is
closed.
The value of the Fund's portfolio securities (except for short-term taxable debt
securities and certain other investments) are valued by an outside independent
pricing service. The service uses a computerized grid matrix of tax-exempt
securities and its evaluations in determining what it believes is the fair value
of the portfolio securities. The Fund's Board of Trustees believes that timely
and reliable market quotations are generally not readily available to the Fund
to value tax-exempt securities and the valuations that the pricing service
supplies are more likely to approximate the fair value of the securities.
Short-term debt portfolio securities with remaining maturities of sixty days or
less at the time of purchase are valued at amortized cost. However, if the cost
does not reflect the securities' market value, these securities will be valued
at their fair value.
[GRAPHIC OMITTED]
HOW TO BUY SHARES
-----------------
(sidebar)
CONTACTING A FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (877) 937-MSDW (toll-free) for the
telephone number of the Morgan Stanley Dean Witter office nearest you. You may
also access our office locator on our Internet site at:
www.msdw.com/individual/funds
(end sidebar)
You may open a new account to buy Fund shares or buy additional Fund shares for
an existing account by contacting your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative. Your Financial Advisor
will assist you, step-by-step, with the procedures to invest in the Fund. You
may also purchase shares directly by calling the Fund's transfer agent and
requesting an application.
When you buy Fund shares, the shares are purchased at the next share price
calculated after we receive your purchase order. Your payment is due on the
third business day after you place your purchase order. We reserve the right to
reject any order for the purchase of Fund shares.
8
<PAGE>
(sidebar)
EASYINVEST(SM)
A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
(end sidebar)
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
--------------------------------------------------------------------------------
MINIMUM INVESTMENT
----------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
--------------------------------------------------------------------------------
<S> <C> <C>
Regular accounts $1,000 $100
--------------------------------------------------------------------------------
EasyInvest(SM)
(Automatically from your
checking or savings account
or Money Market Fund) $ 100* $100*
--------------------------------------------------------------------------------
</TABLE>
* Provided your schedule of investments totals $1,000 in twelve months.
There is no minimum investment amount if you purchase Fund shares through: (1)
the Investment Manager's mutual fund asset allocation plan, (2) a program,
approved by the Fund's distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.
Subsequent Investments Sent Directly to the Fund. In addition to buying
additional Fund shares for an existing account by contacting your Morgan Stanley
Dean Witter Financial Advisor, you may send a check directly to the Fund. To buy
additional shares in this manner:
o Write a "letter of instruction" to the Fund specifying the name(s) on the
account, the account number, the social security or tax identification
number, and the investment amount. The letter must be signed by the account
owner(s).
o Make out a check for the total amount payable to: Morgan Stanley Dean
Witter Limited Term Municipal Trust.
o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O.
Box 1040, Jersey City, NJ 07303.
PLAN OF DISTRIBUTION The Fund has adopted a Plan of Distribution in accordance
with Rule 12b-1 under the Investment Company Act of 1940. The Plan allows the
Fund's distributor to pay distribution fees for the sale and distribution of
Fund shares.
9
<PAGE>
[GRAPHIC OMITTED]
HOW TO EXCHANGE SHARES
----------------------
Permissible Fund Exchanges. You may only exchange shares of the Fund for shares
of other continuously offered Morgan Stanley Dean Witter Funds if the Fund
shares were acquired in an exchange of shares initially purchased in a
Multi-Class Fund or an FSC Fund (subject to a front-end sales charge). In that
case, the shares may be subsequently re-exchanged for shares of the same Class
of any Multi-Class Fund or FSC Fund or for shares of another No-Load Fund, a
Money Market Fund, North American Government Income Trust or Short-Term U.S.
Treasury Trust. Of course, if an exchange is not permitted, you may sell shares
of the Fund and buy another Fund's shares with the proceeds.
See the inside back cover of this Prospectus for each Morgan Stanley Dean Witter
Fund's designation as a Multi-Class Fund, FSC Fund, No-Load Fund or Money Market
Fund. If a Morgan Stanley Dean Witter Fund is not listed, consult the inside
back cover of that fund's prospectus for its designation. For purposes of
exchanges, shares of FSC Funds are treated as Class A shares of a Multi-Class
Fund.
Exchanges may be made after shares of the fund acquired by purchase have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment. The current prospectus for each
fund describes its investment objective(s), policies and investment minimums,
and should be read before investment. Since exchanges are available only into
continuously offered Morgan Stanley Dean Witter Funds, exchanges are not
available into any new Morgan Stanley Dean Witter Fund during its initial
offering period, or when shares of a particular Morgan Stanley Dean Witter Fund
are not being offered for purchase.
Exchange Procedures. You can process an exchange by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Otherwise, you must forward an exchange privilege authorization
form to the Fund's transfer agent -- Morgan Stanley Dean Witter Trust FSB -- and
then write the transfer agent or call (800) 869-NEWS to place an exchange order.
You can obtain an exchange privilege authorization form by contacting your
Financial Advisor or other authorized financial representative, or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be processed
until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money Market Fund)
is made on the basis of the next calculated net asset values of the funds
involved after the exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next calculated net asset
value and the Money Market Fund's shares are purchased at their net asset value
on the following business day.
The Fund may terminate or revise the exchange privilege upon required notice.
The check writing privilege is not available for Money Market Fund shares you
acquire in an exchange.
10
<PAGE>
Telephone Exchanges. For your protection when calling Morgan Stanley Dean Witter
Trust FSB, we will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. These procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number. Telephone
instructions also may be recorded.
Telephone instructions will be accepted if received by the Fund's transfer agent
between 9:00 a.m. and 4:00 p.m. Eastern time on any day the New York Stock
Exchange is open for business. During periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be difficult
to implement, although this has not been the case with the Fund in the past.
Margin Accounts. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the sale of such shares.
Tax Considerations of Exchanges. If you exchange shares of the Fund for shares
of another Morgan Stanley Dean Witter Fund there are important tax
considerations. For tax purposes, the exchange out of the Fund is considered a
sale of Fund shares -- and the exchange into the other fund is considered a
purchase. As a result, you may realize a capital gain or loss.
You should review the "Tax Consequences" section and consult your own tax
professional about the tax consequences of an exchange.
Limitations on Exchanges. Certain patterns of past exchanges and/or purchase or
sale transactions involving the Fund or other Morgan Stanley Dean Witter Funds
may result in the Fund limiting or prohibiting, at its discretion, additional
purchases and/or exchanges. Determinations in this regard may be made based on
the frequency or dollar amount of the previous exchanges or purchase or sale
transactions. You will be notified in advance of limitations on your exchange
privileges.
For further information regarding exchange privileges, you should contact your
Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.
11
<PAGE>
[GRAPHIC OMITTED]
HOW TO SELL SHARES
------------------
You can sell some or all of your Fund shares at any time. Your shares will be
sold at the next price calculated after we receive your order to sell as
described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
-----------------------------------------------------------------------------------------------------------------
<S> <C>
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter Financial Advisor or
Financial Advisor other authorized financial representative.
-------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Payment will be sent to the address to which the account is registered or deposited in
your brokerage account.
-----------------------------------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction" that includes:
o your account number;
[GRAPHIC OMITTED] o the dollar amount or the number of shares you wish to sell; and
o the signature of each owner as it appears on the account.
-------------------------------------------------------------------------------------------
If you are requesting payment to anyone other than the registered owner(s) or that
payment be sent to any address other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature guarantee. You can generally
obtain a signature guarantee from an eligible guarantor acceptable to Morgan Stanley
Dean Witter Trust FSB. (You should contact Morgan Stanley Dean Witter Trust FSB at
(800) 869-NEWS for determination as to whether a particular institution is an eligible
guarantor.) A notary public cannot provide a signature guarantee. Additional
documentation may be required for shares held by a corporation, partnership, trustee
or executor.
-------------------------------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at P.O. Box 983, Jersey City,
NJ 07303. If you hold share certificates, you must return the certificates, along with the
letter and any required additional documentation.
-------------------------------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account is registered, or
otherwise according to your instructions.
-----------------------------------------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter Family of Funds has a total
Withdrawal Plan market value of at least $10,000, you may elect to withdraw amounts of $25 or more, or in
any whole percentage of a fund's balance (provided the amount is at least $25), on
[GRAPHIC OMITTED] a monthly, quarterly, semi-annual or annual basis, from any fund with a balance of at
least $1,000. Each time you add a fund to the plan, you must meet the plan
requirements.
-------------------------------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan Stanley Dean
Witter Financial Advisor or call (800) 869-NEWS. You may terminate or suspend your
plan at any time. Please remember that withdrawals from the plan are sales of shares,
not Fund "distributions," and ultimately may exhaust your account balance. The Fund
may terminate or revise the plan at any time.
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Payment for Sold Shares. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.
12
<PAGE>
Payment may be postponed or the right to sell your shares suspended under
unusual circumstances. If you request to sell shares that were recently
purchased by check, your sale will not be effected until it has been verified
that the check has been honored.
Involuntary Sales. The Fund reserves the right, on sixty days' notice, to sell
the shares of any shareholder (other than shares held in an IRA or 403(b)
Custodial Account) whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through EasyInvest(SM), if after
12 months the shareholder has invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we will notify you
and allow you sixty days to make an additional investment in an amount that will
increase the value of your account to at least the required amount before the
sale is processed.
Margin Accounts. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the sale of such shares.
[GRAPHIC OMITTED]
DISTRIBUTIONS
-------------
The Fund passes substantially all of its earnings from income and capital gains
along to its investors as "distributions." The Fund earns interest from
fixed-income investments. These amounts are passed along to Fund shareholders as
"income dividend distributions." The Fund realizes capital gains whenever it
sells securities for a higher price than it paid for them. These amounts may be
passed along as "capital gain distributions."
Normally, income dividends are declared on each day the New York Stock Exchange
is open for business and are distributed to shareholders monthly. Capital gains,
if any, are usually distributed in June and December. The Fund, however, may
retain and reinvest any long-term capital gains. The Fund may at times make
payments from sources other than income or capital gains that represent a return
of a portion of your investment.
(sidebar)
TARGETED DIVIDENDS(SM)
You may select to have your Fund distributions automatically invested in
another Morgan Stanley Dean Witter Fund that you own. Contact your Morgan
Stanley Dean Witter Financial Advisor for further information about this
service.
(end sidebar)
Distributions are reinvested automatically in additional shares of the Fund and
automatically credited to your account, unless you request in writing that all
distributions be paid in cash. If you elect the cash option, processing of your
dividend checks begins immediately following the monthly payment date, and the
Fund will mail a monthly dividend check to you normally during the first seven
days of the following month. No interest will accrue on uncashed checks. If you
wish to change how your distributions are paid, your request should be received
by the Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at least
five business days prior to the record date of the distributions.
13
<PAGE>
[GRAPHIC OMITTED]
TAX CONSEQUENCES
----------------
As with any investment, you should consider how your Fund investment will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.
You need to be aware of the possible tax consequences when:
o The Fund makes distributions; and
o You sell Fund shares, including an exchange to another Morgan Stanley Dean
Witter Fund.
Taxes on Distributions. Your income dividend distributions are normally exempt
from federal income taxes -- to the extent they are derived from municipal
obligations. Income derived from other portfolio securities may be subject to
federal, state and/or local income taxes.
Income derived from some municipal securities is subject to the federal
"alternative minimum tax." Certain tax-exempt securities whose proceeds are used
to finance private, for-profit organizations are subject to this special tax
system that ensures that individuals pay at least some federal taxes. Although
interest on these securities is generally exempt from federal income tax, some
taxpayers who have many tax deductions or exemptions nevertheless may have to
pay tax on the income.
If you borrow money to purchase shares of the Fund, the interest on the borrowed
money is generally not deductible for personal income tax purposes.
If the Fund makes any capital gain distributions, those distributions will
normally be subject to federal and state income tax when they are paid, whether
you take them in cash or reinvest them in Fund shares. Any short-term capital
gain distributions are taxable to you as ordinary income. Any long-term capital
gain distributions are taxable to you as long-term capital gains, no matter how
long you have owned shares in the Fund.
The Fund may derive gains in part from municipal obligations the Fund purchased
below their principal or face values. All, or a portion, of these gains may be
taxable to you as ordinary income rather than capital gains.
Every January, you will be sent a statement (IRS Form 1099-DIV) showing the
distributions paid to you in the previous year. The statement provides
information on your dividends and capital gains for tax purposes.
Taxes on Sales. Your sale of Fund shares normally is subject to federal and
state income tax and may result in a taxable gain or loss to you. A sale also
may be subject to local income tax. Your exchange of Fund shares for shares of
another Morgan Stanley Dean
14
<PAGE>
Witter Fund is treated for tax purposes like a sale of your original shares and
a purchase of your new shares. Thus, the exchange may, like a sale, result in a
taxable gain or loss to you and will give you a new tax basis for your new
shares.
When you open your Fund account, you should provide your social security or tax
identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax of
31% on taxable distributions and sale proceeds. Any withheld amount would be
sent to the IRS as an advance tax payment.
15
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 fiscal years of the Fund. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost on
an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.34 $10.26 $9.91 $9.95 $9.56
-----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.38 0.39 0.40 0.40 0.41
Net realized and unrealized gain (loss) (0.38) 0.08 0.35 (0.04) 0.39
------ ------ ----- ----- -----
Total income from investment operations -- 0.47 0.75 0.36 0.80
-----------------------------------------------------------------------------------------------------------------
Less dividends from net investment income (0.38) (0.39) (0.40) (0.40) (0.41)
-----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.96 $10.34 $10.26 $9.91 $9.95
-----------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 0.08% 4.68% 7.70% 3.65% 8.42%
-----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
-----------------------------------------------------------------------------------------------------------------
Expenses 0.91% 0.86%(1) 0.83% 0.88%(1) 0.87%(1)
-----------------------------------------------------------------------------------------------------------------
Net investment income 3.81% 3.75% 3.92% 3.99% 4.09%
-----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $44,237 $58,648 $57,500 $61,098 $72,766
-----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 29% -- -- --
-----------------------------------------------------------------------------------------------------------------
</TABLE>
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Does not reflect the effect of expense offset of 0.01%.
16
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers
investors a wide range of investment choices. Come on
in and meet the family!
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GROWTH FUNDS Aggressive Equity Fund THEME FUNDS
American Opportunities Fund Financial Services Trust
Capital Growth Securities Health Sciences Trust
Developing Growth Securities Information Fund
Growth Fund Natural Resource Development Securities
Market Leader Trust GLOBAL/INTERNATIONAL FUNDS
Mid-Cap Equity Trust Competitive Edge Fund - "Best Ideas" Portfolio
Next Generation Trust European Growth Fund
Small Cap Growth Fund Fund of Funds - International Portfolio
Special Value Fund International Fund
Tax-Managed Growth Fund International SmallCap Fund
21st Century Trend Fund Japan Fund
Latin American Growth Fund
Pacific Growth Fund
-----------------------------------------------------------------------------------------------------------------------------------
GROWTH & INCOME FUNDS Balanced Growth Fund Total Market Index Fund
Balanced Income Fund Total Return Trust
Convertible Securities Trust Value Fund
Dividend Growth Securities Value-Added Market Series/Equity Portfolio
Equity Fund THEME FUNDS
Fund of Funds - Domestic Portfolio Real Estate Fund
Income Builder Fund Utilities Fund
Mid-Cap Dividend Growth Securities GLOBAL FUNDS
S&P 500 Index Fund Global Dividend Growth Securities
S&P 500 Select Fund Global Utilities Fund
Strategist Fund
-----------------------------------------------------------------------------------------------------------------------------------
INCOME FUNDS GOVERNMENT INCOME FUNDS GLOBAL INCOME FUNDS
Federal Securities Trust North American Government Income Trust
Short-Term U.S. Treasury Trust World Wide Income Trust
U.S. Government Securities Trust TAX-FREE INCOME FUNDS
DIVERSIFIED INCOME FUNDS California Tax-Free Income Fund
Diversified Income Trust Hawaii Municipal Trust(FSC)
CORPORATE INCOME FUNDS Limited Term Municipal Trust(NL)
High Yield Securities Multi-State Municipal Series Trust(FSC)
Intermediate Income Securities New York Tax-Free Income Fund
Short-Term Bond Fund(NL) Tax-Exempt Securities Trust
-----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Liquid Asset Fund(MM) California Tax-Free Daily Income Trust(MM)
U.S. Government Money Market Trust(MM) New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
</TABLE>
There may be funds created after this Prospectus was published. Please consult
the inside back cover of a new fund's prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of funds are: NL -- No-Load (Mutual) Fund; MM --
Money Market Fund; FSC -- A mutual fund sold with a front-end sales charge and a
distribution (12b-1) fee.
<PAGE>
PROSPECTUS - MAY 30, 2000
Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's Statement of Additional Information also provides additional information
about the Fund. The Statement of Additional Information is incorporated herein
by reference (legally is part of this Prospectus). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
WWW.MSDW.COM/INDIVIDUAL/FUNDS
Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (202) 942-8090. Reports and
other information about the Fund are available on the EDGAR Database on the
SEC's Internet site at (www.sec.gov), and copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the following
E-mail address: [email protected], or by writing the Public Reference Section
of the SEC, Washington, DC 20549-0102.
TICKER SYMBOL:
DWLTX
----------
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7700)
MORGAN STANLEY DEAN WITTER
--------------------------------------------------------------
LIMITED TERM MUNICIPAL TRUST
[GRAPHIC OMITTED]
A MUTUAL FUND
THAT SEEKS TO
PROVIDE A HIGH
LEVEL OF CURRENT
INCOME THAT IS
EXEMPT FROM FEDERAL
INCOME TAX CONSISTENT
WITH THE PRESERVATION
OF CAPITAL AND PRESCRIBED
STANDARDS OF QUALITY AND MATURITY
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY DEAN WITTER
LIMITED TERM MUNICIPAL
May 30, 2000 TRUST
--------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated May 30, 2000) for Morgan Stanley Dean Witter Limited Term
Municipal Trust may be obtained without charge from the Fund at its address or
telephone number listed below or from Dean Witter Reynolds at any of its branch
offices.
Morgan Stanley Dean Witter Limited Term Municipal Trust
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
I. Fund History ..........................................................4
II. Description of the Fund and Its Investments and Risks .................4
A. Classification .................................................4
B. Investment Strategies and Risks ................................4
C. Fund Policies/Investment Restrictions ..........................9
III. Management of the Fund ...............................................10
A. Board of Trustees .............................................10
B. Management Information ........................................11
C. Compensation ..................................................15
IV. Control Persons and Principal Holders of Securities ..................17
V. Investment Management and Other Services .............................17
A. Investment Manager ............................................17
B. Principal Underwriter .........................................17
C. Services Provided by the Investment Manager ...................18
D. Rule 12b-1 Plan ...............................................19
E. Other Service Providers .......................................20
F. Codes of Ethics ...............................................20
VI. Brokerage Allocation and Other Practices .............................21
A. Brokerage Transactions ........................................21
B. Commissions ...................................................21
C. Brokerage Selection ...........................................21
D. Directed Brokerage ............................................22
E. Regular Broker-Dealers ........................................22
VII. Capital Stock and Other Securities ...................................22
VIII. Purchase, Redemption and Pricing of Shares ...........................23
A. Purchase/Redemption of Shares .................................23
B. Offering Price ................................................23
IX. Taxation of the Fund and Shareholders ................................24
X. Underwriters .........................................................26
XI. Calculation of Performance Data ......................................26
XII. Financial Statements .................................................28
Appendix - Ratings of Investments ..........................................39
</TABLE>
2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
--------------------------------------------------------------------------------
The terms defined in this glossary are frequently used in this Statement of
Additional Information (other terms used occasionally are defined in the text of
the document).
"Custodian" - The Bank of New York is the Custodian of the Fund's assets.
"Dean Witter Reynolds" - Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"Distributor" - Morgan Stanley Dean Witter Distributors Inc., a
wholly-owned broker-dealer subsidiary of MSDW.
"Financial Advisors" - Morgan Stanley Dean Witter authorized financial
services representatives.
"Fund" - Morgan Stanley Dean Witter Limited Term Municipal Trust, a
registered open-end investment company.
"Independent Trustees" - Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.
"Investment Manager" - Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW.
"Morgan Stanley & Co." - Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"Morgan Stanley Dean Witter Funds" - Registered investment companies (i)
for which the Investment Manager serves as the investment advisor and (ii) that
hold themselves out to investors as related companies for investment and
investor services.
"MSDW" - Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.
"MSDW Services Company" - Morgan Stanley Dean Witter Services Company Inc.,
a wholly-owned fund services subsidiary of the Investment Manager.
"Transfer Agent" - Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.
"Trustees" - The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
--------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on February 25, 1993 with the name Dean Witter Limited
Term Municipal Trust. Effective June 22, 1998, the Fund's name was changed to
Morgan Stanley Dean Witter Limited Term Municipal Trust.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
--------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is a no-load, open-end, diversified management investment company
whose investment objective is to provide a high level of current income that is
exempt from federal income tax, consistent with the preservation of capital and
prescribed standards of quality and maturity.
B. INVESTMENT STRATEGIES AND RISKS
The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information," and "Additional Risk Information."
TAXABLE SECURITIES. The Fund may invest in taxable money market
instruments. Investments in taxable money market instruments would generally be
made under any one of the following circumstances: (a) pending investment of
proceeds of the sale of each of the Fund's shares or of portfolio securities,
(b) pending settlement of purchases of portfolio securities and (c) to maintain
liquidity for the purpose of meeting anticipated redemptions.
The types of taxable money market instruments in which the Fund may invest
are limited to the following short-term fixed-income securities (maturing in one
year or less from the time of purchase): (i) obligations of the United States
Government, its agencies, instrumentalities or authorities; (ii) commercial
paper rated P-1 by Moody's Investors Service, Inc. ("Moody's"), A-1 by Standard
& Poor's Corporation ("S&P"), or AAA by Fitch IBCA, Inc. ("Fitch"); (iii)
certificates of deposit of domestic banks with assets of $1 billion or more; and
(iv) repurchase agreements with respect to portfolio securities. The Fund's
fixed-income investments may include zero coupon securities, which are purchased
at a discount but make no payments until maturity.
VARIABLE RATE AND FLOATING RATE OBLIGATIONS. The Fund may invest in
Municipal Bonds and Municipal Notes ("Municipal Obligations") of the type called
variable rate obligations. The interest rate payable on a variable rate
obligation is adjusted either at predesignated periodic intervals or whenever
there is a change in the market rate of interest on which the interest rate
payable is based. Other features may include the right whereby the Fund may
demand prepayment of the principal amount of the obligation prior to its stated
maturity (a "demand feature") and the right of the issuer to prepay the
principal amount prior to maturity. The principal benefit of a variable rate
obligation is that the interest rate adjustment minimizes changes in the market
value of the obligation. The principal benefit to the Fund of purchasing
obligations with a demand feature is that liquidity, and the ability of the Fund
to obtain repayment of the full principal amount of an obligation prior to
maturity, is enhanced.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend portfolio securities to
brokers, dealers and financial institutions provided that cash equal to at least
100% of the market value of the securities loaned is deposited by the borrower
with the Fund and is maintained each business day in a segregated account
pursuant to applicable regulations. The collateral value of the loaned
securities will be marked-to-market daily. While such securities are on loan,
the borrower will pay the Fund any income accruing thereon, and the Fund may
invest the cash collateral in portfolio securities, thereby earning additional
income. The Fund will not lend more than 25% of the value of the total assets of
the Fund. Loans will be subject to termination by the Fund, in the normal
settlement time, currently five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during
4
<PAGE>
the term of the loan inures to the Fund and its shareholders. The Fund may pay
reasonable finders, borrowers, administrative, and custodial fees in connection
with a loan. The creditworthiness of firms to which the Fund lends its portfolio
securities will be monitored on an ongoing basis.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may purchase and sell
futures with respect to financial instruments and municipal bond index futures.
Futures may be used to seek to hedge against interest rate changes.The Fund may
invest in financial futures contracts ("futures contracts") and related options
thereon. These futures contracts and related options thereon may be used only as
a hedge against anticipated interest rate changes. A futures contract sale
creates an obligation by the Fund, as seller, to deliver the specific type of
instrument called for in the contract at a specified future time for a specified
price. A futures contract purchase would create an obligation by the Fund, as
purchaser, to take delivery of the specific type of financial instrument at a
specified future time at a specified price. The specific securities delivered or
taken, respectively, at settlement date, would not be determined until on or
near that date. The determination would be in accordance with the rules of the
exchange on which the futures contract sale or purchase was effected.
Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is usually effected by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale is
effected by the Fund entering into a futures contract purchase for the same
aggregate amount of the specific type of financial instrument at the same
delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund is immediately paid the difference and thus realizes a gain.
If the offsetting purchase price exceeds the sale price, the Fund pays the
difference and realizes a loss. Similarly, the closing out of a futures contract
purchase is effected by the Fund entering into a futures contract sale. If the
offsetting sale price exceeds the purchase price, the Fund realizes a gain, and
if the offsetting sale price is less than the purchase price, the Fund realizes
a loss.
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date, an option on a futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract (a long
position in the case of a call option and a short position in the case of a put
option). If the holder decides not to enter into the contract, the premium paid
for the contract is lost. Since the value of the option is fixed as the point of
sale, there are no daily payments of cash to reflect the change in the value of
the underlying contract, as discussed below for futures contracts. The value of
the option change is reflected in the net asset value of the particular Fund
holding the options.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects futures contracts and options thereon. The initial
margin requirements vary according to the type of the underlying security. In
addition, due to current industry practice, daily variations in gains and losses
on open contracts are required to be reflected in cash in the form of variation
margin payments. The Fund may be required to make additional margin payments
during the term of the contract.
Currently, futures contracts can be purchased on debt securities such as
U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 61/2
and 10 years, Certificates of the Government National Mortgage Association, Bank
Certificates of Deposit and on a municipal bond index. The Fund may invest in
interest rate futures contracts covering these types of financial instruments as
well as in new types of contracts that become available in the future.
Financial futures contracts are traded in an auction environment on the
floors of several Exchanges - principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. Each Exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the Exchange membership which is also
responsible for handling daily accounting of deposits or withdrawals of margin.
A risk in employing futures contracts may correlate imperfectly with the
behavior of the cash prices of the Fund's portfolio securities. The correlation
may be distorted by the fact that the futures market is dominated by short-term
traders seeking to profit from the difference between a contract or security
price objective and a short time period. The correlation may be further
distorted since the futures contracts that are being used to hedge are not based
on municipal obligations.
5
<PAGE>
FUTURES. If the Fund purchases or sells futures, its participation in these
markets would subject the Fund's portfolio to certain risks. The Investment
Manager's predictions of movements in the direction of interest rate markets may
be inaccurate, and the adverse consequences to the Fund (e.g., a reduction in
the Fund's net asset value or a reduction in the amount of income available for
distribution) may leave the Fund in a worse position than if these strategies
were not used. Other risks inherent in the use of futures include, for example,
the possible imperfect correlation between the price of futures contracts and
movements in the prices of the securities being hedged, and the possible absence
of a liquid secondary market for any particular instrument. The risk of
imperfect correlations may be increased by the fact that futures contracts in
which the Fund may invest are taxable securities rather than tax-exempt
securities. The prices of taxable securities may not move in a similar manner to
prices of tax-exempt securities.
Another risk is that the Fund's Investment Manager could be incorrect in
its expectations as to the direction or extent of various interest rate
movements or the time span within which the movements take place. For example,
if the Fund sold futures contracts for the sale of securities in anticipation of
an increase in interest rates, and the interest rates went down instead, causing
bond prices to rise, the Fund would lose money on the sale. Put and call options
on financial futures have characteristics similar to exchange traded options.
In addition to the risks associated in investing in options on securities,
there are particular risks associated with investing in options on futures. In
particular, the ability to establish and close out positions on such options
will be subject to the development and maintenance of a liquid secondary market.
It is not certain that such a market will develop.
If the Fund maintains a short position in a futures contract or has sold a
call option in a futures contract, it will cover this position by holding, in a
segregated account maintained on the books of the Fund, cash, U.S. government
securities or other liquid portfolio securities equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the option.
Such a position may also be covered by owning the securities underlying the
futures contract (in the case of a stock index futures contract a portfolio of
securities substantially replicating the relevant index), or by holding a call
option permitting the Fund to purchase the same contract at a price no higher
than the price at which the short position was established.
In addition, if the Fund holds a long position in a futures contract or has
sold a put option on a futures contract, it will hold cash, U.S. government
securities or other liquid portfolio securities equal to the purchase price of
the contract or the exercise price of the put option (less the amount of initial
or variation margin on deposit) in a segregated account maintained on the books
of the Fund. Alternatively, the Fund could cover its long position by purchasing
a put option on the same futures contract with an exercise price as high or
higher than the price of the contract held by the Fund.
The Fund may not enter into futures contracts or related options thereon
if, immediately thereafter, the amount committed to margin plus the amount paid
for option premiums exceeds 5% of the value of the Fund's total assets. The Fund
may not purchase or sell futures contracts or related options thereon if,
immediately thereafter, more than one-third of the Fund's net assets would be
hedged.
Municipal Bond Index Futures. The Fund may utilize municipal bond index
futures contracts for hedging purposes. The strategies in employing such
contracts will be similar to that discussed above with respect to financial
futures and options thereon. A municipal bond index is a method of reflecting in
a single number the market value of many different municipal bonds and is
designed to be representative of the municipal bond market generally. The index
fluctuates in response to changes in the market values of the bonds included
within the index. Unlike futures contracts on particular financial instruments,
transactions in futures on a municipal bond index will be settled in cash, if
held until the close of trading in the contract. However, like any other futures
contract, a position in the contract may be closed out by a purchase or sale of
an offsetting contract for the same delivery month prior to expiration of the
contract.
Options. The Fund may purchase or sell (write) options on debt securities
as a means of achieving additional return or hedging the value of the Fund's
portfolio. The Fund may only buy options listed on national securities
exchanges. The Fund will not purchase options if, as a result, the aggregate
cost of all outstanding options exceeds 10% of the Fund's total assets.
6
<PAGE>
Presently there are no options on tax-exempt securities traded on national
securities exchanges. The Fund will not invest in options on debt securities in
the coming year or until such time as they become available on national
securities exchanges.
A call option is a contract that gives the holder of the option the right
to buy from the writer of the call option, in return for a premium, the security
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option has the obligation, upon exercise
of the option, to deliver the underlying security upon payment of the exercise
price during the option period. A put option is a contract that gives the holder
of the option the right to sell to the writer, in return for a premium, the
underlying security at a specified price during the term of the option. The
writer of the put has the obligation to buy the underlying security upon
exercise, at the exercise price during the option period.
The Fund may only write covered call or covered put options listed on
national exchanges. The Fund may not write covered options in an amount
exceeding 10% of the value of the total assets of the Fund. A call option is
"covered" if the Fund owns the underlying security covered by the call or has an
absolute and immediate right to acquire that security or futures contract
without additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Fund
holds a call on the same security or futures contract as the call written, where
the exercise price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, Treasury bills or
other liquid portfolio securities in a segregated account with its custodian. A
put option is "covered" if the Fund maintains cash, Treasury bills or other
liquid portfolio securities with a value equal to the exercise price in a
segregated account with its custodian, or else holds a put on the same security
or futures contract as the put written where the exercise price of the put held
is equal to or greater than the exercise price of the put written.
If the Fund has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction. Similarly, if the Fund is the holder of an option,
it may liquidate its position by effecting a closing sale transaction. This is
accomplished by selling an option of the same fund as the option previously
purchased. There can be no assurance that either a closing purchase or sale
transaction on behalf of the Fund can be effected when the Fund so desires.
The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option. Since call option prices generally reflect increases in the
price of the underlying security, any loss resulting from the purchase of a call
option may also be wholly or partially offset by unrealized appreciation of the
underlying security. If a put option written by the Fund is exercised, the Fund
may incur a loss equal to the difference between the exercise price of the
option and the sum of the sale price of the underlying security plus the
premiums received from the sale of the option. Other principal factors affecting
the market value of a put or a call option include supply and demand, interest
rates, the current market price and price volatility of the underlying security
and the time remaining until the expiration date.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Fund will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option. In such event, it might not be
possible to effect closing transactions in particular options, so that the Fund
would have to exercise its options in order to realize any profit and would
incur brokerage commission upon the exercise of call options and upon covered
call option writer is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
7
<PAGE>
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although this
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager subject to procedures established by the Trustees. In addition, as
described above, the value of the collateral underlying the repurchase agreement
will be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not to
invest in repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid asset held by the Fund, amount to
more than 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. From time to time the Fund may
purchase tax-exempt securities on a when-issued or delayed delivery basis. When
these transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery with the intention of acquiring the securities,
the Fund may sell the securities before the settlement date, if it is deemed
advisable. The securities so purchased or sold are subject to market fluctuation
and no interest or dividends accrue to the purchaser prior to the settlement
date.
At the time the Fund makes the commitment to purchase or sell securities on
a when-issued, delayed delivery, it will record the transaction and thereafter
reflect the value, each day, of such security purchased, or if a sale, the
proceeds to be received, in determining its net asset value. At the time of
delivery of the securities, their value may be more or less than the purchase or
sale price. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued, delayed delivery may increase the
volatility of its net asset value. The Fund will also establish a segregated
account on the Fund's books in which it will continually maintain cash or cash
equivalents or other liquid portfolio securities equal in value to commitments
to purchase securities on a when-issued or delayed delivery basis.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Investment Manager determines that issuance of the security is probable. At
that time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At that time, the
Fund will also establish a segregated account on the Fund's books in which it
will maintain cash or cash equivalents or other liquid portfolio securities
equal in value to recognized commitments for such securities.
8
<PAGE>
The value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all securities of such issuer owned by the
Fund, may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of its net asset
value. The Fund may also sell securities on a "when, as and if issued" basis
provided that the issuance of the security will result automatically from the
exchange or conversion of a security owned by the Fund at the time of sale.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund.
The Investment Company Act defines a majority as the lesser of (a) 67% or more
of the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions: (i) all percentage limitations apply immediately after a purchase
or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.
In addition, for purposes of the following restrictions: (a) an "issuer" of
a security is the entity whose assets and revenues are committed to the payment
of interest and principal on that particular security, provided that the
guarantee of a security will be considered a separate security and provided
further that a guarantee of a security shall not be deemed a security issued by
the guarantor if the value of all securities guaranteed by the guarantor and
owned by the Fund does not exceed 10% of the value of the total assets of the
Fund; (b) a "taxable security" is any security the interest on which is subject
to federal income tax; and (c) all percentage limitations apply immediately
after a purchase or initial investment, and any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund will:
1. Seek to provide a high level of current income that is exempt from
federal income tax, consistent with the preservation of capital and
prescribed standards of quality and maturity.
The Fund may not:
1. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuing operation. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
2. With respect to 75% of its total assets, purchase securities of any
issuer if, immediately thereafter, more than 5% of the value of its
total assets are in the securities of any one issuer (other than
obligations issued, or guaranteed by, the United States Government, its
agencies or instrumentalities).
3. With respect to 75% of its total assets, purchase more than 10% of all
outstanding taxable debt securities of any one issuer (other than debt
securities issued, or guaranteed as to principal and interest by, the
United States Government, its agencies and instrumentalities).
4. Invest in common stock.
5. Write, purchase or sell puts, calls, or combinations thereof, except
for options on futures contracts or options on debt securities.
6. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities or to domestic bank obligations.
9
<PAGE>
7. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or trustee of the Fund or any officer or director of the
Investment Manager owns more than 1/2 of 1% of the outstanding
securities of the issuer, and the officers, trustees and directors who
own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of the issuer.
8. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities
secured by real estate or interests therein.
9. Purchase or sell commodities except that the Fund may purchase
financial futures contracts and related options in accordance with
procedures adopted by the Trustees.
10. Borrow money, except that the Fund may borrow from a bank for temporary
or emergency purposes in amounts not exceeding 5% (taken at the lower
of cost or current value) of the value of its total assets (including
the amount borrowed) less its liabilities (not including any borrowings
but including the fair market value at the time of computation of any
senior securities then outstanding).
11. Pledge its assets or assign or otherwise encumber them except to secure
permitted borrowings. However, for the purpose of this restriction,
collateral arrangements with respect to the writing of options and
collateral arrangements with respect to initial margin for futures are
not deemed to be pledges of assets and neither such arrangements nor
the purchase or sale of futures are deemed to be the issuance of a
senior security as set forth in restriction 9.
12. Issue senior securities as defined in the Investment Company Act,
except insofar as the Fund may be deemed to have issued a senior
security by reason of: (a) entering into any repurchase agreement; (b)
purchasing any securities on a when-issued or delayed delivery basis;
or (c) borrowing money.
13. Make loans of money or securities, except: (a) by the purchase of debt
obligations; (b) by investment in repurchase agreements; and (c) by
lending its portfolio securities.
14. Make short sales of securities.
15. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities.
16. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act in disposing of a
portfolio security.
17. Invest for the purpose of exercising control or management of any other
issuer.
18. Purchase oil, gas or other mineral leases, rights or royalty contracts,
or exploration or development programs.
19. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
III. MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided to
the Fund in a satisfactory manner.
10
<PAGE>
Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's own
interest or the interest of another person or organization. A Trustee satisfies
his or her duty of care by acting in good faith with the care of an ordinarily
prudent person and in a manner the Trustee reasonably believes to be in the best
interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any of
its affiliated persons and do not own any stock or other securities issued by
the Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other two Trustees (the "management Trustees") are
affiliated with the Investment Manager.
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the Morgan Stanley Dean Witter Funds (there were 93
such Funds as of the calendar year ended December 31, 1999) are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- ----------------------------------------------------
<S> <C>
Michael Bozic (59) ........................ Vice Chairman of Kmart Corporation (since
Trustee December 1998); Director or Trustee of the Morgan
c/o Kmart Corporation Stanley Dean Witter Funds; formerly Chairman
3100 West Big Beaver Road and Chief Executive Officer of Levitz Furniture
Troy, Michigan Corporation (November 1995-November 1998) and
President and Chief Executive Officer of Hills
Department Stores (May 1991-July 1995); formerly
variously Chairman, Chief Executive Officer,
President and Chief Operating Officer (1987-1991) of
the Sears Merchandise Group of Sears, Roebuck and
Co.; Director of Weirton Steel Corporation.
Charles A. Fiumefreddo* (67) .............. Chairman, Director or Trustee and Chief Executive
Chairman of the Board, Officer of the Morgan Stanley Dean Witter Funds;
Chief Executive Officer and Trustee formerly Chairman, Chief Executive Officer and
Two World Trade Center Director of the Investment Manager, the Distributor
New York, New York and MSDW Services Company; Executive Vice
President and Director of Dean Witter Reynolds;
Chairman and Director of the Transfer Agent; formerly
Director and/or officer of various MSDW subsidiaries
(until June, 1998).
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- -----------------------------------------------------
<S> <C>
Edwin J. Garn (67) ........................ Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds; formerly United States Senator
c/o Summit Ventures LLC (R-Utah) (1974-1992) and Chairman, Senate
1 Utah Center Banking Committee (1980-1986); formerly Mayor
201 S. Main Street of Salt Lake City, Utah (1971-1974); formerly
Salt Lake City, Utah Astronaut, Space Shuttle Discovery (April 12-19,
1985); Vice Chairman, Huntsman Corporation (chemical
company); Director of Franklin Covey (time management
systems), BMW Bank of North America, Inc. (industrial
loan corporation), United Space Alliance (joint
venture between Lockheed Martin and the Boeing
Company) and Nuskin Asia Pacific (multilevel
marketing); member of the Utah Regional Advisory
Board of Pacific Corp.; member of the board of
various civic and charitable organizations.
Wayne E. Hedien (66) ...................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Director of The PMI Group, Inc.
c/o Mayer, Brown & Platt (private mortgage insurance); Trustee and Vice
Counsel to the Independent Trustees Chairman of The Field Museum of Natural History;
1675 Broadway formerly associated with the Allstate Companies
New York, New York (1966-1994), most recently as Chairman of The
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 (51) ................ 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; Chairman of the Audit
Washington, D.C. Committee and Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of Greenwich
Capital Markets, Inc. (broker-dealer), Independent
Standards Board (private sector organization
governing independence of auditors) and NVR, Inc.
(home construction); Chairman and Trustee of the
Financial Accounting Foundation (oversight
organization of the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System and Assistant
Secretary of the U.S. Treasury.
Michael E. Nugent (64) .................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan
237 Park Avenue Stanley Dean Witter Funds; formerly Vice
New York, New York President, Bankers Trust Company and BT Capital
Corporation (1984-1988); director of various business
organizations.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
--------------------------------------------- -----------------------------------------------------
<S> <C>
Philip J. Purcell* (56) ..................... Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds
1585 Broadway and Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of American
Airlines, Inc. and its parent company, AMR
Corporation; Director and/or officer of various
MSDW subsidiaries.
John L. Schroeder (69) ...................... Retired; Chairman of the Derivatives Committee
Trustee and Director or Trustee of the Morgan Stanley
c/o Mayer, Brown & Platt Dean Witter Funds; Director of Citizens Utilities
Counsel to the Independent Trustees Company (telecommunications, gas, electric and
1675 Broadway water utilities company); formerly Executive Vice
New York, New York President and Chief Investment Officer of the
Home Insurance Company (August 1991- September 1995).
Mitchell M. Merin (46) ...................... President and Chief Operating Officer of Asset
President Management of MSDW (since December 1998);
Two World Trade Center President and Director (since April 1997) and Chief
New York, New York Executive Officer (since June, 1998) of the
Investment Manager and MSDW
Services Company; Chairman, Chief Executive Officer
and Director of the Distributor (since June 1998);
Chairman and Chief Executive Officer (since June
1998) and Director (since January 1998) of the
Transfer Agent; Director of various MSDW
subsidiaries; President of the Morgan Stanley Dean
Witter Funds (since May 1999); Trustee of various
Van Kampen investment companies (since December
1999); previously Chief Strategic Officer of the
Investment Manager and MSDW Services Company and
Executive Vice President of the Distributor (April
1997-June, 1998), Vice President of the Morgan
Stanley Dean Witter Funds (May 1997-April 1999),
and Executive Vice President of Dean Witter,
Discover & Co.
Barry Fink (45) ............................. General Counsel of Asset Management of MSDW
Vice President, Secretary and General Counsel (since May 2000); Executive Vice President (since
Two World Trade Center December 1999) and Secretary and General
New York, New York Counsel (since February 1997) and Director (since
July 1998) of the Investment Manager and MSDW
Services Company; Vice President, Secretary and
General Counsel of the Morgan Stanley Dean Witter
Funds (since February 1997); Vice President and
Secretary of the Distributor; previously, Senior
Vice President (March 1997-December 1999), First
Vice President,Assistant Secretary and Assistant
General Counsel of the Investment Manager and MSDW
Services Company.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- ----------------------------------------------------
<S> <C>
Katherine H. Stromberg (51) ............... Vice President of the Investment Manager; Vice
Vice President President of various Morgan Stanley Dean Witter
Two World Trade Center Funds.
New York, New York
Thomas F. Caloia (54) ..................... First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW
Two World Trade Center Services Company; Treasurer of the Morgan
New York, New York Stanley Dean Witter Funds.
</TABLE>
----------
* Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, Robert S. Giambrone, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer Agent,
Peter M. Avelar, Director of the High Yield Group, Jonathan R. Page, Director of
the Money Market Group, and James F. Willison, Director of the Tax-Exempt Fixed
Income Group, Senior Vice Presidents of the Investment Manager, and Joseph R.
Arcieri and Gerard J. Lian, Vice Presidents of the Investment Manager, are Vice
Presidents of the Fund.
In addition, Marilyn K. Cranney, Todd Lebo, Lou Anne D. McInnis, Carsten
Otto and Ruth Rossi, First Vice Presidents and Assistant General Counsels of the
Investment Manager and MSDW Services Company, and Natasha Kassian, Assistant
Vice President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Fund.
INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the independent
directors/trustees. The Morgan Stanley Dean Witter Funds seek as independent
directors/trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' boards, such individuals may reject other
attractive assignments because the Funds make substantial demands on their time.
All of the independent directors/trustees serve as members of the Audit
Committee. In addition, three of the directors/trustees, including two
independent directors/trustees, serve as members of the Derivatives Committee
and the Insurance Committee.
The independent directors/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 directors/trustees are required to select and nominate individuals
to fill any independent director/trustee vacancy on the board of any Fund that
has a Rule 12b-1 plan of distribution. Most of the Morgan Stanley Dean Witter
Funds have a Rule 12b-1 plan.
The Audit Committee is charged with recommending to the full board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
board.
14
<PAGE>
The board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.
Finally, the board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS/TRUSTEES FOR
ALL MORGAN STANLEY DEAN WITTER FUNDS. The independent directors/trustees and the
Funds' management believe that having the same independent directors/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 directors/trustees for each of the Funds or even of sub-groups of
Funds. They believe that having the same individuals serve as independent
directors/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 directors/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 directors/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 directors/trustees, of
the caliber, experience and business acumen of the individuals who serve as
independent directors/trustees of the Morgan Stanley Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties. It
also provides that all third persons shall look solely to the Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Trustees are paid a single
meeting fee by the Fund. The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by the
Investment Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund for their services as Trustee.
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended March 31, 2000.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
------------------------------- --------------
<S> <C>
Michael Bozic ................. $1,550
Edwin J. Garn ................. 1,550
Wayne E. Hedien ............... 1,550
Dr. Manuel H. Johnson ......... 2,425
Michael E. Nugent ............. 2,133
John L. Schroeder ............. 2,133
</TABLE>
15
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1999 for services
to the 93 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1999.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES TO
93 MORGAN
NAME OF STANLEY DEAN
INDEPENDENT TRUSTEE WITTER FUNDS
------------------------------- ----------------
<S> <C>
Michael Bozic ................. $134,600
Edwin J. Garn ................. 138,700
Wayne E. Hedien ............... 138,700
Dr. Manuel H. Johnson ......... 208,638
Michael E. Nugent ............. 193,324
John L. Schroeder ............. 193,324
</TABLE>
As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds, including the Fund, have adopted a retirement
program under which an independent director/ 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/trustee of any Morgan Stanley Dean Witter Fund
that has adopted the retirement program (each such Fund referred to as an
"Adopting Fund" and each such trustee referred to as an "Eligible Trustee") is
entitled to retirement payments upon reaching the eligible retirement age
(normally, after attaining age 72). Annual payments are based upon length of
service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
independent director/trustee of any Adopting Fund in excess of five years up to
a maximum of 60.44% after ten years of service. The foregoing percentages may be
changed by the board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are accrued as expenses on the books of
the Adopting Fund. Such benefits 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 March 31, 2000
and by the 55 Morgan Stanley Dean Witter Funds (including the Fund) for the
calendar year ended December 31, 1999, and the estimated retirement benefits for
the Independent Trustees, to commence upon their retirement, from the Fund as of
the fiscal year ended March 31, 2000 and from the 55 Morgan Stanley Dean Witter
Funds as of the calendar year ended December 31, 1999.
----------
(1) An Eligible Trustee may elect alternative payments of his or her retirement
benefits based upon the combined life expectancy of the Eligible Trustee and
his or her spouse on the date of such Eligible Trustee's retirement. In
addition, the Eligible Trustee may elect that the surviving spouse's
periodic payment of benefits will be equal to a lower percentage of the
periodic amount when both spouses were alive. The amount estimated to be
payable under this method, through the remainder of the later of the lives
of the Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit.
16
<PAGE>
RETIREMENT BENEFITS FROM THE FUND AND ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
RETIREMENT BENEFITS ESTIMATED ANNUAL
ACCRUED AS BENEFITS
FOR ALL ADOPTING FUNDS EXPENSES UPON RETIREMENT(1)
-------------------------------- ------------------- ------------------
ESTIMATED
CREDITED YEARS ESTIMATED
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
------------------------------- ---------------- --------------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic ................. 10 60.44% $371 $20,933 $ 907 $50,588
Edwin J. Garn ................. 10 60.44 620 31,737 909 50,675
Wayne E. Hedien ............... 9 51.37 703 39,566 771 43,000
Dr. Manuel H. Johnson ......... 10 60.44 289 13,129 1,360 75,520
Michael E. Nugent ............. 10 60.44 534 23,175 1,209 67,209
John L. Schroeder ............. 8 50.37 861 41,558 955 52,994
</TABLE>
----------
(1) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) on
page 16 of this Statement of Additional Information.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
--------------------------------------------------------------------------------
As of May 8, 2000, no person owned 5% or more of the outstanding shares of
the Fund.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1% of the Fund's shares of beneficial
interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
--------------------------------------------------------------------------------
A. INVESTMENT MANAGER
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New York,
NY 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the Investment Manager to
provide administrative services and manage the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Fund pays the Investment Manager monthly compensation calculated
daily by applying the annual rate of 0.50% to the net assets of the Fund
determined as of the close of each business day.
For the fiscal years ended March 31, 1998, 1999 and 2000, the Investment
Manager accrued total compensation under the Management Agreement in the amounts
of $281,962, $290,798 and $247,150 respectively.
The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.
B. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.
17
<PAGE>
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. These expenses include the payment of commissions
for sales of the Fund's shares and incentive compensation to Financial Advisors,
the cost of educational and/or business-related trips, and educational and/or
promotional and business-related expenses. The Distributor also pays certain
expenses in connection with the distribution of the Fund's shares, including the
costs of preparing, printing and distributing advertising or promotional
materials, and the costs of printing and distributing prospectuses and
supplements thereto used in connection with the offering and sale of the Fund's
shares. The Fund bears the costs of initial typesetting, printing and
distribution of prospectuses and supplements thereto to shareholders. The Fund
also bears the costs of registering the Fund and its shares under federal and
state securities laws and pays filing fees in accordance with state securities
laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER
The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.
Under the terms of the Management Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's books
and records and furnishes, at its own expense, the office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund may
reasonably require in the conduct of its business, including the preparation of
prospectuses, proxy statements and reports required to be filed with federal and
state securities commissions (except insofar as the participation or assistance
of independent accountants and attorneys is, in the opinion of the Investment
Manager, necessary or desirable). In addition, the Investment Manager pays the
salaries of all personnel, including officers of the Fund, who are employees of
the Investment Manager. The Investment Manager also bears the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses include, but are not limited to: charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing share certificates; registration costs of the Fund
and its shares under federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing prospectuses of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Trustees' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Trustees or
members of any advisory board or committee who are not employees of the
Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to any dividend, withdrawal or redemption options; charges and
expenses of any outside service used for pricing of the Fund's shares; fees and
expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Investment Manager (not including
compensation or expenses of attorneys who are employees of the Investment
Manager); fees and expenses of the Fund's independent accountants; membership
dues of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation.
18
<PAGE>
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees including a majority of the Independent Trustees.
D. RULE 12b-1 PLAN
In accordance with a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act between the Fund and the Distributor (the "Plan"), the
Distributor is authorized to use its own resources to finance certain activities
in connection with the distribution of shares of the Fund.
The Investment Manager pays a retention fee to Financial Advisors at an
annual rate of 0.05% of the value of shares of the Fund sold after January 1,
2000 and held for at least one year. Shares purchased through the reinvestment
of dividends will be eligible for a retention fee, provided that such dividends
were earned on shares otherwise eligible for a retention fee payment. Shares
owned in variable annuities, closed-end fund shares and shares held in 401(k)
plans where the Transfer Agent or Dean Witter Reynolds' Retirement Plan Services
is either recordkeeper or trustee are not eligible for a retention fee.
For the first year only, the retention fee is paid on any shares of the
Fund sold after January 1, 2000 and held by shareholders on December 31, 2000.
The retention fees are paid by the Investment Manager from its own assets,
which may include profits from investment management fees payable under the
Management Agreement, as well as from borrowed funds.
Under the Plan, the Distributor uses its best efforts in rendering services
to the Fund, but in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations, the Distributor is not
liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each fiscal
quarter, a written report regarding the distribution expenses incurred on behalf
of the Fund during such fiscal quarter, which report includes (1) an itemization
of the types of expenses and the purposes therefore; (2) the amounts of such
expenses; and (3) a description of the benefits derived by the Fund. In the
Trustees' quarterly review of the Plan they consider its continued
appropriateness and the level of compensation provided therein.
No interested person of the Fund nor any Independent Trustee has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, the Investment Manager, Dean Witter Reynolds, MSDW Services Company
or certain of their employees may be deemed to have such an interest as a result
of benefits derived from the successful operation of the Plan or as a result of
receiving a portion of the amounts expended thereunder by the Fund.
On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtaining and would be likely to obtain
under the Plan, including to enable the Fund to continue to grow and avoid a
pattern of net redemptions which, in turn, are essential for effective
investment management; and without the compensation to individual brokers and
the reimbursement of distribution and account maintenance
19
<PAGE>
expenses of Dean Witter Reynolds's branch offices made possible by the Plan,
Dean Witter Reynolds could not establish and maintain an effective system for
distribution, servicing of Fund shareholders and maintenance of shareholder
accounts; and (3) what services had been provided and were continuing to be
provided under the Plan to the Fund and its shareholders. Based upon their
review, the Trustees, including each of the Independent Trustees, determined
that continuation of the Plan would be in the best interest of the Fund and
would have a reasonable likelihood of continuing to benefit the Fund and its
shareholders. In the Trustees' quarterly review of the Plan, they will consider
its continued appropriateness and the level of compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
Fund, and all material amendments to the Plan must also be approved by the
Trustees in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Investment Company Act) on not more than thirty days'
written notice to any other party to the Plan. So long as the Plan is in effect,
the election and nomination of Independent Trustees shall be committed to the
discretion of the Independent Trustees.
E. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans. The principal business address of the Transfer Agent is Harborside
Financial Center, Plaza Two, Jersey City, NJ 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Bank of New York, 100 Church Street, New York, NY 10007 is the
Custodian for the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, NY
10036, serves as the independent accountants of the Fund. The independent
accountants are responsible for auditing the annual financial statements of the
Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these services,
the Transfer Agent receives a per shareholder account fee from the Fund and is
reimbursed for its out-of-pocket expenses in connection with such services.
F. CODES OF ETHICS
The Fund, the Investment Manager and Distributor have each adopted a Code
of Ethics pursuant to rule 17j-1 under the Investment Company Act. The Codes of
Ethics are designed to detect and prevent improper personal trading. The Codes
of Ethics permit personnel subject to the Codes to invest in securities,
including securities that may be purchased, sold or held by the Fund, subject to
a number of restrictions and controls including prohibitions against purchases
of securities in an Initial Public Offering and a preclearance requirement with
respect to personal securities transactions.
20
<PAGE>
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
--------------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
is responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the negotiation
of brokerage commissions, if any. The Fund expects that the primary market for
the securities in which it intends to invest will generally be the
over-the-counter market. Securities are generally traded in the over-the-counter
market on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually includes
a profit to the dealer. Options and futures transactions will usually be
effected through a broker and a commission will be charged. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, generally referred to
as the underwriter's concession or discount. On occasion the Fund may also
purchase certain money market instruments directly from an issuer, in which case
no commissions or discounts are paid.
During the fiscal years ended March 31, 1998, 1999 and 2000, the Fund paid
no such brokerage commissions or concessions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds. The Fund will
limit its transactions with Dean Witter Reynolds to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e. Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper (not including Tax-Exempt
Municipal Paper). The transactions will be effected with Dean Witter Reynolds
only when the price available from Dean Witter Reynolds is better than that
available from other dealers.
During the fiscal years ended March 31, 1998, 1999 and 2000, the Fund did
not effect any principal transactions with Dean Witter Reynolds.
Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds, Morgan
Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an exchange during a comparable period of time. This standard would allow the
affiliated broker or dealer to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Trustees, including the Independent
Trustees, have adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to an affiliated broker or
dealer are consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by any amount of the brokerage
commissions it may pay to an affiliated broker or dealer.
During the fiscal years ended March 31, 1998, 1999 and 2000, the Fund paid
no brokerage commissions to an affiliated broker or dealer.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions.
In seeking to implement the Fund's policies, the Investment Manager effects
transactions with those brokers and dealers who the Investment Manager believes
provide the most favorable prices and are capable of providing efficient
executions. If the Investment Manager believes the prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or
21
<PAGE>
the Investment Manager. The services may include, but are not limited to, any
one or more of the following: information as to the availability of securities
for purchase or sale; statistical or factual information or opinions pertaining
to investment; wire services; and appraisals or evaluations of portfolio
securities.
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services is
useful in varying degrees and would generally reduce the amount of research or
services otherwise performed by the Investment Manager and thereby reduce its
expenses, it is of indeterminable value and the Fund does not reduce the
management fee it pays to the Investment Manager by any amount that may be
attributable to the value of such services.
Subject to the principle of obtaining best price and execution, the
Investment Manager may consider a broker-dealer's sales of shares of the Fund as
a factor in selecting from among those broker-dealers qualified to provide
comparable prices and execution on the Fund's portfolio transactions. The Fund
does not, however, require a broker-dealer to sell shares of the Fund in order
for it to be considered to execute portfolio transactions, and will not enter
into any arrangement whereby a specific amount or percentage of the Fund's
transactions will be directed to a broker which sells shares of the Fund to
customers. The Trustees review, periodically, the allocation of brokerage orders
to monitor the operation of these policies.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain initial
and secondary public offerings, the Investment Manager utilizes a pro rata
allocation process based on the size of the Morgan Stanley Dean Witter Funds
involved and the number of shares available from the public offering.
D. DIRECTED BROKERAGE
During the fiscal year ended March 31, 2000, the Fund did not pay any
brokerage commissions to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the fiscal year ended March 31, 2000, the Fund did not purchase
securities issued by brokers or dealers that were among the ten brokers or the
ten dealers which executed transactions for or with the Fund in the largest
dollar amounts during the year. At March 31, 2000, the Fund did not own any
securities issued by any of such issuers.
VII. CAPITAL STOCK AND OTHER SECURITIES
--------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. All shares of beneficial interest of
the Fund are of $0.01 par value and are equal as to earnings, assets and voting
privileges.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
Prospectus.
22
<PAGE>
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by the actions
of the Trustees. In addition, under certian circumstances, the shareholders may
call a meeting to remove the Trustees and the Fund is required to provide
assistance in communicating with shareholders about such a meeting. 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.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
All of the Trustees have been elected by the shareholders of the Fund, most
recently at a Special Meeting of Shareholders held on May 21, 1997. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees (as provided for in the Declaration of Trust), and they may at any time
lengthen or shorten their own terms or make their terms of unlimited duration
and appoint their own successors, provided that always at least a majority of
the Trustees has been elected by the shareholders of the Fund.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
--------------------------------------------------------------------------------
A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
Morgan Stanley Dean Witter Fund and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transaction pursuant to the exchange privilege.
B. OFFERING PRICE
The price of Fund shares, called "net asset value," is based on the value
of the Fund's portfolio securities.
Portfolio securities (other than short-term debt securities and futures and
options) are valued for the Fund by an outside independent pricing service
approved by the Board of Trustees. The pricing service
23
<PAGE>
has informed the Fund that in valuing the Fund's portfolio securities it uses
both a computerized grid matrix of tax-exempt securities and evaluations by its
staff, in each case based on information concerning market transactions and
quotations from dealers which reflect the bid side of the market each day. The
Fund's portfolio securities are thus valued by reference to a combination of
transactions and quotations for the same or other securities believed to be
comparable in quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. The Board of Trustees
believes that timely and reliable market quotations are generally not readily
available to the Fund for purposes of valuing tax-exempt securities and that the
valuations supplied by the pricing service, using the procedures outlined above
and subject to periodic review, are more likely to approximate the fair value of
such securities. The Investment Manager will periodically review and evaluate
the procedures, methods and quality of services provided by the pricing service
then being used by the Fund and may, from time to time, recommend to the Board
of Trustees the use of other pricing services or discontinuance of the use of
any pricing service in whole or part. The Board may determine to approve such
recommendation or take other provisions for pricing of the Fund's portfolio
securities.
Short-term taxable debt securities with remaining maturities of 60 days or
less at time of purchase are valued at amortized cost, unless the Board
determines such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the Board
of Trustees. Other taxable short-term debt securities with maturities of more
than 60 days will be valued on a mark to market basis until such time as they
reach a maturity of 60 days, whereupon they will be valued at amortized cost
using their value on the 61st day unless the Trustees determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair market value as determined by the Board of Trustees.
Listed options on debt securities are valued at the latest sale price on
the exchange on which they are listed unless no sales of such options have taken
place that day, in which case, they will be valued at the mean between their
closing bid and asked prices. Unlisted options on debt securities are valued at
the mean between their latest bid and asked price. Futures are valued at the
latest sale price on the commodities exchange on which they trade unless the
Board of Trustees determines that such price does not reflect their fair value,
in which case they will be valued at their fair market value as determined by
the Board of Trustees. All other securities and other assets are valued at their
fair value as determined in good faith under procedures established by and under
the supervision of the Board of Trustees.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
--------------------------------------------------------------------------------
The Fund generally will make three basic types of distributions: tax exempt
dividends, ordinary dividends and long-term capital gain distributions. These
types of distributions are reported differently on a shareholder's income tax
return and they are also subject to different rates of tax. The tax treatment of
the investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Shareholders are urged to
consult their own tax professionals regarding specific questions as to federal,
state or local taxes.
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any ordinary income or capital gains in any year for reinvestment. In
such event, the Fund will pay federal income tax (and possibly excise tax) on
such retained gains.
Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more than
one year. Gains or losses on the sale of securities with a tax holding period of
one year or less will be short-term gains or losses.
24
<PAGE>
In computing net investment income, the Fund will amortize any premiums and
original issue discounts on securities owned, if applicable. Capital gains or
losses realized upon sale or maturity of such securities will be based on their
amortized cost.
All or a portion of any of the Fund's gain from tax-exempt obligations
purchased at a market discount may be treated as ordinary income rather than
capital gain.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be affected. In that event, the Fund
would re-evaluate its investment objective and policies.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. The Fund intends to qualify to pay
"exempt-interest dividends" to its shareholders by maintaining, as of the close
of each of its taxable years, at least 50% of the value of its assets in
tax-exempt securities. An obligation shall be considered a tax-exempt security
only if, in the opinion of bond counsel, the interest payable thereon is exempt
from federal income tax. An exempt-interest dividend is that part of the
dividend distributions made by the Fund which consists of interest received by
the Fund on tax-exempt securities upon which the shareholder incurs no federal
income taxes. Exempt-interest dividends are included, however, in determining
what portion, if any, of a person's Social Security benefits are subject to
federal income tax.
The Fund intends to invest a portion of its assets in certain "private
activity bonds". As a result, a portion of the exempt-interest dividends paid by
the Fund will be an item of tax preference to shareholders subject to the
alternative minimum tax. Certain corporations which are subject to the
alternative minimum tax may also have to include exempt-interest dividends in
calculating their alternative minimum taxable income in situations where the
"adjusted current earnings" of the corporation exceeds its alternative minimum
taxable income.
Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of net
short-term capital gains. Such dividends and distributions are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Distributions of
long-term capital gains, if any, are taxable as long-term capital gains,
regardless of how long the shareholder has held the Fund shares and regardless
of whether the distribution is received in additional shares or in cash. Since
the Fund's income is expected to be derived entirely from interest rather than
dividends, it is anticipated that no portion of such dividend distributions will
be eligible for the federal dividends received deduction available to
corporations.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of any ordinary dividends.
After the end of each calendar year, shareholders will be sent information
on their dividends and capital gain distributions for tax purposes, including
the portion taxable as ordinary income, the portion taxable as long-term capital
gains and the percentage of any distributions which constitute an item of tax
preference for purposes of the alternative minimum tax.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from the Fund will have the
effect of reducing the net asset value of the shareholder's stock in the Fund by
the exact amount of the dividend or capital gains distribution. Furthermore,
capital gains distributions and some portion of the dividends may be subject to
federal income taxes. If the net asset value of the shares should be reduced
below a shareholder's cost as a
25
<PAGE>
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 but nonetheless would be taxable to the shareholder.
Therefore, an investor should consider the tax implications of purchasing Fund
shares immediately prior to a distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Under current law, the maximum tax rate on long-term capital gains
realized by non-corporate shareholders is 20%.
Any loss realized by shareholders upon a sale or redemption of shares
within six months of the date of their purchase will be treated as a long-term
capital loss to the extent of any distributions of net long-term capital gains
with respect to such shares during the six-month period. If a shareholder of the
Fund receives exempt-interest dividends with respect to any share and if such
share is held by the shareholder for six months or less, then any loss on the
sale or redemption of such share may, to the extent of such exempt-interest
dividends, be disallowed.
Gain or loss on the sale or redemption of shares in the Fund is measured by
the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the tax
basis of their shares. Under certain circumstances a shareholder may compute and
use an average cost basis in determining the gain or loss on the sale or
redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
OTHER CONSIDERATIONS
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund is not deductible. Furthermore, entities or persons who are
"substantial users" (or related persons) of facilities financed by industrial
development bonds should consult their tax advisers before purchasing shares of
the Fund. "Substantial user" is defined generally by Income Tax Regulation
1.103-11(b) as including a "non-exempt person" who regularly uses in a trade or
business a part of a facility financed from the proceeds of industrial
development bonds.
X. UNDERWRITERS
--------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plan."
26
<PAGE>
XI. CALCULATION OF PERFORMANCE DATA
--------------------------------------------------------------------------------
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 income for each security in the Fund's
portfolio is determined as described below; 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 maximum offering price per share on the last
day of the period (reduced by any undeclared earned income per share that is
expected to be declared shortly after the end 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.
To determine interest income from debt obligations, a yield-to-maturity,
expressed as a percentage, is determined for obligations held at the beginning
of the period, based on the current market value of the security plus accrued
interest, generally as of the end of the month preceding the 30-day period, or,
for obligations purchased during the period, based on the cost of the security
(including accrued interest). The yield-to-maturity is multiplied by the market
value (plus accrued interest) for each security and the result is divided by 360
and multiplied by 30 days or the number of days the security was held during the
period, if less. Modifications are made for determining yield-to-maturity on
certain tax-exempt securities. For the 30-day period ended March 31, 2000, the
Fund's yield, calculated pursuant to the formula described above was 4.10%.
The Fund may also quote a "tax-equivalent yield" determined by dividing the
tax-exempt portion of quoted yield by 1 minus the stated income tax rate and
adding the result to the portion of the yield that is not tax-exempt. The Fund's
tax-equivalent yield, based upon a Federal personal income tax bracket of 39.6%
for the 30-day period ended March 31, 2000 was 6.79% based upon the yield
calculated above.
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 of the Fund for the one and five year periods ended March
31, 2000 and for the period July 12, 1993 (commencement of operations) through
March 31, 2000 were 0.08%, 4.86% and 4.03%, respectively.
In addition, 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. Based on the
foregoing calculation, the Fund's total returns for the one and five year
periods ended March 31, 2000 and for the period July 12, 1993 (commencement of
operations) through March 31, 2000 were 0.08%, 26.78% and 30.43%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date and multiplying by $10,000, $50,000 or $100,000,
respectively. Investments of $10,000, $50,000 and $100,000 in the Fund since
inception would have grown to $13,043, $65,215, and $130,430, respectively, at
March 31, 2000.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indices compiled by recognized organizations.
27
<PAGE>
XII. FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Experts. The financial statements of the Fund for the fiscal year ended
March 31, 2000 included in this Statement of Additional Information and
incorporated by reference in the Prospectus have been so included and
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
* * * * *
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from the
SEC.
28
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (87.1%)
General Obligation (15.8%)
Connecticut,
$ 1,000 1998 Ser C ................................................................. 5.25 % 10/15/11 $ 1,012,900
1,000 1998 Ser C ................................................................. 5.25 10/15/12 1,006,410
1,000 Chicago, Illinois, Emergency Telephone Refg (FGIC) ........................... 5.00 01/01/09 987,380
1,000 New Hampshire, Refg Ser 1998 A ............................................... 5.25 10/01/10 1,009,650
1,000 Massillon City School District, Ohio, Refg Ser 1994 (AMBAC) .................. 4.70 12/01/05 988,780
500 Puerto Rico, Public Improvement Ser 1998 ..................................... 5.25 07/01/10 503,900
1,500 Knox County, Tennessee, Public Improvement Ser 1998 .......................... 5.25 04/01/13 1,490,235
--------- -----------
7,000 6,999,255
--------- -----------
Educational Facilities Revenue (6.8%)
1,000 University of Delaware, Ser 1993 ............................................. 4.90 11/01/02 1,004,770
2,000 University of Minnesota, Ser 1993 A .......................................... 4.80 08/15/03 1,995,580
--------- -----------
3,000 3,000,350
--------- -----------
Electric Revenue (11.9%)
1,000 Salt River Project Agricultural Improvement & Power District, Arizona,
Refg Ser 1993 B ............................................................ 4.75 01/01/03 1,000,700
1,505 Wyandotte County/Kansas City, Kansas, Utility Refg Ser 1998 (MBIA) ........... 5.125 09/01/13 1,470,265
1,000 Long Island Power Authority, Ser 1998 B (MBIA) ............................... 5.125 04/01/11 989,650
1,820 San Antonio, Texas, Electric & Gas Refg Ser 1994 ............................. 4.70 02/01/05 1,793,319
--------- -----------
5,325 5,253,934
--------- -----------
Hospital Revenue (4.5%)
1,000 Maryland Health & Higher Educational Facilities Authority, Medlantic/Helix
Ser 1998 A (FSA) ............................................................ 5.25 08/15/12 1,001,460
1,000 Fairfax County Industrial Development Authority, Virginia, Inova Health
Refg Ser 1993 A ............................................................ 4.70 08/15/04 977,560
--------- -----------
2,000 1,979,020
--------- -----------
Industrial Development/Pollution Control Revenue (6.7%)
1,000 Massachusetts Industrial Finance Agency, Eastern Edison Co Refg Ser 1993 5.875 08/01/08 972,980
2,000 Greenwood, Wisconsin, Land O'Lakes Inc (AMT) ................................. 5.50 09/01/03 1,979,400
--------- -----------
3,000 2,952,380
--------- -----------
Mortgage Revenue - Multi-Family (2.3%)
1,000 Wisconsin Housing & Economic Development Authority, Ser 1993 B (AMT) 5.10 11/01/03 996,530
--------- -----------
Mortgage Revenue - Single Family (6.5%)
1,000 Connecticut Housing Finance Authority, 1993 Subser F-1 ....................... 4.90 05/15/04 996,700
2,000 Maryland Department of Housing & Community Development, 1999
Third Ser (AMT) ............................................................ 4.40 04/01/07 1,896,760
--------- -----------
3,000 2,893,460
--------- -----------
Public Facilities Revenue (1.1%)
500 Michigan Building Authority, Refg 1998 Ser 1 ................................. 5.25 10/15/13 494,740
--------- -----------
</TABLE>
See Notes to Financial Statements
29
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Resource Recovery Revenue (6.8%)
$ 1,000 Hempstead Industrial Development Agency, New York, American
REF-FUEL Co of Hempstead Ser 1997 (MBIA) ................................... 5.00 % 12/01/09 $ 982,650
2,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) ........................................................... 5.50 07/01/01 2,017,120
-------- -----------
3,000 2,999,770
-------- -----------
Student Loan Revenue (4.5%)
2,000 Montana Higher Education Student Assistance Corporation, Senior
-------- Ser 1993 B (AMT) ........................................................... 5.10 12/01/01 2,013,860
-----------
Transportation Facilities Revenue (6.7%)
1,000 Delaware River & Bay Authority, Delaware & New Jersey, Ser 1993+ ............. 4.50 01/01/04 987,730
1,000 Washington Metropolitan Area Transit Authority, District of Columbia,
Maryland and Virginia, Refg Ser 1993 (FGIC)++ .............................. 4.90 01/01/05 998,330
1,000 Houston, Texas, Airport Sub Lien 1998 Ser B (AMT) (FGIC) ..................... 5.25 07/01/12 976,970
-------- -----------
3,000 2,963,030
-------- -----------
Water & Sewer Revenue (13.5%)
1,000 Atlanta, Georgia, Water & Wastewater Ser 1999 A (FGIC) ....................... 5.50 11/01/11 1,031,080
1,000 Honolulu City & County, Hawaii, Wastewater Jr Ser 1998 (FGIC) ................ 5.25 07/01/13 986,780
1,000 Massachusetts Water Resources Authority, Ser 1993 C .......................... 5.25 12/01/06 1,015,090
960 New York City Municipal Water Finance Authority, New York, Ser 1994 B ........ 5.125 06/15/04 966,595
1,000 Pittsburgh Water & Sewer Authority, Pennsylvania, Refg Ser 1993 A (FGIC) 4.60 09/01/03 990,880
1,000 Southeastern Public Service Authority, Virginia, Regional Solid Waste Refg
Ser 1993 A (MBIA) .......................................................... 4.70 07/01/04 991,050
-------- -----------
5,960 5,981,475
-------- -----------
38,785 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $39,439,267) ............... 38,527,804
-------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (11.3%)
1,800 Delta County Economic Development Corporation, Michigan, Mead-Escanaba
Paper Co Ser 1985 E (Demand 04/03/00) ...................................... 3.95* 12/01/13 1,800,000
1,600 Chattanooga-Hamilton County Hospital Authority, Tennessee, Erlanger
Medical Center Ser 1987 (Demand 04/03/00) .................................. 4.00* 10/01/17 1,600,000
1,000 North Central Texas Health Facilities Development Corporation, Texas,
Presbyterian Medical Center Ser 1985 D (MBIA) (Demand 04/03/00) ............ 4.10* 12/01/15 1,000,000
600 Texas Water Development Board, Revolving Fund Ser 1992-A
(Demand 04/03/00) ........................................................... 4.00* 03/01/15 600,000
-----------
5,000 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost $5,000,000) 5,000,000
-------- -----------
$ 43,785 TOTAL INVESTMENTS (Identified Cost $44,439,267) (a) ................................. 98.4% 43,527,804
========
OTHER ASSETS IN EXCESS OF LIABILITIES ............................................... 1.6 709,184
-----------
NET ASSETS .......................................................................... 100.0% $44,236,988
===========
</TABLE>
See Notes to Financial Statements
30
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 2000, continued
--------------
AMT Alternative Minimum Tax.
+ Joint exemption in Delaware and New Jersey.
++ Joint exemption in District of Columbia, Maryland and Virginia.
* Current coupon of variable rate demand obligation.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$73,477 and the aggregate gross unrealized depreciation is
$984,940, resulting in net unrealized depreciation of $911,463.
Bond Insurance:
---------------
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
31
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(identified cost $44,439,267)................... $43,527,804
Cash .............................................. 79,412
Receivable for:
Interest ..................................... 571,416
Shares of beneficial interest sold ........... 156,241
Prepaid expenses .................................. 34,709
------------
TOTAL ASSETS .................................. 44,369,582
------------
LIABILITIES:
Payable for:
Investment management fee .................... 18,787
Shares of beneficial interest repurchased..... 18,191
Dividends to shareholders .................... 9,491
Accrued expenses .................................. 86,125
------------
TOTAL LIABILITIES ............................. 132,594
------------
NET ASSETS .................................... $44,236,988
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................... $53,016,384
Net unrealized depreciation ....................... (911,463)
Accumulated net realized loss ..................... (7,867,933)
------------
NET ASSETS .................................... $44,236,988
============
NET ASSET VALUE PER SHARE,
4,441,049 shares outstanding
(unlimited shares authorized of $.01 par
value) ......................................... $9.96
=====
</TABLE>
STATEMENT OF OPERATIONS
For the year ended March 31, 2000
<TABLE>
<CAPTION>
NET INVESTMENT INCOME:
<S> <C>
INTEREST INCOME ............................... $2,329,329
----------
EXPENSES
Investment management fee ..................... 247,150
Professional fees ............................. 81,705
Shareholder reports and notices ............... 37,316
Registration fees ............................. 31,351
Transfer agent fees and expenses .............. 26,972
Trustees' fees and expenses ................... 15,805
Custodian fees ................................ 3,774
Other ......................................... 7,360
----------
TOTAL EXPENSES ............................ 451,433
Less: expense offset .......................... (3,768)
----------
NET EXPENSES .............................. 447,665
----------
NET INVESTMENT INCOME ..................... 1,881,664
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ............................. 181,899
Net change in unrealized appreciation ......... (2,125,031)
----------
NET LOSS .................................. (1,943,132)
----------
NET DECREASE .................................. $ (61,468)
==========
</TABLE>
See Notes to Financial Statements
32
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 1,881,664 $ 2,181,163
Net realized gain .................................... 181,899 739,516
Net change in unrealized appreciation ................ (2,125,031) (312,924)
------------- ------------
NET INCREASE (DECREASE) ........................... (61,468) 2,607,755
Dividends from net investment income ................. (1,881,664) (2,181,163)
Net increase (decrease) from transactions in shares of
beneficial interest ................................ (12,467,400) 720,864
------------- ------------
NET INCREASE (DECREASE) ........................... (14,410,532) 1,147,456
NET ASSETS:
Beginning of period .................................. 58,647,520 57,500,064
------------- ------------
END OF PERIOD ..................................... $ 44,236,988 $ 58,647,520
============= ============
</TABLE>
See Notes to Financial Statements
33
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Limited Term Municipal Trust (the "Fund") is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund's investment
objective is to provide a high level of current income which is exempt from
federal income tax, consistent with the preservation of capital and prescribed
standards of quality and maturity. The Fund seeks to achieve this objective by
investing primarily in intermediate term, investment grade municipal securities.
The Fund was organized as a Massachusetts business trust on February 25, 1993
and commenced operations on July 12, 1993.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS - Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Fund that in valuing the portfolio securities, it uses both a
computerized matrix of tax-exempt securities and evaluations by its staff, in
each case based on information concerning market transactions and quotations
from dealers which reflect the bid side of the market each day. The portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. 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 and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income
34
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 2000, continued
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 Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the annual rate
of 0.50% to the Fund's net assets determined as of the close of each business
day.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended March 31, 2000 aggregated $1,402,140
and $14,367,243, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Fund's transfer agent.
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 March 31, 2000 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$4,825. At March 31, 2000, the Fund had an accrued pension liability of $35,315
which is included in accrued expenses in the Statement of Assets and
Liabilities.
35
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 2000, continued
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Sold .............................. 5,120,592 $ 51,143,930 3,554,302 $ 36,852,846
Reinvestment of dividends ......... 141,616 1,419,848 166,102 1,716,817
--------- ------------- --------- -------------
5,262,208 52,563,778 3,720,404 38,569,663
Repurchased ....................... (6,492,288) (65,031,178) (3,654,764) (37,848,799)
---------- ------------- ---------- -------------
Net increase (decrease) ........... (1,230,080) $ (12,467,400) 65,640 $ 720,864
========== ============= ========== =============
</TABLE>
5. FEDERAL INCOME TAX STATUS
During the year ended March 31, 2000, the Fund utilized approximately $217,000
of its net capital loss carryover. At March 31, 2000, the Fund had a net capital
loss carryover of approximately $7,832,000 which may be used to offset future
capital gains to the extent provided by regulations, which is available through
March 31 of the following years:
AMOUNTS IN THOUSANDS
----------------------------------------------------------
2003 2004 2005
---- ---- ----
$3,664 $3,941 $227
====== ====== ====
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 $36,000 during fiscal 2000.
As of March 31, 2000, the Fund had temporary book/tax differences primarily
attributable to post-October losses.
36
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL 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 MARCH 31,
------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $10.34 $10.26 $9.91 $9.95 $9.56
------ ------ ----- ----- -----
Income (loss) from investment operations:
Net investment income ........................... 0.38 0.39 0.40 0.40 0.41
Net realized and unrealized gain (loss) ......... (0.38) 0.08 0.35 (0.04) 0.39
------ ------ ----- ----- -----
Total income from investment operations ........... - 0.47 0.75 0.36 0.80
------ ------ ----- ----- -----
Less dividends from net investment income ......... (0.38) (0.39) (0.40) (0.40) (0.41)
------ ------ ----- ----- -----
Net asset value, end of period .................... $9.96 $10.34 $10.26 $9.91 $9.95
====== ====== ===== ===== =====
TOTAL RETURN+ ..................................... 0.08% 4.68% 7.70% 3.65% 8.42%
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 0.91% 0.86 %(1) 0.83% 0.88%(1) 0.87%(1)
Net investment income ............................. 3.81% 3.75% 3.92% 3.99% 4.09 %
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $44,237 $58,648 $57,500 $61,098 $72,766
Portfolio turnover rate ........................... 3% 29% - - -
</TABLE>
-------------
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Does not reflect the effect of expense offset of 0.01%.
See Notes to Financial Statements
37
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL 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 Limited
Term Municipal Trust (the "Fund") at March 31, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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 March 31,
2000 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
May 9, 2000
2000 FEDERAL TAX NOTICE (unaudited)
For the year ended March 31, 2000, all of the Fund's dividends from net
investment income were exempt interest dividends, excludable from gross
income for Federal income tax purposes.
38
<PAGE>
APPENDIX
--------------------------------------------------------------------------------
RATINGS OF INVESTMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
MUNICIPAL BOND RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligation; i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Conditional Rating: Bonds for which the security depends upon the
completion of some act of the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its municipal bond
rating system. The modifier 1 indicates a mid- range ranking; and a modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
39
<PAGE>
MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). MIG 1 denotes best quality and
means there is present strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing. MIG 2 denotes high quality and means that margins of protection are
ample although not as large as in MIG 1. MIG 3 denotes favorable quality and
means that all security elements are accounted for but that the undeniable
strength of the previous grades, MIG 1 and MIG 2, is lacking. MIG 4 denotes
adequate quality and means that the protection commonly regarded as required of
an investment security is present and that while the notes are not distinctly or
predominantly speculative, there is specific risk.
VARIABLE RATE DEMAND OBLIGATIONS
A short-term rating, in addition to the Bond or MIG ratings, designated
VMIG may also be assigned to an issue having a demand feature. The assignment of
the VMIG symbol reflects such characteristics as payment upon periodic demand
rather than fixed maturity dates and payment relying on external liquidity. The
VMIG rating criteria are identical to the MIG criteria discussed above.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. These ratings apply to Municipal commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
MUNICIPAL BOND RATINGS
A Standard & Poor's municipal rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
40
<PAGE>
A Debt rated "A" has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B Debt rated "B" has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC Debt rated "CCC" has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payments of interest and repayments of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC" rating.
C The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC" debt rating.
Cl The rating "Cl" is reserved for income bonds on which no interest is being
paid.
D Debt rated "D" is in payment default. The `D' rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The `D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation
and "C" the highest degree of speculation. While such debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
ratings categories.
The foregoing ratings are sometimes followed by a "p" which indicates that
the rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This
rating, however, while addressing credit quality subsequent to completion of
the project, makes no comment on the likelihood or risk of default upon
failure of such completion.
41
<PAGE>
MUNICIPAL NOTE RATINGS
Commencing on July 27, 1984, Standard & Poor's instituted a new rating
category with respect to certain municipal note issues with a maturity of less
than three years. The new note ratings denote the following:
SP-1 denotes a very strong or strong capacity to pay principal and interest.
Issues determined to possess overwhelming safety characteristics are
given a plus (+) designation (SP-1+).
SP-2 denotes a satisfactory capacity to pay principal and interest.
SP-3 denotes a speculative capacity to pay principal and interest.
COMMERCIAL PAPER RATINGS
Standard and Poor's commerical paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. The ratings
may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information. Ratings are graded into group categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Ratings are applicable to both taxable and tax-exempt commercial paper. The
categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2 and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payments is very
strong.
A-2 indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying
this designation are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher designations.
42
<PAGE>
FITCH IBCA, INC. ("FITCH")
MUNICIPAL BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The rating
represents Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guarantees unless otherwise indicated.
Bonds carrying the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings.
Plus (+) or Plus and minus signs are used with a rating symbol to indicate the
Minus (-) relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR Indicates that Fitch does not rate the specific issue.
Conditional A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
Suspended A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
43
<PAGE>
Withdrawn A rating will be withdrawn when an issue matures or is called
or refinanced and, at Fitch's discretion, when an issuer fails
to furnish proper and timely information.
FitchAlert Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the
likely direction of such change. These are designated as
"Positive," indicating a potential upgrade, "Negative," for
potential downgrade, or "Evolving," where ratings may be
raised or lowered. FitchAlert is relatively short-term, and
should be resolved within 12 months.
Ratings Outlook An outlook is used to describe the most likely
direction of any rating change over the intermediate term. It
is described as "Positive" or "Negative." The absence of a
designation indicates a stable outlook.
Speculative Grade Bond Ratings: Fitch speculative grade bond ratings
provide a guide to investors in determining the credit risk associated with a
particular security. The ratings ("BB" to "C") represent Fitch's assessment of
the likelihood of timely payment of principal and interest in accordance with
the terms of obligation for bond issues not in default. For defaulted bonds, the
rating ("DDD" to "D") is an assessment of the ultimate recovery value through
reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the rating are of similar but not necessarily identical
credit quality since rating categories cannot fully reflect the differences in
degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can
be identified which could assist the obligor in satisfying its
debt service requirements.
B Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability
of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD Bonds are in default on interest and/or principal payments. Such
DD and D bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization
of the obligor. "DDD" represents the highest potential for
recovery on these bonds, and "D" represents the lowest potential
for recovery.
Plus (+) or Plus and minus signs are used with a rating symbol to indicate the
Minus (-) relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "DDD," "DD," or "D"
categories.
44
<PAGE>
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated "F-1+."
F-2 Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not
as great as for issues assigned "F-1+" and "F-1" ratings.
F-3 Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate;
however, near-term adverse changes could cause these securities to be
rated below investment grade.
F-S Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.
D Default. Issues assigned this rating are in actual or imminent payment
default.
LOC The symbol "LOC" indicates that the rating is based on a letter of credit
issued by a commercial bank.
45
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PART C OTHER INFORMATION
Item 23. Exhibits
--------
1(a). Declaration of Trust of the Registrant, dated February 25, 1993,
is incorporated by reference to Exhibit 1(a) of Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A, filed
on May 23, 1996.
1(b). Amendment to the Declaration of Trust of the Registrant, dated
June 22, 1998, is incorporated by reference to Exhibit 1 of
Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A, filed on June, 30, 1998.
2. Amended and Restated By-Laws of the Registrant is incorporated by
reference to Exhibit 2 of Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A, filed on May 27, 1999.
3. Not applicable
4. Amended and Restated Investment Management Agreement between the
Registrant and Morgan Stanley Dean Witter Advisors Inc. is
incorporated by reference to Exhibit 5 of Post-Effective Amendment
No. 6 to the Registration Statement on Form N-1A, filed on
June 30, 1998.
5(a). Distribution Agreement is incorporated by reference to Exhibit 6
of Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A, filed on June 30, 1998.
5(b). Omnibus Selected Dealer Agreement is incorporated by reference to
Exhibit 5 of Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A, filed on May 27, 1999.
6. Amended Retirement Plan for Non-Interested Directors or Trustees
is incorporated by reference to Exhibit 6 of Post-Effective
Amendment No. 7 to the Registration Statement on Form N-1A, filed
on May 27, 1999.
7(a). Custody Agreement between the Registrant and The Bank of New York
is incorporated by reference to Exhibit 8(a) of Post-Effective
Amendment No.4 to the Registration Statement on Form N-1A, filed
on May 23, 1996.
7(b). Amendment to the Custody Agreement between the Registrant and the
Bank of New York is incorporated by reference to Exhibit 8(b) of
Post-Effective Amendment No. 4 to the Registration Statement on
Form N-1A, filed on May 23, 1996.
8(a). Amended and Restated Transfer Agency and Service Agreement between
the Registrant and Morgan Stanley Dean Witter Trust FSB dated June
22, 1998 is incorporated by reference to Exhibit (8) of
Post-Effective Amendment No. 7 to the Registration Statement on
Form N-1A, filed on May 27, 1999.
1
<PAGE>
8(b). Amended and Restated Services Agreement between the Registrant and
Morgan Stanley Dean Witter Services Company Inc. is incorporated
by reference to Exhibit (9) of Post-Effective Amendment No. 6 to
the Registration Statement on Form N-1A, filed on June 30, 1998.
9(a). Opinion of Sheldon Curtis, Esq., dated June 30, 1993, is
incorporated by reference to Exhibit 9(a) of Post-Effective
Amendment No. 7 to the Registration Statement on Form N-1A, filed
on May 27, 1999.
9(b). Opinion of Lane, Altman & Owens LLP, Massachusetts Counsel, dated
June 30, 1993, is incorporated by reference to Exhibit 9(a) of
Post-Effective Amendment No. 7 to the Registration Statement on
Form N-1A, filed on May 27, 1999.
10. Consent of Independent Accountants, filed herein.
11. Not applicable.
12. Not applicable.
13. Amended Plan of Distribution pursuant to Rule 12b-1 is
incorporated by reference to Exhibit 15 of Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A, filed
on May 23, 1996.
14. Not applicable.
16(a). Code of Ethics of Morgan Stanley Dean Witter Advisors Inc., Morgan
Stanley Dean Witter Services Company Inc. and Morgan Stanley Dean
Witter Distributors Inc., filed herein.
16(b). Code of Ethics of the Morgan Stanley Dean Witter Funds, filed
herein.
Other Powers of Attorney of Trustees is incorporated by reference to
Exhibit (Other) of Post-Effective Amendment No. 2 and
Post-Effective Amendment No. 6 (filed on May 20, 1994 and June 30,
1998, respectively) to the Registration Statement on Form N-1A.
Item 24. Persons Controlled by or Under Common Control with the Fund.
None
Item 25. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant.
2
<PAGE>
Trustees, officers, employees and agents will be indemnified for the expense of
litigation if it is determined that they are entitled to indemnification against
any liability established in such litigation. The Registrant may also advance
money for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 26. Business and Other Connections of Investment Advisor
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment advisor. The following information is given regarding officers
of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW Advisors is
a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
Closed-End Investment Companies
3
<PAGE>
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities
Open-end Investment Companies
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Institutional Money Trust
(4) Active Assets Money Trust
(5) Active Assets Premier Money Trust
(6) Active Assets Tax-Free Trust
(7) Morgan Stanley Dean Witter 21st Century Trend Fund
(8) Morgan Stanley Dean Witter Aggressive Equity Fund
(9) Morgan Stanley Dean Witter American Opportunities Fund
(10) Morgan Stanley Dean Witter Balanced Growth Fund
(11) Morgan Stanley Dean Witter Balanced Income Fund
(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
4
<PAGE>
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
(32) Morgan Stanley Dean Witter Information Fund
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(42) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(43) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(44) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Real Estate Fund
(51) Morgan Stanley Dean Witter S&P 500 Index Fund
(52) Morgan Stanley Dean Witter S&P 500 Select Fund
(53) Morgan Stanley Dean Witter Select Dimensions Investment Series
(54) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(55) Morgan Stanley Dean Witter Short-Term Bond Fund
(56) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(57) Morgan Stanley Dean Witter Small Cap Growth Fund
(58) Morgan Stanley Dean Witter Special Value Fund
(59) Morgan Stanley Dean Witter Strategist Fund
(60) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(61) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(62) Morgan Stanley Dean Witter Tax-Managed Growth Fund
(63) Morgan Stanley Dean Witter Total Market Index Fund
(64) Morgan Stanley Dean Witter Total Return Trust
(65) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(66) Morgan Stanley Dean Witter U.S. Government Securities Trust
(67) Morgan Stanley Dean Witter Utilities Fund
(68) Morgan Stanley Dean Witter Value-Added Market Series
(69) Morgan Stanley Dean Witter Value Fund
(70) Morgan Stanley Dean Witter Variable Investment Series
(71) Morgan Stanley Dean Witter World Wide Income Trust
5
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and
Director Director of Morgan Stanley Dean Witter
Distributors Inc. ("MSDW Distributors") and
Morgan Stanley Dean Witter Trust FSB ("MSDW
Trust"); President, Chief Executive Officer and
Director of Morgan Stanley Dean Witter Services
Company Inc. ("MSDW Services"); President of the
Morgan Stanley Dean Witter Funds; Executive Vice
President and Director of Dean Witter Reynolds
Inc. ("DWR"); Director of various MSDW
subsidiaries; Trustee of various Van Kampen
investment companies.
Barry Fink General Counsel of Asset Management of MSDW;
Executive Vice President, Executive Vice President, Secretary, General
Secretary, General Counsel Counsel and Director of MSDW Services; Vice
and Director President and Secretary of MSDW Distributors;
Vice President, Secretary and General Counsel of
the Morgan Stanley Dean Witter Funds.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter
Executive Vice President Funds; Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison Executive Vice President, Chief Administrative
Executive Vice President, Officer and Director of MSDW Services; Vice
Chief Administrative President of the Morgan Stanley Dean Witter
Officer and Director Funds.
Edward C. Oelsner, III
Executive Vice President
Joseph R. Arcieri Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Peter M. Avelar Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the High
Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Douglas Brown
Senior Vice President
6
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Rosalie Clough
Senior Vice President
and Director of Marketing
Richard Felegy
Senior Vice President
Sheila A. Finnerty Vice President of Morgan Stanley Dean Witter
Senior Vice President Prime Income Trust.
Edward F. Gaylor Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW
Trust; Vice President of the Morgan Stanley Dean
Witter Funds.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean
Senior Vice President, Witter Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative
Officer - Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Kevin Hurley Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Jenny Beth Jones Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of Sector
Rotation
Jonathan R. Page Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the Money
Market Group
7
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Ira N. Ross Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Growth Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
James Solloway
Senior Vice President
Katherine H. Stromberg Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the Growth
and Income Group
Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication
James F. Willison Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Tax-Exempt Fixed
Income Group
Raymond A. Basile
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and
Treasurer Accounting Officer of the Morgan Stanley Dean
Witter Funds.
Thomas Chronert
First Vice President
8
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of MSDW Services;
and Assistant Secretary Assistant Secretary of MSDW Distributors and the
Morgan Stanley Dean Witter Funds.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
Michael Interrante First Vice President and Controller of MSDW
First Vice President Services; Assistant Treasurer of MSDW
and Controller Distributors; First Vice President and Treasurer
of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Douglas J. Ketterer
First Vice President
Todd Lebo First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors and the Morgan Stanley Dean Witter
Funds.
Lou Anne D. McInnis First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors and the Morgan Stanley Dean Witter
Funds.
Carsten Otto First Vice President and Assistant Secretary of
First Vice President MSDW Services; Assistant Secretary of MSDW
and Assistant Secretary Distributors and the Morgan Stanley Dean Witter
Funds.
Carl F. Sadler
First Vice President
Ruth Rossi First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
and Assistant Secretary Distributors the Morgan Stanley Dean Witter
Funds.
James P. Wallin
First Vice President
9
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Robert Abreu
Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz Vice President of Morgan Stanley Dean Witter
Vice President Global Utilities Fund.
Armon Bar-Tur Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Maurice Bendrihem
Vice President and
Assistant Controller
Thomas A. Bergeron
Vice President
Philip Bernstein
Vice President
Dale Boettcher
Vice President
Michelina Calandrella
Vice President
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Liam Carroll
Vice President
Philip Casparius
Vice President
Annette Celenza
Vice President
10
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Aaron Clark Vice President of Morgan Stanley Dean Witter
Vice President Market Leader Trust
William Connerly
Vice President
Virginia Connors
Vice President
Michael J. Davey
Vice President
David Dineen Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
June Ewers
Vice President
Jeffrey D. Geffen Vice President of Morgan Stanley Dean Witter
Vice President U.S. Government Securities Trust
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity Burke
Vice President
Peter Gewirtz
Vice President
Mina Gitsevich
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Joan Hamilton
Vice President
11
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Trey Hancock
Vice President
Laury A. Haskamp
Vice President
Matthew T. Haynes Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Peter Hermann Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
David T. Hoffman
Vice President
Thomas G. Hudson II
Vice President
Linda Jones
Vice President
Norman Jones
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Carol Espejo-Kane
Vice President
Nancy Karole Kennedy
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Lester Lay
Vice President
Gerard J. Lian Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
12
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Cameron J. Livingstone
Vice President
Nancy Login
Vice President
Sharon Loguercio
Vice President
Stephanie Lovinger
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Peter R. McDowell
Vice President
Albert McGarity
Vice President
Teresa McRoberts Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Mark Mitchell
Vice President
Julie Morrone Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Hilary A. O'Neill
Vice President
13
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Mori Paulsen
Vice President
Anne Pickrell
Vice President
Reginald Rigaud
Vice President
Frances Roman
Vice President
Dawn Rorke
Vice President
John Roscoe Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Hugh Rose
Vice President
Robert Rossetti Vice President of Morgan Stanley Dean Witter
Vice President Competitive Edge Fund.
Sally Sancimino Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter
Vice President Federal Securities Trust.
Alison M. Sharkey
Vice President
Peter J. Seeley Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Ronald B. Silvestri Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Herbert Simm
Vice President
14
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
-------------------- ------------------------------------------------
Martha Slezak
Vice President
Otha Smith
Vice President
Stuart Smith
Vice President
Robert Stearns
Vice President
Naomi Stein
Vice President
William Stevens
Vice President
Michael Strayhorn
Vice President
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Bradford Thomas
Vice President
Barbara Toich
Vice President
Robert Vanden Assem
Vice President
Frank Vindigni
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
John Wong
Vice President
15
<PAGE>
The principal address of MSDW Advisors, MSDW Services, MSDW Distributors,
DWR, and the Morgan Stanley Dean Witter Funds is Two World Trade Center, New
York, New York 10048. The principal address of MSDW is 1585 Broadway, New York,
New York 10036. The principal address of MSDW Trust is 2 Harborside Financial
Center, Jersey City, New Jersey 07311.
Item 27. Principal Underwriters
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Institutional Money Trust
(4) Active Assets Money Trust
(5) Active Assets Premier Money Trust
(6) Active Assets Tax-Free Trust
(7) Morgan Stanley Dean Witter 21st Century Trend Fund
(8) Morgan Stanley Dean Witter Aggressive Equity Fund
(9) Morgan Stanley Dean Witter American Opportunities Fund
(10) Morgan Stanley Dean Witter Balanced Growth Fund
(11) Morgan Stanley Dean Witter Balanced Income Fund
(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
(32) Morgan Stanley Dean Witter Information Fund
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
16
<PAGE>
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(42) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(43) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(44) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Prime Income Trust
(51) Morgan Stanley Dean Witter Real Estate Fund
(52) Morgan Stanley Dean Witter S&P 500 Index Fund
(53) Morgan Stanley Dean Witter S&P 500 Select Fund
(54) Morgan Stanley Dean Witter Short-Term Bond Fund
(55) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(56) Morgan Stanley Dean Witter Small Cap Growth Fund
(57) Morgan Stanley Dean Witter Special Value Fund
(58) Morgan Stanley Dean Witter Strategist Fund
(59) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(60) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(61) Morgan Stanley Dean Witter Tax-Managed Growth Fund
(62) Morgan Stanley Dean Witter Total Market Index Fund
(63) Morgan Stanley Dean Witter Total Return Trust
(64) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(65) Morgan Stanley Dean Witter U.S. Government Securities Trust
(66) Morgan Stanley Dean Witter Utilities Fund
(67) Morgan Stanley Dean Witter Value-Added Market Series
(68) Morgan Stanley Dean Witter Value Fund
(69) Morgan Stanley Dean Witter Variable Investment Series
(70) Morgan Stanley Dean Witter World Wide Income Trust
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than Mr.
Purcell, who is a Trustee of the Registrant, none of the following persons has
any position or office with the Registrant.
Name Positions and Office with MSDW Distributors
---- -------------------------------------------
Michael T. Gregg Vice President and Assistant Secretary.
James F. Higgins Director
Philip J. Purcell Director
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
Item 28. Location of Accounts and Records
17
<PAGE>
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 29. Management Services
Registrant is not a party to any such management-related service contract.
Item 30. Undertakings
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 30th day of May, 2000.
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
By /s/ Barry Fink
---------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 9 has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer Chief Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 05/30/00
---------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 05/30/00
---------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 05/30/00
---------------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder
By /s/ David M. Butowsky 05/30/00
---------------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
EXHIBIT INDEX
10. Consent of Independent Accountants.
16(a). Code of Ethics of Morgan Stanley Dean Witter Advisors Inc.,
Morgan Stanley Dean Witter Services Company Inc. and Morgan
Stanley Dean Witter Distributors Inc.
16(b). Code of Ethics of the Morgan Stanley Dean Witter Funds.
