<PAGE>
PROSPECTUS - AUGUST 26, 1999
Morgan Stanley Dean Witter
SHORT-TERM BOND FUND
[COVER PHOTO]
A MUTUAL FUND THAT SEEKS TO
PROVIDE A HIGH LEVEL OF CURRENT INCOME,
CONSISTENT WITH THE PRESERVATION OF CAPITAL
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon
the adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
The Fund Investment Objective........................................ 1
Principal Investment Strategies............................. 1
Principal Risks............................................. 1
Past Performance............................................ 3
Fees and Expenses........................................... 4
Additional Investment Strategy Information.................. 4
Additional Risk Information................................. 5
Fund Management............................................. 7
Shareholder Information Pricing Fund Shares......................................... 8
How to Buy Shares........................................... 8
How to Exchange Shares...................................... 9
How to Sell Shares.......................................... 11
Distributions............................................... 13
Tax Consequences............................................ 13
Financial Highlights ............................................................ 15
Our Family of Funds ............................................................ Inside Back Cover
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUND.
PLEASE READ IT CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.
</TABLE>
<PAGE>
[Sidebar]
INCOME
An investment objective having the goal of selecting securities to pay out
income rather than rise in price.
[End Sidebar]
THE FUND
[ICON] INVESTMENT OBJECTIVE
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Morgan Stanley Dean Witter Short-Term Bond Fund seeks to
provide a high level of current income, consistent with the
preservation of capital.
[ICON] PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund will normally invest at least 65% of its total
assets in bonds issued or guaranteed as to principal and
interest by the U.S. government, its agencies or
instrumentalities (including zero coupon securities), and
investment grade corporate and other types of bonds. In
selecting portfolio investments to purchase or sell, the
"Investment Manager," Morgan Stanley Dean Witter Advisors
Inc., considers both domestic and international economic
developments, interest rate trends and other factors and
seeks to maintain an overall weighted average maturity for
the Fund of three years or less.
MORTGAGE-BACKED SECURITIES. Certain of the U.S. government
securities in which the Fund may invest are mortgage-backed
securities. One type of mortgage-backed security, in which
the Fund may invest, is a mortgage pass-through security.
These securities represent a participation interest in a
pool of residential mortgage loans originated by U.S.
governmental or private lenders such as banks. They differ
from conventional debt securities, which provide for
periodic payment of interest in fixed amounts and principal
payments at maturity or on specified call dates. Mortgage
pass-through securities provide for monthly payments that
are a "pass-through" of the monthly interest and principal
payments made by the individual borrowers on the pooled
mortgage loans. Mortgage pass-through securities may be
collateralized by mortgages with fixed rates of interest or
adjustable rates.
Bonds are fixed-income debt securities. The issuer of the
debt security borrows money from the investor who buys the
security. Most debt securities pay either fixed or
adjustable rates of interest at regular intervals until they
mature, at which point investors get their principal back.
In addition, the Fund may invest in foreign, asset-backed
and restricted securities and "junk bonds."
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 trading strategies it uses. For example, the
Investment Manager in its discretion may determine to use
some permitted trading strategies while not using others.
[ICON] PRINCIPAL RISKS
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There is no assurance that the Fund will achieve its
investment objective. The Fund's share price will fluctuate
with changes in the market value of the Fund's portfolio
securities. The Fund's yield will vary based on the yield of
the Fund's portfolio securities. Neither the value nor the
yield of the U.S. government securities that the Fund
invests in (or the value or yield of the Fund's shares) is
guaranteed by the U.S. government. 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.
1
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FIXED-INCOME SECURITIES. All fixed-income securities, such
as bonds, are subject to two types of risk: credit risk and
interest rate risk. Credit risk refers to the possibility
that the issuer of a security will be unable to make
interest payments and repay the principal on its debt.
Certain of the Fund's investments 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
rates goes up, the prices of most fixed-income securities go
down. When the general level of interest rates goes down,
the prices of most fixed-income securities go up. (Zero
coupon securities are typically subject to greater price
fluctuations than comparable securities that pay interest.)
As merely illustrative of the relationship between
fixed-income securities and interest rates, the following
table shows how interest rates affect bond prices.
<TABLE>
<CAPTION>
PRICE PER $1,000 OF A BOND IF
INTEREST RATES:
HOW INTEREST RATES AFFECT BOND PRICES ------------------------------
- -------------------------------------- INCREASE DECREASE
-------------- --------------
BOND MATURITY COUPON 1% 2% 1% 2%
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------
1 year N/A $1,000 $1,000 $1,000 $1,000
- ----------------------------------------------------------------------
5 years 4.25% $967 $934 $1,038 $1,076
- ----------------------------------------------------------------------
10 years 4.75% $930 $867 $1,074 $1,155
- ----------------------------------------------------------------------
30 years 5.25% $865 $756 $1,166 $1,376
- ----------------------------------------------------------------------
</TABLE>
Coupons reflect yields on Treasury securities as of December
31, 1998. The table is not representative of price changes
for mortgage-backed securities principally because of
prepayment risk. 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.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities in
which the Fund may invest have different risk
characteristics than traditional debt securities. Although
generally the value of fixed-income securities increases
during periods of falling interest rates and decreases
during periods of rising interest rates, this is not always
the case with mortgage-backed securities.
This is due to the fact that principal on underlying
mortgages may be prepaid at any time as well as other
factors. Generally, prepayments will increase during a
period of falling interest rates and decrease during a
period of rising interest rates. The rate of prepayments
also may be influenced by economic and other factors.
Prepayment risk includes the possibility that, as interest
rates fall, securities with stated interest rates may have
the principal prepaid earlier than expected, requiring the
Fund to invest the proceeds at generally lower interest
rates.
Investments in mortgage-backed securities are made based
upon, among other things, expectations regarding the rate of
prepayments on underlying mortgage pools. Rates of
prepayment, faster or slower than expected by the Investment
Manager, could reduce the Fund's yield, increase the
volatility of the Fund and/or cause a decline in net asset
value. Mortgage-backed securities, especially privately
issued mortgage-backed securities, are more volatile and
less liquid than other traditional types of securities.
2
<PAGE>
[Sidebar]
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's shares has varied from year
to year over the past 4 calendar years.
AVERAGE ANNUAL
TOTAL RETURNS
This table compares the Fund's average annual returns with those of a broad
measure of market performance over time as well as with an index of funds with
similar investment objectives.
[End Sidebar]
OTHER RISKS. The performance of the Fund also will depend on
whether or not the Investment Manager is successful in
pursuing the Fund's investment strategy. The Fund is also
subject to other risks from its permissible investments
including risks associated with investments in foreign,
asset-backed and restricted securities and "junk bonds." 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.
[ICON] PAST PERFORMANCE
- --------------------------------------------------------------------------------
The bar chart and table below provide some indication of the
risks of investing in the Fund. The Fund's past performance
does not indicate how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CALENDAR YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 11.86%
'96 4.54%
'97 6.41%
'98 6.97%
</TABLE>
Year-to-date total return as of June 30, 1999 was 1.12%.
During the periods shown in the bar chart, the highest
return for a calendar quarter was 3.73% (quarter ended June
30, 1995) and the lowest return for a calendar quarter was
-1.35% (quarter ended December 31, 1994).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)
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LIFE OF FUND
PAST 1 YEAR (SINCE 1/10/94)
<S> <C> <C>
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Short-Term Bond Fund 6.97% 5.54%(3)
- -------------------------------------------------------------------------
Lehman Brothers Mutual Fund Short (1-5)
Investment Grade Debt Index(1) 7.55% 6.59%(4)
- -------------------------------------------------------------------------
Lipper Short Investment Grade Debt Fund
Index(2) 5.74% 5.39%(4)
- -------------------------------------------------------------------------
</TABLE>
1 The Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index
measures all investment grade corporate debt securities with maturities of
one to five years. The Index does not include any expenses, fees or
charges. The Index is unmanaged and should not be considered an investment.
2 The Lipper Short Investment Grade Debt Fund Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper Short Investment Grade Debt Funds objective. The Index, which is
adjusted for capital gains distributions and income dividends, is unmanaged
and should not be considered an investment. There are currently 30 funds
represented in this Index.
3 For the Period January 10, 1994 to December 31, 1998.
4 For the Period January 31, 1994 to December 31, 1998.
3
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[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 April 30, 1999.
[End Sidebar]
[ICON] FEES AND EXPENSES
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The table below briefly describes the fees and expenses that
you may pay if you buy and hold shares of the Fund. The Fund
does not charge account or exchange fees.
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
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Management fee 0.70%*
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Distribution and service (12b-1) fees None
- -----------------------------------------------------------------------
Other expenses 0.18%*
- -----------------------------------------------------------------------
Total annual Fund operating expenses 0.88%*
- -----------------------------------------------------------------------
</TABLE>
* During the fiscal year ended April 30, 1999, the Investment Manager waived
its compensation and assumed all operating expenses (except brokerage fees)
without limitation, until December 31, 1998, and to the extent such
compensation and expenses exceeded 0.80% of the Fund's daily net assets on
an annualized basis, from January 1, 1999 through the end of that period.
The Investment Manager will continue to assume all operating expenses
(except brokerage fees) and waive its compensation to the extent they
exceed 0.80% of the Fund's daily net assets, on an annualized basis, until
December 31, 1999. For the fiscal year ended April 30, 1999, taking the
waiver of expenses into account, the actual management fee was 0.24% of the
Fund's daily net assets and the actual other expenses were 0.07% of the
Fund's daily net assets.
EXAMPLE
This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other
mutual funds.
The example assumes that you invest $10,000 in the Fund,
your investment has a 5% return each year, and the Fund's
operating expenses remain the same. Although your actual
costs may be higher or lower, the tables below show your
costs at the end of each period based on these assumptions.
<TABLE>
<CAPTION>
EXPENSES OVER TIME
- -----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
- -----------------------------------------
$90 $281 $488 $1,084
- -----------------------------------------
</TABLE>
[ICON] ADDITIONAL INVESTMENT STRATEGY INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the
Fund's principal investment strategies.
FOREIGN SECURITIES. The Fund may invest up to 25% of its
total assets in investment grade fixed-income securities
issued by foreign governments or corporations.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed
securities. The securitization techniques used to develop
mortgage-backed securities are also applied to a broad range
of other assets. Various types of assets, primarily
automobile and credit card receivables and home equity
loans, are being securitized in pass-through structures
similar to the mortgage pass-through structures.
4
<PAGE>
The percentage limitations relating to the composition of
the Fund's portfolio apply at the time the Fund acquires an
investment and refer to the Fund's net assets, unless
otherwise noted. Subsequent percentage changes that result
from market fluctuations will not require the Fund to sell
any portfolio security. The Fund may change its principal
investment strategies without shareholder approval; however,
you would be notified of any changes.
RESTRICTED SECURITIES AND JUNK BONDS. The Fund's investments
also include "Rule 144A" fixed-income securities, which are
subject to resale restrictions. Up to 5% of the Fund's
assets may be invested in fixed-income securities rated
lower than investment grade, or if unrated of comparable
quality as determined by the Investment Manager (commonly
known as "junk bonds").
The percentage limitations relating to the composition of
the Fund's portfolio apply at the time the Fund acquires an
investment and refer to the Fund's net assets, unless
otherwise noted. Subsequent percentage changes that result
from market fluctuations will not require the Fund to sell
any portfolio security. The Fund may change its principal
investment strategies without shareholder approval; however,
you would be notified of any changes.
[ICON] ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the
principal risks of investing in the Fund.
FOREIGN SECURITIES. The Fund's investments in foreign
securities (including depository receipts) involve risks in
addition to the risks associated with domestic securities.
One additional risk may be currency risk. While the price of
Fund shares is quoted in U.S. dollars, the Fund generally
may convert U.S. dollars to a foreign market's local
currency to purchase a security in that market. If the value
of that local currency falls relative to the U.S. dollar,
the U.S. dollar value of the foreign security will decrease.
This is true even if the foreign security's local price
remains unchanged.
Foreign securities also have risks related to economic and
political developments abroad, including expropriation,
confiscatory taxation, exchange control regulation,
limitations on the use or transfer of Fund assets, and any
effects of foreign social, economic or political
instability. Foreign companies, in general, are not subject
to the regulatory requirements of U.S. companies and, as
such, there may be less publicly available information about
these companies. Moreover, foreign accounting, auditing and
financial reporting standards generally are different from
those applicable to U.S. companies. Finally, in the event of
a default of any foreign debt obligations, it may be more
difficult for the Fund to obtain or enforce a judgment
against the issuers of the securities.
Securities of foreign issuers may be less liquid than
comparable securities of U.S. issuers and, as such, their
price changes may be more volatile. Furthermore, foreign
exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their
U.S. counterparts.
5
<PAGE>
Many European countries have adopted or are in the process
of adopting a single European currency, referred to as the
"euro." The consequences of the euro conversion for foreign
exchange rates, interest rates and the value of European
securities the Fund may purchase are presently unclear. The
consequences may adversely affect the value and/or increase
the volatility of securities held by the Fund.
ASSET-BACKED SECURITIES. Asset-backed securities have risk
characteristics similar to mortgage-backed securities. Like
mortgage-backed securities, they generally decrease in value
as a result of interest rate increases, but may benefit less
than other fixed-income securities from declining interest
rates, principally because of prepayments. Also, as in the
case of mortgage-backed securities, prepayments generally
increase during a period of declining interest rates
although other factors, such as changes in credit use and
payment patterns, may also influence prepayment rates.
Asset-backed securities also involve the risk that various
federal and state consumer laws and other legal and economic
factors may result in the collateral backing the securities
being insufficient to support payment on the securities.
RESTRICTED SECURITIES AND JUNK BONDS. The Fund's investments
in junk bonds pose significant risks. The prices of junk
bonds are likely to be more sensitive to adverse economic
changes or individual corporate developments than higher
rated securities. During an economic downturn or substantial
period of rising interest rates, junk bond issuers and, in
particular, highly leveraged issuers may experience
financial stress that would adversely affect their ability
to service their principal and interest payment obligations,
to meet their projected business goals or to obtain
additional financing. In the event of a default, the Fund
may incur additional expenses to seek recovery. The
secondary market for junk bonds may be less liquid than the
markets for higher quality securities and, as such, may have
an adverse effect on the market prices of certain
securities. Many junk bonds are issued as Rule 144A
securities. Rule 144A securities could have the effect of
increasing the level of Fund illiquidity to the extent a
Fund may be unable to find qualified institutional buyers
interested in purchasing the securities. The illiquidity of
the market may also adversely affect the ability of the
Fund's Trustees to arrive at a fair value for certain junk
bonds at certain times and could make it difficult for the
Fund to sell certain securities.
YEAR 2000. The Fund could be adversely affected if the
computer systems necessary for the efficient operation of
the Investment Manager, the Fund's other service providers
and the markets and corporate and governmental issuers in
which the Fund invests do not properly process and calculate
date-related information from and after January 1, 2000.
While year 2000-related computer problems could have a
negative effect on the Fund, the Investment Manager and its
affiliates are working hard to avoid any problems and to
obtain assurances from their service providers that they are
taking similar steps.
In addition, it is possible that the markets for securities
in which the Fund invests may be detrimentally affected by
computer failures throughout the financial services industry
beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity
issues. In addition, corporate and
6
<PAGE>
governmental data processing errors may result in production
problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be
affected by remediation costs, which may be substantial and
may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be
adversely affected.
[Sidebar]
MORGAN STANLEY DEAN WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc., its
wholly-owned subsidiary, has more than $137 billion in assets under management
or administration as of July 1, 1999.
[End Sidebar]
[ICON] FUND MANAGEMENT
- --------------------------------------------------------------------------------
The Fund has retained the Investment Manager -- Morgan
Stanley Dean Witter Advisors Inc. -- to provide
administrative services, manage its business affairs and
invest its assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment
Manager is a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three
primary businesses: securities, asset management and credit
services. Its main business office is located at Two World
Trade Center, New York, New York 10048.
The Fund's portfolio is managed within the Investment
Manager's Taxable Income Group. Rochelle G. Siegel, Senior
Vice President of the Investment Manager and a member of the
Corporate Bond Group, is the primary portfolio manager of
the Fund. Ms. Siegel has been a portfolio manager with the
Investment Manager for over five years.
The Fund pays the Investment Manager a monthly management
fee as full compensation for the services and facilities
furnished to the Fund, and for Fund expenses assumed by the
Investment Manager. The fee is based on the Fund's average
daily net assets. For the fiscal year ended April 30, 1999,
the Fund paid total compensation to the Investment Manager
amounting to 0.24% of the Fund's average daily net assets;
this amount reflects the waiver of fees and assumption of
expenses.
7
<PAGE>
[Sidebar]
CONTACTING A
FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (800) THE-DEAN for the telephone number of
the Morgan Stanley Dean Witter office nearest you. You may also access our
office locator on our Internet site at: www.msdw.com/individual/funds
[End Sidebar]
SHAREHOLDER INFORMATION
[ICON] 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 is based on
the securities' market price when available. When a market
price is not readily available, including circumstances
under which the Investment Manager determines that a
security's market price is not accurate, a portfolio
security is valued at its fair value, as determined under
procedures established by the Fund's Board of Trustees. In
these cases, the Fund's net asset value will reflect
certain portfolio securities' fair value rather than their
market price. In addition, if the Fund holds securities
primarily listed on foreign exchanges, the value of the
Fund's portfolio securities may change on days when you
will not be able to purchase or sell your shares.
An exception to the Fund's general policy of using market
prices concerns its short-term debt portfolio securities.
Debt securities with remaining maturities of sixty days or
less at the time of purchase may be valued at amortized
cost. However, if the cost does not reflect the
securities' market value, these securities will be valued
at their fair value.
[ICON] HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may open a new account to buy Fund shares or buy
additional Fund shares for an existing account by
contacting your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative. Your
Financial Advisor will assist you, step-by-step, with the
procedures to invest in the Fund. You may also purchase
shares directly by calling the Fund's transfer agent and
requesting an application.
When you buy Fund shares, the shares are purchased at the
next share price calculated after we receive your purchase
order in proper form. 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> <C>
- ---------------------------------------------------------------------------------------
Regular Accounts $1,000 $100
- ---------------------------------------------------------------------------------------
Individual Retirement Accounts: Regular IRAs $1,000 $100
Education IRAs $500 $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:
- 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).
- Make out a check for the total amount payable to:
Morgan Stanley Dean Witter Short-Term Bond Fund.
- 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 use its own assets or those of its
affiliates, including MSDW Advisors to pay distribution
fees for the sale and distribution of Fund shares.
[ICON] HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may only exchange shares
of the Fund for shares of other continuously offered
Morgan Stanley Dean Witter Funds if the Fund shares were
acquired in an exchange of shares initially purchased in a
Multi-Class Fund or an FSC Fund (subject to a front-end
sales charge). In that case, the shares may be
subsequently re-exchanged for shares of the same Class of
any Multi-Class Fund or FSC Fund or for shares of another
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.
9
<PAGE>
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 objectives,
policies and investment minimums, and should be read
before investment. Since exchanges are available only into
continuously offered Morgan Stanley Dean Witter Funds,
exchanges are not available into any new Morgan Stanley
Dean Witter Fund during its initial offering period, or
when shares of a particular Morgan Stanley Dean Witter
Fund are not being offered for purchase.
EXCHANGE PROCEDURES. You can process an exchange by
contacting your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative.
Otherwise, you must forward an exchange privilege
authorization form to the Fund's transfer agent - Morgan
Stanley Dean Witter Trust FSB - and then write the
transfer agent or call (800) 869-NEWS to place an exchange
order. You can obtain an exchange privilege authorization
form by contacting your Financial Advisor or other
authorized financial representative, or by calling (800)
869-NEWS. If you hold share certificates, no exchanges may
be processed until we have received all applicable share
certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except
a Money Market Fund) is made on the basis of the next
calculated net asset values of the Funds involved after
the exchange instructions are accepted. When exchanging
into a Money Market Fund, the Fund's shares are sold at
their next calculated net asset value and the Money Market
Fund's shares are purchased at their net asset value on
the following business day.
The Fund may terminate or revise the exchange privilege
upon required notice. The check writing privilege is not
available for Money Market Fund shares you acquire in an
exchange.
TELEPHONE EXCHANGES. For your protection when calling
Morgan Stanley Dean Witter Trust FSB, we will employ
reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine.
These procedures may include requiring various forms of
personal identification such as name, mailing address,
social security or other tax identification number.
Telephone instructions also may be recorded.
Telephone instructions will be accepted if received by the
Fund's transfer agent between 9:00 a.m. and 4:00 p.m.
Eastern time, on any day the New York Stock Exchange is
open for business. During periods of drastic economic or
market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this
has not been the case with the Fund in the past.
10
<PAGE>
MARGIN ACCOUNTS. If you have pledged your Fund shares in a
margin account, contact your Morgan Stanley Dean Witter
Financial Advisor or other authorized financial
representative regarding restrictions on the exchange of
such shares.
TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of
the Fund for shares of another Morgan Stanley Dean Witter
Fund there are important tax considerations. For tax
purposes, the exchange out of the Fund is considered a sale
of Fund shares - and the exchange into the other Fund is
considered a purchase. As a result, you may realize a
capital gain or loss.
You should review the "Tax Consequences" section and consult
your own tax professional about the tax consequences of an
exchange.
FREQUENT EXCHANGES. A pattern of frequent exchanges may
result in the Fund limiting or prohibiting, at its
discretion, additional purchases and/or exchanges. The Fund
will notify you in advance of limiting your exchange
privileges.
FOR FURTHER INFORMATION REGARDING EXCHANGE PRIVILEGES, YOU
SHOULD CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL
ADVISOR OR CALL (800) 869-NEWS.
[ICON] HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell some or all of your Fund shares at any time.
Your shares will be sold at the net price calculated after
we receive your order to sell shares as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
- ------------------------------------------------------------------------------------------
Contact your To sell your shares, simply call your Morgan Stanley Dean Witter
Financial Advisor Financial Advisor or other authorized financial representative.
----------------------------------------------------------------------
[ICON] Payment will be sent to the address to which the account is registered
or deposited in your brokerage account.
- ------------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction"
that includes:
[ICON] - your account number;
- the dollar amount or the number of shares you wish to sell; and
- 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 a determination as to whether a particular
institution is an eligible guarantor.) A notary public CANNOT provide
a signature guarantee. Additional documentation may be required for
shares held by a corporation, partnership, trustee or executor.
----------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at P.O. Box
983, Jersey City, New Jersey 07303. If you hold share certificates,
you must return the certificates, along with the letter and any
required additional documentation.
----------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account
is registered, or otherwise according to your instructions.
----------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
- ------------------------------------------------------------------------------------------
<S> <C>
Systematic If your investment in all of the Morgan Stanley Dean Witter Family of
Withdrawal Plan Funds has a total market value of at least $10,000, you may elect to
[ICON] withdraw amounts of $25 or more, or in any whole percentage of a
Fund's balance (provided the amount is at least $25), on a monthly,
quarterly, semi-annual or annual basis, from any Fund with a balance
of at least $1,000. Each time you add a Fund to the plan, you must
meet the plan requirements.
----------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan
Stanley Dean Witter Financial Advisor or call (800) 869-NEWS. You may
terminate or suspend your plan at any time. Please remember that
withdrawals from the plan are sales of shares, not Fund
"distributions," and ultimately may exhaust your account balance. The
Fund may terminate or revise the plan at any time.
- ------------------------------------------------------------------------------------------
</TABLE>
PAYMENT FOR SOLD SHARES. After we receive your complete
instructions to sell as described above, a check will be
mailed to you within seven days, although we will attempt to
make payment within one business day. Payment may also be
sent to your brokerage account.
Payment may be postponed or the right to sell your shares
suspended under unusual circumstances. If you request to
sell shares that were recently purchased by check, payment
of the sale proceeds may be delayed for the minimum time
needed to verify that the check has been honored (not more
than fifteen days from the time we receive the check).
TAX CONSIDERATIONS. Normally, your sale of Fund shares is
subject to federal and state income tax. You should review
the "Tax Consequences" section of this PROSPECTUS and
consult your own tax professional about the tax consequences
of a sale.
INVOLUNTARY SALES. The Fund reserves the right, on sixty
days' notice, to sell the shares of any shareholder (other
than shares held in an IRA or 403(b) Custodial Account)
whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through
EASYINVEST -SM-, if after 12 months the shareholder has
invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner,
we will notify you and allow you sixty days to make an
additional investment in an amount that will increase the
value of your account to at least the required amount before
the sale is processed. No CDSC will be imposed on any
involuntary sale.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a
margin account, contact your Morgan Stanley Dean Witter
Financial Advisor or other authorized financial
representative regarding restrictions on the sale of such
shares.
12
<PAGE>
[Sidebar]
TARGETED DIVIDENDS-SM-
You may select to have your Fund distributions automatically invested in another
Morgan Stanley Dean Witter Fund that you own. Contact your Morgan Stanley Dean
Witter Financial Advisor for further information about this service.
[End Sidebar]
[ICON] DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund passes substantially all of its earnings from
income and capital gains along to its investors as
"distributions." The Fund earns interest from fixed-income
investments. These amounts are passed along to Fund
shareholders as "income dividend distributions." The Fund
realizes capital gains whenever it sells securities for a
higher price than it paid for them. These amounts may be
passed along as "capital gain distributions."
Normally, income dividends are declared on each day the New
York Stock Exchange is open for business, and are
distributed to shareholders monthly. The Fund, however, may
retain and reinvest any long-term capital gains. The Fund
may at times make payments from sources other than income or
capital gains that represent a return of a portion of your
investment.
Distributions are reinvested automatically in additional
shares of the 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,
the Fund will mail a check to you no later than seven
business days after the distribution is declared. No
interest will accrue on uncashed checks. If you wish to
change how your distributions are paid, your request should
be received by the Fund's transfer agent, Morgan Stanley
Dean Witter Trust FSB, at least five business days prior to
the record date of the distributions.
[ICON] TAX CONSEQUENCES
- --------------------------------------------------------------------------------
As with any investment, you should consider how your Fund
investment will be taxed. The tax information in this
PROSPECTUS is provided as general information. You should
consult your own tax professional about the tax consequences
of an investment in the Fund.
Unless your investment in the Fund is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need
to be aware of the possible tax consequences when:
- The Fund makes distributions; and
- You sell Fund shares, including an exchange to another
Morgan Stanley Dean Witter Fund.
TAXES ON DISTRIBUTIONS. Your distributions are normally
subject to federal and state income tax when they are paid,
whether you take them in cash or reinvest them in Fund
shares. A distribution also may be subject to local income
tax. Any income dividend distributions and any short-term
capital gain distributions are taxable to you as ordinary
income. Any long-term capital gain distributions are taxable
as long-term capital gains, no matter how long you have
owned shares in the Fund.
Every January, you will be sent a statement (IRS Form
1099-DIV) showing the taxable distributions paid to you in
the previous year. The statement provides full information
on your dividends and capital gains for tax purposes.
13
<PAGE>
TAXES ON SALES. Your sale of Fund shares normally is subject
to federal and state income tax and may result in a taxable
gain or loss to you. A sale also may be subject to local
income tax. Your exchange of Fund shares for shares of
another Morgan Stanley Dean Witter Fund is treated for tax
purposes like a sale of your original shares and a purchase
of your new shares. Thus, the exchange may, like a sale,
result in a taxable gain or loss to you and will give you a
new tax basis for your new shares.
When you open your Fund account, you should provide your
social security or tax identification number on your
investment application. By providing this information, you
will avoid being subject to a federal backup withholding tax
of 31% on taxable distributions and redemption proceeds. Any
withheld amount would be sent to the IRS as an advance tax
payment.
14
<PAGE>
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
throughout each year. The total returns in the table represent the rate
an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers, LLP,
independent accountants, whose report, along with the Fund's financial
statements, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED APRIL 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
FUND SHARES
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.49 $ 9.50 $ 9.54 $ 9.46 $ 9.62
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.56 0.65 0.61 0.63 0.77
Net realized and unrealized gain (loss) -- -- (0.06) 0.05 (0.33)
------- ------- -------- -------- -----------
Total income from investment operations 0.56 0.65 0.55 0.68 0.44
- ----------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.56) (0.66) (0.59) (0.45) (0.59)
Paid-in-capital -- -- -- (0.15) (0.01)
------- ------- -------- -------- -----------
Total dividends and distributions (0.56) (0.66) (0.59) (0.60) (0.60)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.49 $ 9.49 $ 9.50 $ 9.54 $ 9.46
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 6.00% 7.02% 5.88% 7.33% 4.76%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(1)
- ----------------------------------------------------------------------------------------------------------------------------
Expenses 0.31% -- 0.64% 0.37% --
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 5.68% 6.52% 6.25% 6.54% 7.64%
- ----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $186,442 $107,699 $ 42,252 $ 33,178 $ 29,818
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 58% 55% 67% 64% 74%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Calculated based on the net asset value as of the last business day of the
period.
(1) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the annualized expense and net investment income ratios
would have been 0.88% and 5.11%, respectively, for the year ended April 30,
1999; 1.10% and 5.42%, respectively, for the year ended April 30, 1998;
1.30% and 5.59%, respectively, for the year ended April 30, 1997; 1.29% and
5.61%, respectively, for the year ended April 30, 1996; and 1.08% and 6.56%,
respectively, for the year ended April 30, 1995.
15
<PAGE>
NOTES
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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!
- --------------------------------------------------------------------------------
GROWTH FUNDS
- --------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Equity Fund
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
Small Cap Growth Fund
Special Value Fund
Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas"
Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUNDS
- --------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Market Index Fund
Total Return Trust
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
- --------------------------------------------------------------------------------
INCOME FUNDS
- --------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust (FSC)
Limited Term Municipal Trust (NL)
Multi-State Municipal Series Trust (FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
- --------------------------------
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund (MM)
U.S. Government Money Market Trust (MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust (MM)
New York Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)
There may be Funds created after this PROSPECTUS was published. Please consult
the inside 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>
MORGAN STANLEY DEAN WITTER
SHORT-TERM BOND FUND
[Sidebar]
TICKER SYMBOL:
DWSBX
- -----
[End Sidebar]
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 (800)
SEC-0330. Reports and other information about the Fund are
available on the SEC's Internet site (www.sec.gov), and
copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section
of the SEC, Washington, DC 20549-6009.
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7117)
