<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1999
FILE NOS.: 33-50857
811-7117
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 6 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 7 /X/
-------------------
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
(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:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
----------------
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)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
_X_ on August 26, 1999 pursuant to paragraph (a) of rule 485.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
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- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS - AUGUST , 1999
Morgan Stanley Dean Witter
SHORT-TERM BOND FUND
[COVER PHOTO]
A MUTUAL FUND WHOSE INVESTMENT OBJECTIVE
IS TO PROVIDE INVESTORS WITH 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....................................... 2
Past Performance...................................... 4
Fees and Expenses..................................... 5
Additional Investment Strategy Information............ 6
Additional Risk Information........................... 6
Fund Management....................................... 8
Shareholder Information Pricing Fund Shares................................... 9
How to Buy Shares..................................... 9
How to Exchange Shares................................ 11
How to Sell Shares.................................... 13
Distributions......................................... 14
Tax Consequences...................................... 15
Financial Highlights ...................................................... 17
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
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter Short-Term Bond Fund is a mutual fund that
seeks to provide investors with 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, 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.
1
<PAGE>
ICON PRINCIPAL RISKS
- --------------------------------------------------------------------------------
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.
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
2
<PAGE>
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 rage 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.
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.
3
<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.
(END SIDEBAR)
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>
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). Year-to-date
total return as of March 31, 1999 was 0.84%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)
- -------------------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR (SINCE 1/10/94)
<S> <C> <C>
- -------------------------------------------------------------------------
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.
4
<PAGE>
(SIDEBAR)
ANNUAL FUND OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE FUND'S ASSETS AND ARE BASED ON EXPENSES
PAID FOR THE FISCAL YEAR ENDED APRIL 30, 1999.
(END SIDEBAR)
ICON 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 does not charge
account or exchange fees.
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
- -----------------------------------------------------------------------
Management fee 0.70%*
- -----------------------------------------------------------------------
Distribution and service (12b-1) fees None
- -----------------------------------------------------------------------
Other expenses 0.18%*
- -----------------------------------------------------------------------
Total annual Fund operating expenses 0.88%*
- -----------------------------------------------------------------------
</TABLE>
* For 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 .80% of the Fund's daily net assets, on an annualized basis, until
December 31, 1999. The actual management fee and other expenses for the
fiscal year ended April 30, 1999, taking the waiver of fees and assumption
of expenses into account, were 0.24% and 0.07%, respectively.
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> <C>
- --------------------------------------------------
$90 $281 $488 $1,084
- --------------------------------------------------
</TABLE>
5
<PAGE>
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.
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
6
<PAGE>
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.
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.
7
<PAGE>
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 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
(SIDEBAR) adversely affected.
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 $132.5 BILLION IN ASSETS UNDER MANAGEMENT
OR ADMINISTRATION AS OF APRIL 30, 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.
8
<PAGE>
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
(SIDEBAR) valued at their fair value.
CONTACTING A FINANCIAL ADVISOR
IF YOU ARE NEW TO THE MORGAN STANLEY DEAN WITTER FAMILY OF FUNDS AND WOULD LIKE
TO CONTACT A FINANCIAL ADVISOR, CALL (800) THE-DEAN FOR THE TELEPHONE NUMBER OF
THE MORGAN STANLEY DEAN WITTER OFFICE NEAREST YOU. YOU MAY ALSO ACCESS OUR
OFFICE LOCATOR ON OUR INTERNET SITE AT: WWW.DEANWITTER.COM/FUNDS
(END SIDEBAR)
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.
9
<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.
10
<PAGE>
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, Money Market Fund or
Short-Term U.S. Treasury Trust. Of course, if an exchange is not
permitted, you may sell shares of the Fund and buy another Fund's
shares with the proceeds.
See the inside back cover of this PROSPECTUS for each Morgan Stanley
Dean Witter Fund's designation as a Multi-Class Fund, FSC Fund,
No-Load Fund or Money Market Fund. If a Morgan Stanley Dean Witter
Fund is not listed, consult the inside back cover of that Fund's
PROSPECTUS for its designation. For purposes of exchanges, shares of
FSC Funds are treated as Class A shares of a Multi-Class Fund.
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.
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. Certain services normally available to shareholders of Money
Market Funds, including the check writing privilege, are not available
for Money Market Fund shares you acquire in an exchange.
11
<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 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.
12
<PAGE>
ICON HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell some or all of your Fund shares at any time. Your shares
will be sold at the 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
Financial Advisor Witter 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.
- --------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter
Withdrawal Plan Family of Funds has a total 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 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.
13
<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)
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.
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."
14
<PAGE>
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.
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
15
<PAGE>
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.
16
<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>
FUND SHARES
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED APRIL 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
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.
17
<PAGE>
NOTES
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18
<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
Special Value Fund
Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust
Small Cap Growth Fund
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas" Portfolio
European Growth Fund
Fund of Funds - International Portfolio
Global Dividend Growth Securities
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 Return Trust
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Utilities Fund
- --------------------------------------------------------------------------------
INCOME FUNDS
- ---------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
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)
N.Y. Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)
There may be Funds created after this PROSPECTUS was published. Please consult
the inside front cover of a new Fund's prospectus
for its designation, e.g., Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
Short-Term U.S. Treasury Trust, is a Multi-Class
Fund. A Multi-Class Fund is a mutual fund offering multiple Classes of shares.
The other types of funds are: NL - No-Load
(Mutual) Fund; MM - Money Market Fund; FSC - A mutual fund sold with a front-end
sales charge and a distribution (12b-1) fee.
<PAGE>
PROSPECTUS - AUGUST , 1999
Additional information about the Fund's investments is available in the Fund's
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. In the Fund's ANNUAL REPORT, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's Statement of Additional Information also provides additional information
about the Fund. The Statement of Additional Information is incorporated herein
by reference (legally is part of this PROSPECTUS). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
WWW.DEANWITTER.COM/FUNDS
Information about the Fund (including the STATEMENT OF ADDITIONAL INFORMATION)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov), and copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC, Washington,
DC 20549-6009.
Morgan Stanley Dean Witter
SHORT-TERM BOND FUND
[BACK COVER PHOTO]
A MUTUAL FUND WHOSE
INVESTMENT OBJECTIVE IS TO
PROVIDE INVESTORS WITH A
HIGH LEVEL OF CURRENT INCOME,
CONSISTENT WITH THE
PRESERVATION OF CAPITAL
TICKER SYMBOL:
DWSBX
- ---------------------
(THE FUND'S INVESTMENT COMPANY ACT
FILE NO. IS 811-7117)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MORGAN
AUGUST , 1999 STANLEY
DEAN WITTER
SHORT-TERM
BOND FUND
- --------------------------------------------------------------------------------
This STATEMENT OF ADDITIONAL INFORMATION is not a PROSPECTUS. The PROSPECTUS
dated August , 1999 for the Morgan Stanley Dean Witter Short-Term Bond Fund
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
Short-Term Bond Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
I. Fund History........................................................................ 4
II. Description of the Fund and Its Investments and Risks.............................. 4
A. Classification.................................................................... 4
B. Investment Strategies and Risks................................................... 4
C. Fund Policies/Investment Restrictions............................................. 14
III. Management of the Fund............................................................ 15
A. Board of Trustees................................................................. 15
B. Management Information............................................................ 15
C. Compensation...................................................................... 20
IV. Control Persons and Principal Holders of Securities................................ 22
V. Investment Management and Other Services............................................ 22
A. Investment Manager................................................................ 22
B. Principal Underwriter............................................................. 23
C. Services Provided by the Investment Manager and Fund Expenses Paid by Third
Parties............................................................................. 23
D. Dealer Reallowances............................................................... 24
E. Rule 12b-1 Plan................................................................... 24
F. Other Service Providers........................................................... 25
VI. Brokerage Allocation and Other Practices........................................... 25
A. Brokerage Transactions............................................................ 25
B. Commissions....................................................................... 25
C. Brokerage Selection............................................................... 26
D. Directed Brokerage................................................................ 27
E. Regular Broker-Dealers............................................................ 27
VII. Capital Stock and Other Securities................................................ 27
VIII. Purchase, Redemption and Pricing of Shares....................................... 28
A. Purchase/Redemption of Shares..................................................... 28
B. Offering Price.................................................................... 28
IX. Taxation of the Fund and Shareholders.............................................. 29
X. Underwriters........................................................................ 31
XI. Calculation of Performance Data.................................................... 31
XII. Financial Statements.............................................................. 32
</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.
"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 Short-Term Bond Fund, a registered open-end
investment company.
"INVESTMENT MANAGER"--Morgan Stanley Dean Witter Advisors Inc., a wholly-owned
investment advisor subsidiary of MSDW.
"INDEPENDENT TRUSTEES"--Trustees who are not "interested persons" (as defined by
the Investment Company Act) of the Fund.
"MORGAN STANLEY & CO."--Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"MORGAN STANLEY DEAN WITTER FUNDS"--Registered investment companies (i) for
which the Investment Manager serves as the investment advisor; and (ii) that
hold themselves out to investors as related companies for investment and
investor services.
"MSDW"--Morgan Stanley Dean Witter & Co., a preeminent global financial services
firm.
"MSDW SERVICES COMPANY"--Morgan Stanley Dean Witter Services Company Inc., a
wholly-owned fund services subsidiary of the Investment Manager.
"TRANSFER AGENT"--Morgan Stanley Dean Witter Trust FSB, a wholly-owned transfer
agent subsidiary of MSDW.
"TRUSTEES"--The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
- --------------------------------------------------------------------------------
The Fund was organized under the laws of the Commonwealth of Massachusetts
on October 22, 1993 as a Massachusetts business trust under the name Dean Witter
Short-Term Bond Fund. Effective June 22, 1998, the Fund's name was changed to
Morgan Stanley Dean Witter Short-Term Bond Fund.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end, diversified management investment company whose
investment objective is to provide investors with a high level of current
income, consistent with the preservation of capital.
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."
COLLATERALIZED MORTGAGE OBLIGATIONS. The Fund may invest in CMOs
- --collateralized mortgage obligations. CMOs are debt obligations collateralized
by mortgage loans or mortgage pass-through securities (collectively "Mortgage
Assets"). Payments of principal and interest on the Mortgage Assets and any
reinvestment income are used to make payments on the CMOs. CMOs are issued in
multiple classes. Each class has a specific fixed or floating coupon rate and a
stated maturity or final distribution date. The principal and interest on the
Mortgage Assets may be allocated among the classes in a number of different
ways. Certain classes will, as a result of the collection, have more predictable
cash flows than others. As a general matter, the more predictable the cash flow,
the lower the yield relative to other Mortgage Assets. The less predictable the
cash flow, the higher the yield and the greater the risk. The Fund may invest in
any class of CMO.
Certain mortgage-backed securities in which the Fund may invest (e.g.,
certain classes of CMOs) may increase or decrease in value substantially with
changes in interest rates and/or the rate of prepayment. In addition, if the
collateral securing CMOs or any third party guarantees are insufficient to make
payments, the Fund could sustain a loss.
STRIPPED MORTGAGE-BACKED SECURITIES. In addition, the Fund may invest up to
15% of its net assets in stripped mortgage-backed securities, which are usually
structured in two classes. One class entitles the holder to receive all or most
of the interest but little or none of the principal of a pool of Mortgage Assets
(the interest-only or "IO" Class), while the other class entitles the holder to
receive all or most of the principal but little or none of the interest (the
principal-only or "PO" Class). IOs tend to decrease in value substantially if
interest rates decline and prepayment rates become more rapid. POs tend to
decrease in value substantially if interest rates increase and the rate of
prepayment decreases.
INVERSE FLOATERS. The Fund may invest up to 10% of its assets in inverse
floaters. An inverse floater has a coupon rate that moves in the direction
opposite to that of a designated interest rate index. Like most other fixed
income securities, the value of inverse floaters will decrease as interest rates
increase. They are more volatile, however, than most other fixed income
securities because the coupon rate on an inverse floater typically changes at a
multiple of the change in the relevant index rate. Thus, any rise in the index
rate (as a consequence of an increase in interest rates) causes a
correspondingly greater drop in the coupon rate of an inverse floater while a
drop in the index rate causes a correspondingly greater increase in the coupon
of an inverse floater. Some inverse floaters may also increase or decrease
substantially because of changes in the rate of prepayments.
CONVERTIBLE SECURITIES. The Fund may invest in fixed-income securities
which are convertible into common stock. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail less
risk than the corporation's common stock. The value of a convertible security
4
<PAGE>
is a function of its "investment value" (its value as if it did not have a
conversion privilege), and its "conversion value" (the security's worth if it
were to be exchanged for the underlying security, at market value, pursuant to
its conversion privilege).
To the extent that a convertible security's investment value is greater than
its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, will sell at some premium over its conversion value.
(This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security. Convertible securities may be purchased by the Fund
at varying price levels above their investment values and/or their conversion
values in keeping with the Fund's objective.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") as a hedge
against fluctuations in future foreign exchange rates. The Fund may conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large, commercial and investment banks) and their
customers. Forward contracts only will be entered into with United States banks
and their foreign branches, insurance companies and other dealers whose assets
total $1 billion or more, or foreign banks whose assets total $1 billion or
more. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
The Investment Manager also may from time to time utilize forward contracts
to hedge a foreign security held in the portfolio or a security which pays out
principal tied to an exchange rate between the U.S. dollar and a foreign
currency, against a decline in value of the applicable foreign currency. They
also may be used to lock in the current exchange rate of the currency in which
those securities anticipated to be purchased are denominated. At times, the Fund
may enter into "cross-currency" hedging transactions involving currencies other
than those in which securities are held or proposed to be purchased are
denominated.
The Fund will not enter into forward currency contracts or maintain a net
exposure to these contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's portfolio securities.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will, however, do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the spread
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
The Fund may be limited in its ability to enter into hedging transactions
involving forward contracts by the Internal Revenue Code requirements relating
to qualification as a regulated investment company.
Forward currency contracts may limit gains on portfolio securities that
could otherwise be realized had they not been utilized and could result in
losses. The contracts also may increase the Fund's volatility and may involve a
significant amount of risk relative to the investment of cash.
5
<PAGE>
OPTION AND FUTURES TRANSACTIONS. The Fund may engage in transactions in
listed and OTC options on eligible portfolio securities and stock indexes.
Listed options are issued or guaranteed by the exchange on which they are traded
or by a clearing corporation such as the Options Clearing Corporation ("OCC").
Ownership of a listed call option gives the Fund the right to buy from the OCC
(in the U.S.) or other clearing corporation or exchange, the underlying security
or currency covered by the option at the stated exercise price (the price per
unit of the underlying security) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then have
the obligation to sell to the OCC (in the U.S.) or other clearing corporation or
exchange, the underlying security or currency at that exercise price prior to
the expiration date of the option, regardless of its then current market price.
Ownership of a listed put option would give the Fund the right to sell the
underlying security or currency to the OCC (in the U.S.) or other clearing
corporation or exchange, at the stated exercise price. Upon notice of exercise
of the put option, the writer of the put would have the obligation to purchase
the underlying security or currency from the OCC (in the U.S.) or other clearing
corporation or exchange, at the exercise price.
COVERED CALL WRITING. The Fund is permitted to write covered call options
on portfolio securities and on the U.S. dollar and foreign currencies in which
they are denominated, without limit.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium;" i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (or currencies) alone.
Moreover, the premium received will offset a portion of the potential loss
incurred by the Fund if the securities (or currencies) underlying the option
decline in value.
The Fund may be required, at any time during the option period, to deliver
the underlying security (or currency) against payment of the exercise price on
any calls it has written. This obligation is terminated upon the expiration of
the option period or at such earlier time when the writer effects a closing
purchase transaction. A closing purchase transaction 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.
A call option is "covered" if the Fund owns the underlying security subject
to the option or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional consideration (in cash,
Treasury bills or other liquid portfolio securities) held in a segregated
account on the Fund's books) 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 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 on the Fund's books.
Options written by the Fund normally have expiration dates of from up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
COVERED PUT WRITING. A writer of a covered put option incurs an obligation
to buy the security underlying the option from the purchaser of the put, at the
option's exercise price at any time during the option period, at the purchaser's
election. Through the writing of a put option, the Fund would receive income
from the premium paid by purchasers. The potential gain on a covered put option
is limited to the premium received on the option (less the commissions paid on
the transaction). During the option period, the Fund may be required, at any
time, to make payment of the exercise price against delivery of the underlying
security (or currency). 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 on the Fund's books, or holds a put on
the same security 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. The operation of
and limitations on covered put options in other respects are substantially
identical to those of call options.
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PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equaling up to 5% of its total assets. The purchase
of a call option would enable the Fund, in return for the premium paid to lock
in a purchase price for a security or currency during the term of the option.
The purchase of a put option would enable the Fund, in return for a premium
paid, to lock in a price at which it may sell a security or currency during the
term of the option.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts.
OTC OPTIONS. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Fund.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Fund and the transacting dealer, without the
intermediation of a third party such as the OCC. The Fund will engage in OTC
option transactions only with member banks of the Federal Reserve Bank System or
primary dealers in U.S. Government securities or with affiliates of such banks
or dealers.
RISKS OF OPTIONS TRANSACTIONS. The successful use of options depends on the
ability of the Investment Manager to forecast correctly interest rates, currency
exchange rates and/or market movements. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, the Fund may receive a lower total return
from the portion of its portfolio upon which calls have been written than it
would have had such calls not been written. During the option period, the
covered call writer has, in return for the premium on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security (or the value of its denominated currency)
increase, but has retained the risk of loss should the price of the underlying
security (or the value of its denominated currency) decline. The covered put
writer also retains the risk of loss should the market value of the underlying
security decline below the exercise price of the option less the premium
received on the sale of the option. In both cases, the writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. Prior to exercise or expiration, an option position can only be
terminated by entering into a closing purchase or sale transaction. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. In the case of OTC
options, if the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, due to insolvency or otherwise, the Fund would lose the premium
paid for the option as well as any anticipated benefit of the transaction.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security which may be
written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
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The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. There can be no assurance that a
liquid secondary market will exist for a particular option at any specific time.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
FUTURES CONTRACTS. The Fund may purchase and sell interest rate and index
futures contracts that are traded on U.S. and foreign commodity exchanges on
such underlying securities as U.S. Treasury bonds, notes, bills and GNMA
Certificates and/or any foreign government fixed-income security and on such
indexes of U.S. and foreign securities as may exist or come into existence.
A futures contract purchaser incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified time
in the future for a specified price. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price. The purchase of a futures
contract enables the Fund, during the term of the contract, to lock in a price
at which it may purchase a security and protect against a rise in prices pending
purchase of portfolio securities. The sale of a futures contract enables the
Fund to lock in a price at which it may sell a security and protect against
declines in the value of portfolio securities.
Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Index futures contracts provide for
the delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the open or close of the last trading day
of the contract and the futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security and the same delivery date. If the sale
price exceeds the offsetting purchase price, the seller would be paid the
difference and would realize a gain. If the offsetting purchase price exceeds
the sale price, the seller would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same aggregate amount of the specific type of security and
the same delivery date. If the offsetting sale price exceeds the purchase price,
the purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss. There is no assurance
that the Fund will be able to enter into a closing transaction.
MARGIN. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities or
other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges on
which futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required by
the exchanges.
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Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits of cash or U.S. Government
securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect to
such options to terminate an existing position. An option on a futures contract
gives the purchaser the right (in return for the premium paid), and the writer
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option is accompanied by delivery of the accumulated balance in
the writer's futures margin account, which represents the amount by which the
market price of the futures contract at the time of exercise exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's net
assets which may be subject to a hedge position.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The prices
of securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Fund's portfolio securities. Also, prices of futures contracts may not
move in tandem with the changes in prevailing interest rates, market movements
and/or currency exchange rates against which the Fund seeks a hedge. A
correlation may also be distorted (a) temporarily, by short-term traders'
seeking to profit from the difference between a contract or security price
objective and their cost of borrowed funds; (b) by investors in futures
contracts electing to close out their contracts through offsetting transactions
rather than meet margin deposit requirements; (c) by investors in futures
contracts opting to make or take delivery of underlying securities rather than
engage in closing transactions, thereby reducing liquidity of the futures
market; and (d) temporarily, by speculators who view the deposit requirements in
the futures markets as less onerous than margin requirements in the cash market.
Due to the possibility of price distortion in the futures market and because of
the possible imperfect correlation between movements in the prices of securities
and movements in the prices of futures contracts, a correct forecast of interest
rate and/or market movement trends by the Investment Manager may still not
result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Fund may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position and, in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel or prevent the Fund from closing out a contract which may
result in reduced gain or increased loss to the Fund. The absence of a liquid
market in futures contracts might cause the Fund to make or take delivery of the
underlying securities at a time when it may be disadvantageous to do so.
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Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In these situations, if the Fund has insufficient cash, it may have
to sell portfolio securities to meet daily variation margin requirements at a
time when it may be disadvantageous to do so. In addition, the Fund may be
required to take or make delivery of the instruments underlying interest rate
futures contracts it holds at a time when it is disadvantageous to do so. The
inability to close out options and futures positions could also have an adverse
impact on the Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of the Fund's transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
MONEY MARKET SECURITIES. In addition to the short term fixed-income
securities in which the Fund may otherwise invest, the Fund may invest in
various money market securities for cash management purposes or when assuming a
temporary defensive position, which among others may include commercial paper,
bank acceptances, bank obligations, corporate debt securities, certificates of
deposit, U.S. Government securities, obligations of savings institutions and
repurchase agreements. Such securities are limited to:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States Government or its agencies (such as
the Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;
EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposits of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the FDIC), limited to $100,000 principal amount per certificate and to 10% or
less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;
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COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grades by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, issued by a company having
an outstanding debt issue rated at least AA by S&P or Aa by Moody's; and
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 assets held by the Fund, amounts to
more than 15% of its net assets.
INVESTMENT COMPANIES. Any Fund investment in an investment company is
subject to the underlying risk of that investment company's portfolio
securities. For example, if the investment company held common stocks, the Fund
also would be exposed to the risk of investing in common stocks. In addition,
the Fund would bear its share of the investment company's fees and expenses.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. The Fund may use reverse
repurchase agreements and dollar rolls as part of its investment strategy.
Reverse repurchase agreements and dollar rolls are speculative techniques
involving leverage and are considered borrowings by the Fund.
Reverse repurchase agreements involve sales by the Fund of assets
concurrently with an agreement by the Fund to repurchase the same assets at a
later date at a fixed price. Reverse repurchase agreements involve the risk that
the market value of the securities the Fund is obligated to purchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, the Fund's use of the proceeds of the agreement may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.
Dollar rolls involve the Fund selling securities for delivery in the current
month and simultaneously contracting to repurchase substantially similar (same
type and coupon) securities on a specified future date. During the roll period,
the Fund will forgo principal and interest paid on the securities. The Fund is
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compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sale.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions, provided that the loans are
callable at any time by the Fund, and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least 100% of the market value, determined
daily, of the loaned securities. The advantage of these loans is that the Fund
continues to receive the income on the loaned securities while at the same time
earning interest on the cash amounts deposited as collateral, which will be
invested in short-term obligations. The Fund will not lend more than 10% of the
value of its total assets.
As with any extensions of credit, there are risks of delay in recovery and,
in some cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Fund's management to be creditworthy and
when the income which can be earned from such loans justifies the attendant
risks. Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of the rights
if the matters involved would have a material effect on the Fund's investment in
the loaned securities. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time the Fund may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment basis.
When 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 or forward commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the settlement
date, if it is deemed advisable. The securities so purchased or sold are subject
to market fluctuation and no interest 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 or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of 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, delayed delivery or forward commitment 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.
With respect to 75% of the Fund's total assets, 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,
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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 net 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.
PRIVATE PLACEMENTS. The Fund may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for resale
pursuant to Rule 144A under the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of these
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering the securities for resale and the risk of
substantial delays in effecting the registration.
Rule 144A permits the Fund to sell restricted securities to qualified
institutional buyers without limitation. The Investment Manager, pursuant to
procedures adopted by the Trustees, will make a determination as to the
liquidity of each restricted security purchased by the Fund. If a restricted
security is determined to be "liquid," the security will not be included within
the category "illiquid securities," which may not exceed 15% of the Fund's net
assets. However, investing in Rule 144A securities could have the effect of
increasing the level of Fund illiquidity to the extent the Fund, at a particular
point in time, may be unable to find qualified institutional buyers interested
in purchasing such securities.
WARRANTS AND SUBSCRIPTION RIGHTS. The Fund may acquire warrants and
subscription rights attached to other securities. A warrant is, in effect, an
option to purchase equity securities at a specific price, generally valid for a
specific period of time, and has no voting rights, pays no dividends and has no
rights with respect to the corporation issuing it.
A subscription right is a privilege granted to existing shareholders of a
corporation to subscribe to shares of a new issue of common stock before it is
offered to the public. A subscription right normally has a life of two to four
weeks and a subscription price lower than the current market value of the common
stock. A subscription right is freely transferable.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000 and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
13
<PAGE>
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objectives, 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.
The Fund will:
1. Seek to provide a high level of current income, consistent with the
preservation of capital.
The Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any one issuer (other than obligations
issued, or guaranteed by, the United States government, its agencies or
instrumentalities).
2. As to 75% of its total assets, purchase more than 10% of all
outstanding voting securities or any class of securities of any one issuer.
3. 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 or its
agencies or instrumentalities.
4. Invest more than 5% of the value of its total assets in securities
of issuers having a record together with predecessors, of less then three
years of continuous operation. This restriction shall not apply to
mortgage-backed securities or asset-backed securities or to any obligation
of the United States government, its agencies or instrumentalities.
5. Purchase or sell real estate or interest therein, although the Fund
may purchase securities of issuers which engage in real estate operations
and securities secured by real estate or interests therein.
6. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
7. With the exception of reverse repurchase agreements and dollar
rolls, 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 its total assets (not including the
amount borrowed).
8. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. For the purpose of this restriction, collateral
arrangements with respect to the writing of options and collateral
arrangements with respect to initial or variation margin for futures are not
deemed to be pledges of assets.
9. Issue senior securities as defined in the Investment Company Act,
except insofar as the Fund may be deemed to have issued a senior security by
reason of (a) entering into any repurchase or reverse repurchase agreement
or dollar roll; (b) purchasing any securities on a when-issued or delayed
delivery basis; (c) purchasing or selling futures contracts, forward foreign
exchange contracts or options; (d) borrowing money; or (e) lending portfolio
securities.
14
<PAGE>
10. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations in which the Fund may invest
consistent with its investment objectives and policies; (b) by investment in
repurchase agreements; or (c) by lending portfolio securities.
11. Make short sales of securities.
12. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
13. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act in disposing of a
portfolio security.
14. Invest for purposes of exercising control or management of any
other issuer.
15. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the provisions of Section 12(d) of the
Investment Company Act and any Rules promulgated thereunder.
16. Purchase or sell commodities or commodities contracts except that
the Fund may purchase or sell futures contracts or options on futures.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided to
the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as a
duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's own
interest or the interest of another person or organization. A Trustee satisfies
his or her duty of care by acting in good faith with the care of an ordinarily
prudent person and in a manner the Trustee reasonably believes to be in the best
interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any of
its affiliated persons and do not own any stock or other securities issued by
the Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other two Trustees (the "MANAGEMENT TRUSTEES") are
affiliated with the Investment Manager. All of the Trustees also serve as
Trustees of "DISCOVER BROKERAGE INDEX SERIES," a mutual fund for which the
Investment Manager is the investment advisor.
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 90 Morgan Stanley Dean
15
<PAGE>
Witter Funds and Discover Brokerage Index Series, are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Michael Bozic (58) ................................... Vice Chairman of Kmart Corporation (since December, 1998);
Trustee Director or Trustee of the Morgan Stanley Dean Witter
c/o Kmart Corporation Funds and Discover Brokerage Index Series; formerly
3100 West Big Beaver Road Chairman and Chief Executive Officer of Levitz Furniture
Troy, Michigan Corporation (November, 1995-November, 1998) and President
and Chief Executive Officer of Hills Department Stores
(May, 1991-July, 1995); formerly variously Chairman, Chief
Executive Officer, President and Chief Operating Officer
(1987-1991) of the Sears Merchandise Group of Sears,
Roebuck and Co.; Director of Eaglemark Financial Services,
Inc. and Weirton Steel Corporation.
Charles A. Fiumefreddo* (66) ......................... Chairman, Director or Trustee and Chief Executive Officer
Chairman of the Board, of the Morgan Stanley Dean Witter Funds and Discover
Chief Executive Officer and Trustee Brokerage Index Series; formerly Chairman, Chief Executive
Two World Trade Center Officer and Director of the Investment Manager, the
New York, New York Distributor and MSDW Services Company; Executive Vice
President and Director of Dean Witter Reynolds; Chairman
and Director of the Transfer Agent; formerly Director
and/or officer of various MSDW subsidiaries (until June,
1998).
Edwin J. Garn (67) ................................... Director or Trustee of the Morgan Stanley Dean Witter
Trustee Funds and Discover Brokerage Index Series; formerly United
c/o Huntsman Corporation States Senator (R-Utah) (1974-1992) and Chairman, Senate
500 Huntsman Way Banking Committee (1980-1986); formerly Mayor of Salt Lake
Salt Lake City, Utah City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Discovery (April 12-19, 1985); Vice Chairman, Huntsman
Corporation (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 board of various civic and charitable
organizations.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Wayne E. Hedien (65) ................................. Retired; Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds and Discover Brokerage Index Series; Director
c/o Gordon Altman Butowsky of The PMI Group, Inc. (private mortgage insurance);
Weitzen Shalov & Wein Trustee and Vice Chairman of The Field Museum of Natural
Counsel to the Independent Trustees History; formerly associated with the Allstate Companies
114 West 47th Street (1966-1994), most recently as Chairman of The Allstate
New York, New York Corporation (March, 1993-December, 1994) and Chairman and
Chief Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July, 1989-December, 1994);
director of various other business and charitable
organizations.
Dr. Manuel H. Johnson (50) ........................... Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Co-Chairman and a founder of the Group of
c/o Johnson Smick International, Inc. Seven Council (G7C), an international economic commission;
1133 Connecticut Avenue, N.W. Chairman of the Audit Committee and Director or Trustee of
Washington, D.C. the Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series; Director of Greenwich Capital
Markets, Inc. (broker-dealer) and NVR, Inc. (home
construction); Chairman and Trustee of the Financial
Accounting Foundation (oversight organization of the
Financial Accounting Standards Board); formerly Vice
Chairman of the Board of Governors of the Federal Reserve
System (1986-1990) and Assistant Secretary of the U.S.
Treasury.
Michael E. Nugent (63) ............................... General Partner, Triumph Capital, L.P., a private invest-
Trustee ment partnership; Chairman of the Insurance Committee and
c/o Triumph Capital, L.P. Director or Trustee of the Morgan Stanley Dean Witter
237 Park Avenue Funds and Discover Brokerage Index Series; formerly Vice
New York, New York President, Bankers Trust Company and BT Capital
Corporation (1984-1988); director of various business
organizations.
Philip J. Purcell* (56) .............................. Chairman of the Board of Directors and Chief Executive
Trustee Officer of MSDW, Dean Witter Reynolds and Novus Credit
1585 Broadway Services Inc.; Director of the Distributor; Director or
New York, New York Trustee of the Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series; Director and/or officer
of various MSDW subsidiaries.
John L. Schroeder (69) ............................... Retired; Chairman of the Derivatives Committee and
Trustee Director or Trustee of the Morgan Stanley Dean Witter
c/o Gordon Altman Butowsky Funds and Discover Brokerage Index Series; Director of
Weitzen Shalov & Wein Citizens Utilities Company (telecommunications, gas,
Counsel to the Independent Trustees electric and water utilities company); formerly Executive
114 West 47th Street Vice President and Chief Investment Officer of the Home
New York, New York Insurance Company (August, 1991-September, 1995).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Mitchell M. Merin (46) ............................... President and Chief Operating Officer of Asset Management
President of MSDW (since December, 1998); President and Director
Two World Trade Center (since April, 1997) and Chief Executive Officer (since
New York, New York June, 1998) of the Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and Director of
the Distributor (since June, 1998); Chairman and Chief
Executive Officer (since June, 1998) and Director (since
January, 1998) of the Transfer Agent; Director of various
MSDW subsidiaries; President of the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series (since
May, 1999); previously Chief Strategic Officer of the
Investment Manager and MSDW Services Company and Executive
Vice President of the Distributor (April, 1997 - June,
1998), Vice President of the Morgan Stanley Dean Witter
Funds and Discover Brokerage Index Series (May, 1997 -
April, 1999), and Executive Vice President of Dean Witter,
Discover & Co.
Barry Fink (44) ...................................... Senior Vice President (since March, 1997) and Secretary
Vice President, and General Counsel (since February, 1997) and Director
Secretary and General Counsel (since July, 1998) of the Investment Manager and MSDW
Two World Trade Center Services Company; Senior Vice President (since March,
New York, New York 1997) and Assistant Secretary and Assistant General
Counsel (since February, 1997) of the Distributor;
Assistant Secretary of Dean Witter Reynolds (since August,
1996); Vice President, Secretary and General Counsel of
the Morgan Stanley Dean Witter Funds (since February,
1997); Vice President, Secretary and General Counsel of
Discover Brokerage Index Series; previously First Vice
President (June, 1993-February, 1997), Vice President and
Assistant Secretary and Assistant General Counsel of the
Investment Manager and MSDW Services Company and Assistant
Secretary of the Morgan Stanley Dean Witter Funds.
Peter M. Avelar (41) ................................. Senior Vice President of the Investment Manager; Vice
Vice President President of various Morgan Stanley Dean Witter Funds;
Two World Trade Center previously Vice President of the Investment Manager.
New York, New York
Rajesh K. Gupta (39) ................................. Senior Vice President of the Investment Manager; Vice
Vice President President of various Morgan Stanley Dean Witter Funds.
Two World Trade Center
New York, New York
Rochelle G. Siegel (51) .............................. Senior Vice President of the Investment Manager; Vice
Vice President President of various Morgan Stanley Dean Witter Funds.
Two World Trade Center
New York, New York
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Thomas F. Caloia (53) ................................ First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW Services
Two World Trade Center Company; Treasurer of the Morgan Stanley Dean Witter Funds
New York, New York and Discover Brokerage Index Series.
</TABLE>
- ------------------------
* Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
In addition, RONALD E. ROBISON, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company and President of MSDW Trust Company, ROBERT S. GIAMBRONE, Senior Vice
President of the Investment Manager, MSDW Services Company, the Distributor and
the Transfer Agent and Director of the Transfer Agent, JOSEPH J. MCALINDEN,
Executive Vice President and Chief Investment Officer of the Investment Manager
and Director of the Transfer Agent, and JONATHAN PAGE, JAMES F. WILLISON and
KEVIN HURLEY, Senior Vice Presidents of the Investment Manager, are Vice
Presidents of the Fund.
In addition, FRANK BRUTTOMESSO, MARILYN K. CRANNEY, 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 TODD LEBO,
Vice President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Fund.
INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The Morgan
Stanley Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; these are people whose advice and counsel are in demand by others and
for whom there is often competition. To accept a position on the Funds' Boards,
such individuals may reject other attractive assignments because the Funds make
substantial demands on their time. All of the Independent Trustees serve as
members of the Audit Committee. Three of them also serve as members of the
Derivatives Committee. In addition, three of the Trustees, including two
Independent Trustees, serve as members of the Insurance Committee.
The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill any
Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1 plan
of distribution. Most of the Morgan Stanley Dean Witter Funds have a Rule 12b-1
plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
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.
19
<PAGE>
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL MORGAN
STANLEY DEAN WITTER FUNDS. The Independent Trustees and the Funds' management
believe that having the same Independent Trustees for each of the Morgan Stanley
Dean Witter Funds avoids the duplication of effort that would arise from having
different groups of individuals serving as Independent Trustees for each of the
Funds or even of sub-groups of Funds. They believe that having the same
individuals serve as Independent Trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent Trustees
serve on all Fund Boards enhances the ability of each Fund to obtain, at modest
cost to each separate Fund, the services of Independent Trustees, of the
caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Morgan Stanley Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties. It
also provides that all third persons shall look solely to the Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Trustees are paid a single
meeting fee by the Fund. The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by the
Investment Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund for their services as Trustee.
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended April 30, 1999.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,400
Edwin J. Garn................................................. 1,600
Wayne E. Hedien............................................... 1,600
Dr. Manuel H. Johnson......................................... 1,600
Michael E. Nugent............................................. 1,600
John L. Schroeder............................................. 1,600
</TABLE>
20
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 90 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1998. No compensation was paid to the Fund's Independent Trustees by
Discover Brokerage Index Series for the calendar year ended December 31, 1998.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES
TO
90 MORGAN
NAME OF STANLEY DEAN
INDEPENDENT TRUSTEE WITTER FUNDS
- --------------------------- -------------
<S> <C>
Michael Bozic.............. $120,150
Edwin J. Garn.............. 132,450
Wayne E. Hedien............ 132,350
Dr. Manuel H. Johnson...... 155,681
Michael E. Nugent.......... 159,731
John L. Schroeder.......... 160,731
</TABLE>
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, 55 of the Morgan
Stanley Dean Witter Funds, not including the Fund, have adopted a retirement
program under which an Independent Trustee who retires after serving for at
least five years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Morgan Stanley Dean Witter Fund that has
adopted the retirement program (each such Fund referred to as an "Adopting Fund"
and each such Trustee referred to as an "Eligible Trustee") is entitled to
retirement payments upon reaching the eligible retirement age (normally, after
attaining age 72). Annual payments are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years up
to a maximum of 60.44% after ten years of service. The foregoing percentages may
be changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are accrued as expenses on the books of
the Adopting Funds. Such benefits are not secured or funded by the Adopting
Funds.
- ------------------------
(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.
21
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) for the fiscal year ended December 31, 1998, and the
estimated retirement benefits for the Independent Trustees, to commence upon
their retirement, from the 55 Morgan Stanley Dean Witter Funds as of December
31, 1998.
RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
RETIREMENT ANNUAL
BENEFITS BENEFITS
ESTIMATED ACCRUED AS UPON
CREDITED YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- --------------------------------------- --------------- --------------- ------------ --------
<S> <C> <C> <C> <C>
Michael Bozic.......................... 10 60.44% 22,377 52,250
Edwin J. Garn.......................... 10 60.44 32,225 52,250
Wayne E. Hedien........................ 9 51.37 41,979 44,413
Dr. Manuel H. Johnson.................. 10 60.44 14,047 52,250
Michael E. Nugent...................... 10 60.44 25,336 52,250
John L. Schroeder...................... 8 50.37 45,117 44,343
</TABLE>
- ------------------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) on
page 21 of this Statement of Additional Information.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
The following persons owned 5% or more of the Fund on , 1999:
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1% of the Fund's shares of beneficial
interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------
A. INVESTMENT MANAGER
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New York,
New York 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the Investment Manager to
provide administrative services and manage the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Fund pays the Investment Manager monthly compensation calculated
daily by applying the annual rate of 0.70% to the net assets of the Fund
determined as of the close of each business day. However, the Investment Manager
had undertaken from January 1, 1996 through December 31, 1996 to assume all
operating expenses (except for any brokerage fees) and to waive its compensation
to the extent such expenses and compensation exceed 1.0% of the Fund's daily net
assets on an annualized basis. The Investment Manager also had undertaken from
January 1, 1997 through December 31, 1998 to assume all operating expenses
(except for any brokerage fees) and to waive its compensation without
limitation. The Investment Manager also has undertaken from January 1, 1999
through December 31, 1999 to assume all operating expenses (except for any
brokerage fees) and to waive its compensation to the extent such expenses and
compensation exceed 0.80% of the Fund's daily net assets on an annualized basis.
Taking these waivers and assumptions of expenses into account, for the fiscal
years ended April 30, 1997, 1998 and 1999, the fees payable under the Management
Agreement amounted to $23,753, $0 and $416,586.
22
<PAGE>
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.
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 Distributor also pays certain expenses in connection with the distribution
of the Fund's shares, including the costs of preparing, printing and
distributing advertising or promotional materials, and the costs of printing and
distributing prospectuses and supplements thereto used in connection with the
offering and sale of the Fund's shares. The Fund bears the costs of initial
typesetting, printing and distribution of prospectuses and supplements thereto
to shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws and pays filing fees in
accordance with state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER AND FUND EXPENSES PAID BY THIRD
PARTIES
The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.
Under the terms of the Management Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's books
and records and furnishes, at its own expense, the office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund may
reasonably require in the conduct of its business, including the preparation of
prospectuses, proxy statements and reports required to be filed with federal and
state securities commissions (except insofar as the participation or assistance
of independent accountants and attorneys is, in the opinion of the Investment
Manager, necessary or desirable). In addition, the Investment Manager pays the
salaries of all personnel, including officers of the Fund, who are employees of
the Investment Manager. The Investment Manager also bears the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. Such
expenses include, but are not limited to: expenses of the Plan of Distribution
pursuant to Rule 12b-1; charges and expenses of any registrar, custodian, stock
transfer and dividend disbursing agent; brokerage commissions; taxes; engraving
and printing share certificates; registration costs of the Fund and its shares
under federal and state securities laws; the cost and expense of printing,
including typesetting, and distributing prospectuses of the Fund and supplements
thereto to the Fund's shareholders; all expenses of shareholders' and Trustees'
meetings and of preparing, printing and mailing of proxy statements and reports
to shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any outside
service used for
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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.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees.
D. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is defined
in the Securities Act.
E. RULE 12b-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act (the "Plan") pursuant to which the Distributor or any of
its affiliates, including the Investment Manager, is authorized to utilize their
own resources to finance certain activities in connection with the distribution
of the Fund's shares.
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
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maintenance 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.
F. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans. The principal business address of the Transfer Agent is Harborside
Financial Center, Plaza Two, Jersey City, New Jersey 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036 serves as the independent accountants of the Fund. The independent
accountants are responsible for auditing the annual financial statements of the
Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these services,
the Transfer Agent receives a per shareholder account fee from the Fund and is
reimbursed for its out-of-pocket expenses in connection with such services.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
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A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
is responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the negotiation
of brokerage commissions, if any. The Fund expects that the primary market for
the securities in which it intends to invest will generally be the
over-the-counter market. Securities are generally traded in the over-the-counter
market on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually includes
a profit to the dealer. The Fund also expects that securities will be purchased
at times in underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or discount.
Options and futures transactions will usually be effected through a broker and a
commission will be charged. On occasion, the Fund may also purchase certain
money market instruments directly from an issuer, in which case no commissions
or discounts are paid.
For the fiscal years ended April 30, 1997, 1998 and 1999, the Fund paid no
brokerage commissions.
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
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U.S. Government and government agency securities, bank money instruments (i.e.,
certificates of deposit and bankers' acceptances) and commercial 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 April 30, 1997, 1998 and 1999, 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 April 30, 1997, 1998 and 1999, the Fund paid
no brokerage commissions to Dean Witter Reynolds. During the period June 1, 1997
through April 30, 1998, and during the fiscal year ended April 30, 1999, the
Fund paid no brokerage commissions to Morgan Stanley & Co., which broker-dealer
became an affiliate of the Investment Manager on May 31, 1997 upon consummation
of the merger of Dean Witter, Discover & Co. with Morgan Stanley Group Inc.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions.
In seeking to implement the Fund's policies, the Investment Manager effects
transactions with those brokers and dealers who the Investment Manager believes
provide the most favorable prices and are capable of providing efficient
executions. If the Investment Manager believes the prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager. The services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities. The information
and services received by the Investment Manager from brokers and dealers may be
of benefit to the Investment Manager in the management of accounts of some of
its other clients and may not in all cases benefit the Fund directly.
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
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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 April 30, 1999, the Fund did not pay any
brokerage commissions in connection with transactions because of research
services provided.
E. REGULAR BROKER-DEALERS
During the fiscal year ended April 30, 1999, the Fund purchased Bonds issued
by Merrill Lynch & Co. Inc. and J.P. Morgan & Company, which issuers were among
the ten brokers or the ten dealers that executed transactions for or with the
Fund in the largest dollar amounts during the year. At April 30, 1999, the Fund
held a Bond issued by Lehman Brothers Holdings Inc. with a market value of
$2,995,800.
VII. CAPITAL STOCK AND OTHER SECURITIES
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The shareholders of the Fund are entitled to a full vote for each full share
of beneficial interest held. The Fund is authorized to issue an unlimited number
of shares of beneficial interest. All shares of beneficial interest of the Fund
are of $0.01 par value and are equal as to earnings, assets and voting
privileges.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
PROSPECTUS.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by action of the
Trustees or by the shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for the obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that notice
of such Fund obligations include such disclaimer, and provides for
indemnification out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Given the above limitations on shareholder personal liability, and the nature of
the Fund's assets and operations, the possibility of the Fund being unable to
meet its obligations is remote and thus, in the opinion of Massachusetts counsel
to the Fund, the risk to Fund shareholders of personal liability is remote.
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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. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees in accordance with the provisions of Section 16(c) of the Investment
Company Act of 1940. 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 Trustee.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
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A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's PROSPECTUS.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the Transfer
Agent to act as their agent in connection with the application of proceeds of
any redemption of Fund shares to the purchase of shares of any other Morgan
Stanley Dean Witter Fund and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transaction pursuant to the exchange privilege.
B. OFFERING PRICE
The Fund's shares are offered at net asset value per share.
The price of Fund shares, called "net asset value," is based on the value of
the Fund's portfolio securities.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange, prior to the
time when assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where a security is traded on more than
one exchange, the security is valued on the exchange designated as the primary
market pursuant to procedures adopted by the Trustees); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price. When market quotations are not
readily available, including circumstances under which it is determined by the
Investment Manager that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Fund's Trustees. For valuation purposes, quotations of foreign portfolio
securities, other assets and liabilities and forward contracts stated in foreign
currency are translated into U.S. dollar equivalents at the prevailing market
rates prior to the close of the New York Stock Exchange.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
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Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
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
latest bid and asked prices. Unlisted options on debt securities and all options
on equity securities are valued at the mean between their latest bid and asked
prices. Futures are valued at the latest sale price on the commodities exchange
on which they trade unless the Trustees determine such price does not reflect
their market value, in which case they will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events which may affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the New York Stock Exchange and will therefore not be reflected in the
computation of the Fund's net asset value. If events that may affect the value
of such securities occur during such period, then these securities may be valued
at their fair value as determined in good faith under procedures established by
and under the supervision of the Trustees.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
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The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two 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. Tax issues relating to the Fund
are not generally a consideration for shareholders such as tax exempt entities
and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
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 net long-term 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.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and
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losses, change the character of certain gains or losses, or alter the holding
period of other investments held by the Fund. The application of these rules
would therefore also affect the amount, timing and character of distributions
made by the Fund.
Under certain tax rules, the Fund may be required to accrue a portion of any
discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year. To
the extent that the Fund invests in such securities, it would be required to pay
out such accrued discount as an income distribution in each year in order to
avoid taxation at the Fund level. Such distributions will be made from the
available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have to
pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income or
short-term capital gains, are taxable to the shareholder as ordinary income
regardless of whether the shareholder receives such payments in additional
shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. The Taxpayer Relief Act of 1997 reduced the
maximum tax on long-term capital gains applicable to individuals from 28% to
20%.
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 U.S. tax on
distributions by the Fund of investment income and short term capital gains.
After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income and the portion taxable as
long-term capital gains.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment company
will have the effect of reducing the net asset value of the shareholder's stock
in that company by the exact amount of the dividend or capital gains
distribution. Furthermore, such dividends and capital gains distributions are
subject to federal income taxes. If the net asset value of the shares should be
reduced below a shareholder's cost as a result of the payment of dividends or
the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Any loss realized by shareholders upon a redemption of shares within
six months of the date of their purchase will be treated as a long-term capital
loss to the extent of any distributions of net long-term capital gains with
respect to such shares during the six-month period.
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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.
X. UNDERWRITERS
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The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plans."
XI. CALCULATION OF PERFORMANCE DATA
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From time to time, the Fund may quote its "yield" and/or "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 in accordance with regulatory requirements; the total
for the entire portfolio constitutes the Fund's gross income for the period.
Expenses accrued during the period are subtracted to arrive at "net investment
income." The resulting amount is divided by the product of the maximum offering
price per share on the last day of the period multiplied by the average number
of 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. Based on this calculation, the Fund's annualized yield for the 30-day
period ended April 30, 1999 with a waiver of fees was 5.02%. Based on this
calculation, the Fund's annualized yield for the 30-day period ended April 30,
1999 without a waiver of fees would have been 4.86%.
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 operations, if
shorter than any of the foregoing. For the purpose of this calculation, it is
assumed that all dividends and distributions are reinvested. The formula for
computing the average annual total return involves a percentage obtained by
dividing the ending redeemable value by the amount of the initial investment,
taking a root of the quotient (where the root is equivalent to the number of
years in the period) and subtracting 1 from the result. The average annual total
returns for the one year, five year and life of the Fund (commencing January 10,
1994) for the periods ended April 30, 1999 were 6.00%, 6.19% and 5.43%,
respectively. Without the waiver of fees and assumption of expenses by the
Investment Manager, the average annual total return for the one year, five year
and life of the Fund (commencing January 10, 1994) for the periods ended April
30, 1999 were 5.45%, 5.88% and 5.11%, respectively.
In addition, the Fund may advertise its total return over different periods
of time by means of aggregate, average, year-by-year or other types of total
return figures.
31
<PAGE>
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 this
calculation, the total returns for the one year, five year and life of the Fund
periods ended April 30, 1999, were 6.00%, 35.05% and 32.34%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 of shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal and multiplying by
$10,000, $50,000 and $100,000 as the case may be. Investments of $10,000,
$50,000 and $100,000 in the Fund at inception would have grown to $13,234,
$66,170 and $132,340, respectively, at April 30, 1999.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by recognized organizations.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
April 30, 1999 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.
32
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (52.2%)
CABLE TELEVISION (2.0%)
$ 1,000 Century Communications Corp........................................... 9.75% 02/15/02 $ 1,055,000
2,000 Cox Communications, Inc............................................... 6.375 06/15/00 2,015,680
800 Rogers Cablesystems, Ltd.............................................. 9.625 08/01/02 858,000
------------
3,928,680
------------
CASINO/GAMBLING (0.6%)
1,000 Circus Circus Enterprises, Inc........................................ 9.25 12/01/05 1,043,520
------------
CELLULAR TELEPHONE (1.1%)
2,000 AirTouch Communications, Inc.......................................... 7.125 07/15/01 2,054,800
------------
DEPARTMENT STORES (1.5%)
3,000 Dillard's Inc......................................................... 5.79 11/15/01 2,980,500
------------
DIVERSIFIED MANUFACTURING (1.1%)
2,290 Tyco International Group SA (Luxembourg).............................. 6.125 06/15/01 2,304,725
------------
DRUGSTORE CHAINS (1.1%)
2,000 Rite Aid Corp. - 144A*................................................ 5.50 12/15/00 1,982,340
------------
ELECTRIC UTILITIES (6.9%)
1,000 Cinergy Corp. - 144A*................................................. 6.125 04/15/04 992,380
1,500 Commonwealth Edison Co................................................ 6.50 04/15/00 1,511,265
1,000 Consolidated Edison Co.
New York, Inc....................................................... 7.375 09/15/00 1,022,700
370 Consumers Energy Co................................................... 8.875 11/15/99 376,801
3,000 CSW Investments - 144A* (United Kingdom).............................. 6.95 08/01/01 3,057,120
1,000 Detroit Edison Co..................................................... 5.93 02/01/01 1,003,650
1,000 Illinois Power Co..................................................... 5.625 04/15/00 999,120
1,000 Niagara Mohawk Power Co............................................... 7.125 07/01/01 1,012,800
1,000 Ohio Edison Co........................................................ 6.875 09/15/99 1,005,440
2,000 Texas Utilities Electric Co........................................... 8.125 02/01/02 2,109,340
------------
13,090,616
------------
ENGINEERING & CONSTRUCTION (0.5%)
1,000 Korea Development Bank................................................ 6.50 11/15/02 973,190
------------
ENVIRONMENTAL SERVICES (1.2%)
2,370 USA Waste Services, Inc............................................... 6.125 07/15/01 2,375,664
------------
FINANCE - AUTOMOTIVE (1.2%)
2,100 General Motors Acceptance Corp........................................ 6.875 07/15/01 2,148,111
------------
FINANCE COMPANIES (1.1%)
2,000 Bombardier Capital Inc. - 144A*....................................... 6.00 01/15/02 1,986,720
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FOOD CHAINS (1.1%)
$ 2,000 Kroger Co............................................................. 6.00% 07/01/00 $ 2,006,860
------------
FOOD DISTRIBUTORS (1.1%)
2,000 Supervalu, Inc........................................................ 7.25 07/15/99 2,006,780
------------
INDUSTRIAL SPECIALTIES (1.1%)
2,000 Brascan Ltd........................................................... 7.375 10/01/02 2,011,080
------------
INVESTMENT BANKERS/BROKERS/SERVICES (3.7%)
2,000 Donaldson, Lufkin & Jenrette, Inc..................................... 5.875 04/01/02 1,993,260
1,000 Lehman Brothers Holdings, Inc......................................... 7.625 07/15/99 1,003,660
2,000 Lehman Brothers Holdings, Inc......................................... 6.00 02/26/01 1,992,140
2,000 Salomon, Inc.......................................................... 6.50 03/01/00 2,015,120
------------
7,004,180
------------
LIFE INSURANCE (1.1%)
2,000 Conseco, Inc.......................................................... 6.40 06/15/01 1,981,500
------------
MAJOR BANKS (3.8%)
2,000 BankAmerica Corp...................................................... 6.65 05/01/01 2,035,180
2,000 Capital One Bank...................................................... 7.20 07/19/99 2,006,260
1,000 Republic New York Corp................................................ 8.25 11/01/01 1,056,010
2,000 Wells Fargo & Co...................................................... 6.875 05/10/01 2,045,180
------------
7,142,630
------------
MAJOR U.S. TELECOMMUNICATIONS (3.1%)
2,000 AT&T Corp............................................................. 5.625 03/15/04 1,976,480
2,000 MCI WorldCom, Inc..................................................... 6.125 08/15/01 2,009,980
2,000 Sprint Capital Corp................................................... 5.875 05/01/04 1,976,720
------------
5,963,180
------------
MEDIA CONGLOMERATES (1.1%)
2,000 News American Holdings, Inc........................................... 7.45 06/01/00 2,033,520
------------
MID - SIZED BANKS (1.1%)
2,000 Long Island Savings Bank.............................................. 6.20 04/02/01 2,004,980
------------
MILITARY/GOV'T/TECHNICAL (1.1%)
2,000 Raytheon Co........................................................... 6.30 08/15/00 2,014,980
------------
NATURAL GAS DISTRIBUTION (1.0%)
1,836 Enserch Corp.......................................................... 7.00 08/15/99 1,845,584
------------
OIL & GAS PRODUCTION (0.6%)
1,000 Occidental Petroleum Corp............................................. 8.50 11/09/01 1,042,390
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OIL/GAS TRANSMISSION (2.2%)
$ 2,000 Columbia Energy Group (Series A)...................................... 6.39% 11/28/00 $ 2,017,120
2,000 The Williams Companies, Inc........................................... 7.50 09/15/99 2,012,040
------------
4,029,160
------------
OILFIELD SERVICES/EQUIPMENT (0.9%)
1,500 Petroleum Geo-Services ASA (Norway)................................... 6.25 11/19/03 1,478,040
------------
OTHER CONSUMER SERVICES (1.1%)
2,000 Service Corp. International........................................... 6.375 10/01/00 2,001,520
------------
PAPER (1.1%)
2,000 James River Corp...................................................... 6.75 10/01/99 2,009,000
------------
PROPERTY - CASUALTY INSURERS (0.6%)
1,000 NAC Re Corp........................................................... 8.00 06/15/99 1,002,470
------------
RAILROADS (1.7%)
2,000 Norfolk Southern Corp................................................. 6.875 05/01/01 2,040,700
1,000 Union Pac Corp........................................................ 7.375 05/15/01 1,026,640
------------
3,067,340
------------
RENTAL/LEASING COMPANIES (4.4%)
2,000 AT&T Capital Co....................................................... 6.25 05/15/01 2,012,720
1,270 Comdisco, Inc......................................................... 6.50 06/15/00 1,278,928
2,000 Comdisco, Inc......................................................... 6.13 08/01/01 2,004,240
2,000 Gatx Capital Corp..................................................... 6.50 11/01/00 2,009,240
1,000 Hertz Corp............................................................ 7.375 06/15/01 1,027,330
------------
8,332,458
------------
SAVINGS & LOAN ASSOCIATIONS (0.9%)
1,500 Golden West Financial Corp............................................ 7.875 01/15/02 1,568,130
------------
WHOLESALE DISTRIBUTORS (1.1%)
2,000 Ikon Capital Inc...................................................... 6.73 06/15/01 1,994,260
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $97,699,138)..................................................................... 97,408,908
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (42.7%)
DIVERSIFIED FINANCIAL SERVICES (2.2%)
$ 2,000 California Infrastructure & Economic Development Bank Special Purpose
Trust
SCE - 1 Class A-3................................................... 6.17% 03/25/03 $ 2,019,320
2,000 California Infrastructure & Economic Development Bank
Special Purpose Trust PG&E - 1 Class A-5............................ 6.25 06/25/04 2,025,160
------------
4,044,480
------------
MORTGAGE PASS-THROUGH SECURITIES (9.1%)
3,450 Federal Home Loan Mortgage Corp. PC Gold.............................. 5.50 04/01/03 3,402,408
6,564 Federal Home Loan Mortgage Corp. PC Gold.............................. 6.00 09/01/01-09/01/03 6,583,899
3,045 Federal Home Loan Mortgage Corp. PC Gold.............................. 6.50 05/01/99-09/01/02 3,080,921
3,810 Federal National Mortgage Assoc....................................... 6.00 10/01/00-12/01/02 3,808,523
------------
16,875,751
------------
U.S. GOVERNMENT AGENCIES (31.4%)
17,000 Federal Home Loan Banks............................................... 4.66-5.80 12/22/99-10/22/01 16,959,400
4,000 Federal Home Loan Mortgage Corp....................................... 4.75-5.865 07/16/01-12/14/01 3,962,130
22,000 Federal National Mortgage Assoc....................................... 4.90-6.22 07/23/99-12/20/01 21,947,215
12,000 Federal National Mortgage Assoc. Strips............................... 0.00 08/15/01-02/01/02 10,567,840
4,000 Resolution Funding Corp. Strips....................................... 0.00 10/15/01 3,526,720
2,000 Tennessee Valley Authority Strips..................................... 0.00 05/01/02 1,696,340
------------
58,659,645
------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(IDENTIFIED COST $79,760,275)..................................................................... 79,579,876
------------
SHORT-TERM INVESTMENTS (5.4%)
U.S. GOVERNMENT AGENCY (a) (5.1)
9,500 Student Loan Marketing Assoc. (AMORTIZED COST $9,497,467)............. 4.80 05/03/99 9,497,467
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT (0.3%)
$ 526 The Bank of New York (dated 04/30/99; proceeds $526,054) (b)
(IDENTIFIED COST $525,840).......................................... 4.875% 05/03/99 $ 525,840
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $10,023,307)..................................................................... 10,023,307
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $187,482,720) (C)........................................................ 100.3 % 187,012,091
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... (0.3) (570,497)
------ -------------
NET ASSETS................................................................................ 100.0 % $ 186,441,594
------ -------------
------ -------------
</TABLE>
- ---------------------
* Resale is restricted to qualified institutional investors.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $355,837 U.S. Treasury Bond 10.625% due 08/15/15 valued
at $540,984.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $411,099, and the
aggregate gross unrealized depreciation is $881,728, resulting in net
unrealized depreciation of $470,629.
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $187,482,720).............................................................. $187,012,091
Receivable for:
Interest.................................................................................. 2,475,604
Shares of beneficial interest sold........................................................ 1,589,848
Receivable from affiliate..................................................................... 82,245
Prepaid expenses and other assets............................................................. 34,460
------------
TOTAL ASSETS............................................................................. 191,194,248
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased................................................. 2,536,139
Investments purchased..................................................................... 1,990,060
Investment management fee................................................................. 82,589
Dividends to shareholders................................................................. 55,352
Payable to bank............................................................................... 13,854
Accrued expenses and other payables........................................................... 74,660
------------
TOTAL LIABILITIES........................................................................ 4,752,654
------------
NET ASSETS............................................................................... $186,441,594
------------
------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $188,908,616
Net unrealized depreciation................................................................... (470,629)
Accumulated net realized loss................................................................. (1,996,393)
------------
NET ASSETS............................................................................... $186,441,594
------------
------------
NET ASSET VALUE PER SHARE,
19,651,001 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED OF $.01 PAR VALUE)............... $9.49
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME................................................................................ $10,361,991
-----------
EXPENSES
Investment management fee...................................................................... 1,212,106
Transfer agent fees and expenses............................................................... 71,996
Professional fees.............................................................................. 67,793
Shareholder reports and notices................................................................ 53,763
Registration fees.............................................................................. 44,180
Organizational expenses........................................................................ 24,174
Custodian fees................................................................................. 23,266
Trustees' fees and expenses.................................................................... 12,239
Other.......................................................................................... 11,671
-----------
TOTAL EXPENSES............................................................................ 1,521,188
Less: amounts waived/reimbursed................................................................ (991,041)
-----------
NET EXPENSES.............................................................................. 530,147
-----------
NET INVESTMENT INCOME..................................................................... 9,831,844
-----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss.............................................................................. (415,018)
Net change in unrealized depreciation.......................................................... (202,190)
-----------
NET LOSS.................................................................................. (617,208)
-----------
NET INCREASE................................................................................... $ 9,214,636
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
APRIL 30, APRIL 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................................................... $ 9,831,844 $ 4,134,905
Net realized loss............................................................... (415,018) (421,092)
Net change in unrealized depreciation........................................... (202,190) 353,108
------------ ------------
NET INCREASE............................................................... 9,214,636 4,066,921
Dividends from net investment income............................................ (9,831,922) (4,191,003)
Net increase from transactions in shares of beneficial interest................. 79,359,646 65,571,237
------------ ------------
NET INCREASE............................................................... 78,742,360 65,447,155
NET ASSETS:
Beginning of period............................................................. 107,699,234 42,252,079
------------ ------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND $78,
RESPECTIVELY)............................................................... $186,441,594 $107,699,234
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Short-Term Bond Fund (the "Fund"), formerly Dean
Witter Short-Term Bond 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
consistent with the preservation of capital. The Fund seeks to achieve its
objective by investing in a diversified portfolio of short-term fixed income
securities. The Fund was organized as a Massachusetts business trust on October
22, 1993 and commenced operations on January 10, 1994.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) all portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (2) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager"), formerly Dean Witter InterCapital Inc., that sale and bid prices are
not reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Trustees (valuation of securities for which
market quotations are not readily available may be based upon current market
prices of securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors); (3) certain portfolio securities
may be valued by an outside pricing service approved by the Trustees. The
pricing service may utilize a matrix system incorporating security quality,
maturity and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, if available, in determining what it believes is the fair valuation
of the portfolio securities valued by such pricing service; and (4) short-term
debt securities having a maturity date of more than sixty days at the 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.
41
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1999, CONTINUED
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $173,000 which has been
reimbursed, exclusive of any amounts assumed. Such expenses have been deferred
and were fully amortized as of January 9, 1999.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.70% to the net assets of the Fund determined as of the close of
each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of
42
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1999, CONTINUED
all personnel, including officers of the Fund who are employees of the
Investment Manager. The Investment Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.
For the period May 1, 1998 through December 31, 1998, the Investment Manager
waived its compensation and reimbursed all operating expenses without
limitation. For the period January 1, 1999 through December 31, 1999, the
Investment Manager will continue to waive its fee and reimburse expenses to the
extent they exceed 0.80% of the daily net assets of the Fund. At April 30, 1999,
included in the Statement of Assets and Liabilities is a receivable from an
affiliate which represents expense reimbursements due to the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/prepayments of portfolio
securities, excluding short-term investments, for the year ended April 30, 1999
were $173,739,070, and $92,176,851, respectively. Included in the aforementioned
are purchases and sales/prepayments of U.S. Government securities of $81,530,726
and $49,111,126, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Fund's transfer agent. At April 30, 1999, the Fund had transfer agent fees
and expenses payable of approximately $1,400.
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
APRIL 30, 1999 APRIL 30, 1998
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 63,700,556 $ 606,779,742 15,691,994 $149,203,263
Reinvestment of dividends........................................ 796,095 7,583,175 323,662 3,075,757
----------- -------------- ----------- ------------
64,496,651 614,362,917 16,015,656 152,279,020
Repurchased...................................................... (56,192,124) (535,003,271) (9,118,681) (86,707,783)
----------- -------------- ----------- ------------
Net increase..................................................... 8,304,527 $ 79,359,646 6,896,975 $ 65,571,237
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
43
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1999, CONTINUED
5. FEDERAL INCOME TAX STATUS
At April 30, 1999, the Fund had a net capital loss carryover of approximately
$1,935,000, to offset future capital gains to the extent provided by regulations
available through April 30 of the following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
- -----------------------------------------------------
2003 2004 2005 2006 2007
- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$ 378 $ 501 $ 186 $ 359 $ 511
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
</TABLE>
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $61,000, during fiscal 1999.
As of April 30, 1999, the Fund had temporary book/tax differences primarily
attributable to post-October losses.
44
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED APRIL 30,
-------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
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.
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter
Short-Term Bond Fund (the "Fund"), formerly Dean Witter Short-Term Bond Fund, at
April 30, 1999, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at April 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
JUNE 9, 1999
46
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
PART C OTHER INFORMATION
ITEM 23. EXHIBITS
1. Declaration of Trust of the Registrant, dated October 21, 1993, is
incorporated by reference to Exhibit 1 of Post-Effective Amendment
No. 5 to the Registration Statement on Form N-1A, filed on June 30,
1998.
1(a). Amendment dated June 22, 1998 to the Declaration of Trust of the
Registrant is incorporated by reference to Exhibit 1 of
Post-Effective Amendment No. 5 to the Registration Statement on
Form N-1A, filed on June 30, 1998.
2. Amended and Restated By-Laws of the Registrant, dated May 1, 1999.
3. Not Applicable.
4. Amended Investment Management Agreement is incorporated by
reference to Exhibit 5 of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on June 30, 1998.
5(a). Amended Distribution Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Services Company is
incorporated by reference to Exhibit 6 of Post-Effective Amendment
No. 5 to the Registration Statement on Form N-1A, filed on June 30,
1998.
5(b). Selected Dealer Agreement between the Registrant and Dean Witter
Distributors Inc. is incorporated by reference to Exhibit 6(b) of
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on December 9, 1993.
5(c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean
Witter Distributors Inc. and National Financial Services
Corporation dated October 17, 1998.
6. Not Applicable
7(a). Custody Agreement between The Bank of New York and the Registrant
is incorporated by reference to Exhibit 8(a) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed
on December 9, 1993.
7(b). Amendment dated April 17, 1996 to the Custody Agreement is
incorporated by reference to Exhibit 8 of Post-Effective Amendment
No. 3 to the Registration Statement on Form N-1A, filed on June 21,
1996.
8(a). Amended and Restated Transfer Agency and Services Agreement is
incorporated by reference to Exhibit 8 of Post-Effective Amendment
No. 5 to the Registration Statement on Form N-1A, filed on
June 30, 1998.
<PAGE>
8(b). Amended Services Agreement is incorporated by reference to Exhibit
9 of Post-Effective Amendment No. 5 to the Registration Statement
on Form N-1A, filed on June 30, 1998.
9(a). Opinion of Sheldon Curtis, Esq., dated December 8, 1993,
incorporated herein by reference to Exhibit 10 to the Registration
Statement on Form N-1A, filed on December 9, 1993.
9(b). Opinion of Lane, Altman & Owens, LLP, Massachusetts Counsel, dated
December 8, 1993, incorporated herein by reference to Exhibit 10
(a) to Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A, filed on December 9, 1983.
10. Consent of Independent Accountants.
11. Not Applicable.
12. Not Applicable.
13. Amended and Restated Plan of Distribution pursuant to Rule 12b-1 is
incorporated by reference to Exhibit 15 of Pre-Effective Amendment
No. 1 on Form N-1A, filed on December 9, 1993.
14. Not Applicable.
Other Powers of Attorney of Trustees are incorporated by reference to
Exhibit (Other) of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on March 17, 1994 and
Exhibit (Other) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on June 30, 1998.
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. 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.
2
<PAGE>
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
(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
3
<PAGE>
(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 Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
4
<PAGE>
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter North American Government Income Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(46) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(47) Morgan Stanley Dean Witter Real Estate Fund
(48) Morgan Stanley Dean Witter S&P 500 Index Fund
(49) Morgan Stanley Dean Witter S&P 500 Select Fund
(50) Morgan Stanley Dean Witter Select Dimensions Investment Series
(51) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(52) Morgan Stanley Dean Witter Short-Term Bond Fund
(53) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(54) Morgan Stanley Dean Witter Small Cap Growth Fund
(55) Morgan Stanley Dean Witter Special Value Fund
(56) Morgan Stanley Dean Witter Strategist Fund
(57) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(58) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(59) Morgan Stanley Dean Witter Total Return Trust
(60) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(61) Morgan Stanley Dean Witter U.S. Government Securities Trust
(62) Morgan Stanley Dean Witter Utilities Fund
(63) Morgan Stanley Dean Witter Value-Added Market Series
(64) Morgan Stanley Dean Witter Value Fund
(65) Morgan Stanley Dean Witter Variable Investment Series
(66) Morgan Stanley Dean Witter World Wide Income Trust
The term "TCW/DW Funds" refers to the following registered investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
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, TCW/DW Funds and Discover Brokerage
Index Series; Executive Vice President and
Director of Dean Witter Reynolds Inc. ("DWR");
Director of various MSDW subsidiaries.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter
Executive Vice President Funds and Discover Brokerage Index Series;
and Chief Investment Director of MSDW Trust.
Officer
Ronald E. Robison President MSDW Trust; Executive Vice President,
Executive Vice President, Chief Administrative Officer and Director of MSDW
Chief Administrative Services; Vice President of the Morgan Stanley
Officer and Director Dean Witter Funds, TCW/DW Funds and Discover
Brokerage Index Series.
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Senior Vice President, Assistant
Counsel and Director Secretary and Assistant General Counsel of MSDW
Distributors; Vice President, Secretary and
General Counsel of the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
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
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, TCW/DW Funds and Discover Brokerage
Index Series.
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 and Discover Brokerage Index Series.
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 the 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
Jayne M. Stevlingson 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
Frank Bruttomesso First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
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, TCW/DW Funds and Discover Brokerage
Index Series.
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, the
Morgan Stanley Dean Witter Funds, TCW/DW Funds and
Discover Brokerage Index Series.
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
Lou Anne D. McInnis First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
Carsten Otto First Vice President and Assistant Secretary of
First Vice President MSDW Services; Assistant Secretary of MSDW
and Assistant Secretary Distributors, the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
Ruth Rossi First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors the Morgan Stanley Dean Witter Funds,
TCW/DW Funds and Discover Brokerage Index Series.
James P. Wallin
First Vice President
Robert Abreu
Vice President
Dale Albright
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
- ---------------------- ------------------------------------------------
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Armon Bar-Tur
Vice President
Raymond Basile
Vice President
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Dale Boettcher
Vice President
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Liam Carroll
Vice President
Philip Casparius
Vice President
Aaron Clark
Vice President
William Connerly
Vice President
David Dineen
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
- ---------------------- ------------------------------------------------
Sheila Finnerty Vice President of Morgan Stanley Dean Witter Prime
Vice President Income Trust
Jeffrey D. Geffen
Vice President
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Trey Hancock
Vice President
Matthew 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
Kevin Jung Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Carol Espejo-Kane
Vice President
Nancy Karole-Kennedy
Vice President
Doug Ketterer
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
- ---------------------- ------------------------------------------------
Paula LaCosta Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Todd Lebo Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
Gerard J. Lian Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Nancy Login
Vice President
Sharon Loguercio
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.
Albert McGarity
Vice President
Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P
Vice President 500 Select Fund.
Mark Mitchell
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.
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
- ---------------------- ------------------------------------------------
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Dawn Rorke
Vice President
John Roscoe Vice President of Morgan Stanley Dean Witter
Vice President Real Estate Fund
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter
Vice President Federal Securities Trust.
Peter J. Seeley Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Robert Stearns
Vice President
Naomi Stein
Vice President
Michael Strayhorn
Vice President
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
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
- ---------------------- ------------------------------------------------
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Robert Vanden Assem
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
John Wong
Vice President
The principal address of MSDW Advisors, MSDW Services, MSDW Distributors,
DWR, the Morgan Stanley Dean Witter Funds, the TCW/DW Funds and Discover
Brokerage Index Series 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 Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
14
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(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter North American Government Income Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(46) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(47) Morgan Stanley Dean Witter Prime Income Trust
(48) Morgan Stanley Dean Witter Real Estate Fund
(49) Morgan Stanley Dean Witter S&P 500 Index Fund
(50) Morgan Stanley Dean Witter S&P 500 Select Fund
(51) Morgan Stanley Dean Witter Short-Term Bond Fund
(52) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(53) Morgan Stanley Dean Witter Small Cap Growth Fund
(54) Morgan Stanley Dean Witter Special Value Fund
(55) Morgan Stanley Dean Witter Strategist Fund
(56) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(57) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(58) Morgan Stanley Dean Witter Total Return Trust
(59) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(60) Morgan Stanley Dean Witter U.S. Government Securities Trust
(61) Morgan Stanley Dean Witter Utilities Fund
(62) Morgan Stanley Dean Witter Value-Added Market Series
(63) Morgan Stanley Dean Witter Value Fund
(64) Morgan Stanley Dean Witter Variable Investment Series
(65) 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
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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
Fredrick K. Kubler Senior Vice President, Assistant Secretary and Chief
Compliance Officer.
Philip J. Purcell Director
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
Item 28. LOCATION OF ACCOUNTS AND RECORDS
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.
16
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it 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 22nd day of June, 1999.
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
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. 6 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 06/22/99
------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/Thomas F. Caloia 06/22/99
------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/Barry Fink 06/22/99
------------------------------
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. Butowksy 06/22/99
------------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
EXHIBIT INDEX
-------------
2. Amended and Restated By-Laws of the Registrant, dated May 1, 1999.
5(c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and National Financial Services Corporation, dated
October 17, 1998.
10. Consent of Independent Accountants
<PAGE>
BY-LAWS
OF
MORGAN STANLEY DEAN WITTER SHORT-TERM BOND FUND
AMENDED AND RESTATED AS OF MAY 1, 1999
ARTICLE I
DEFINITIONS
The terms "COMMISSION," "DECLARATION," "DISTRIBUTOR," "INVESTMENT ADVISER,"
"MAJORITY SHAREHOLDER VOTE," "1940 ACT," "SHAREHOLDER," "SHARES," "TRANSFER
AGENT," "TRUST," "TRUST PROPERTY," and "TRUSTEES" have the respective meanings
given them in the Declaration of Trust of Morgan Stanley Dean Witter Short-Term
Bond Fund dated October 21, 1993, as amended from time to time.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the principal
office of the Trust in the Commonwealth of Massachusetts shall be in the City of
Boston, County of Suffolk.
SECTION 2.2. OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and without
the Commonwealth as the Trustees may from time to time designate or the business
of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. MEETINGS. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the provisions
of Section 16(a) of the 1940 Act, for that purpose. Meetings of Shareholders
shall also be called by the Secretary upon the written request of the holders of
Shares entitled to vote as otherwise required by Section 16(c) of the 1940 Act
and to the extent required by the corporate or business statute of any state in
which the Shares of the Trust are sold, as made applicable to the Trust by the
provisions of Section 2.3 of the Declaration. Such request shall state the
purpose or purposes of such meeting and the matters proposed to be acted on
thereat. Except to the extent otherwise required by Section 16(c) of the 1940
Act, as made applicable to the Trust by the provisions of Section 2.3 of the
Declaration, the Secretary shall inform such Shareholders of the reasonable
estimated cost of preparing and mailing such notice of the meeting, and upon
payment to the Trust of such costs, the Secretary shall give notice stating the
purpose or purposes of the meeting to all entitled to vote at such meeting. No
meeting need be called upon the request of the holders of Shares entitled to
cast less than a majority of all votes entitled to be cast at such meeting, to
consider any matter which is substantially the same as a matter voted upon at
any meeting of Shareholders held during the preceding twelve months.
SECTION 3.3. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety (90)
days before such meeting to each Shareholder entitled to vote at such meeting.
Such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the Shareholder at his address as it appears
on the records of the Trust.
SECTION 3.4. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders, the holders of a majority of the Shares
<PAGE>
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for the
transaction of business. In the absence of a quorum, the Shareholders present or
represented by proxy and entitled to vote thereat shall have the power to
adjourn the meeting from time to time. The Shareholders present in person or
represented by proxy at any meeting and entitled to vote thereat also shall have
the power to adjourn the meeting from time to time if the vote required to
approve or reject any proposal described in the original notice of such meeting
is not obtained (with proxies being voted for or against adjournment consistent
with the votes for and against the proposal for which the required vote has not
been obtained). The affirmative vote of the holders of a majority of the Shares
then present in person or represented by proxy shall be required to adjourn any
meeting. Any adjourned meeting may be reconvened without further notice or
change in record date. At any reconvened meeting at which a quorum shall be
present, any business may be transacted that might have been transacted at the
meeting as originally called.
SECTION 3.5. VOTING RIGHTS, PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy for each Share of beneficial interest of the Trust
and for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his or her name on the records of the Trust on the date
fixed as the record date for the determination of Shareholders entitled to vote
at such meeting. Without limiting the manner in which a Shareholder may
authorize another person or persons to act for such Shareholder as proxy
pursuant hereto, the following shall constitute a valid means by which a
Shareholder may grant such authority:
(i) A Shareholder may execute a writing authorizing another person or
persons to act for such Shareholder as proxy. Execution may be accomplished
by the Shareholder or such Shareholder's authorized officer, director,
employee, attorney-in-fact or another agent signing such writing or causing
such person's signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile or telecopy signature. No
written evidence of authority of a Shareholder's authorized officer,
director, employee, attorney-in-fact or other agent shall be required; and
(ii) A Shareholder may authorize another person or persons to act for such
Shareholder as proxy by transmitting or authorizing the transmission of a
telegram or cablegram or by other means of telephonic, electronic or
computer transmission to the person who will be the holder of the proxy or
to a proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram or cablegram or
other means of telephonic, electronic or computer transmission must either
set forth or be submitted with information from which it can be determined
that the telegram, cablegram or other transmission was authorized by the
Shareholder.
No proxy shall be valid after eleven months from its date, unless otherwise
provided in the proxy. At all meetings of Shareholders, unless the voting is
conducted by inspectors, all questions relating to the qualification of voters
and the validity of proxies and the acceptance or rejection of votes shall be
decided by the chairman of the meeting. In determining whether a telegram,
cablegram or other electronic transmission is valid, the chairman or inspector,
as the case may be, shall specify the information upon which he or she relied.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or Officers of the Trust. Proxy
solicitations may be made in writing or by using telephonic or other electronic
solicitation procedures that include appropriate methods of verifying the
identity of the Shareholder and confirming any instructions given thereby.
SECTION 3.6. VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority Shareholder
Vote.
SECTION 3.7. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any Shareholder or his proxy shall, appoint Inspectors of Election of the
meeting. In case any person appointed as Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment
2
<PAGE>
made by the Trustees in advance of the convening of the meeting or at the
meeting by the person acting as chairman. The Inspectors of Election shall
determine the number of Shares outstanding, the Shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results, and
do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or of
any Shareholder or his proxy, the Inspectors of Election shall make a report in
writing of any challenge or question or matter determined by them and shall
execute a certificate of any facts found by them.
SECTION 3.8. INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as are
granted to Shareholders under Section 32 of the Business Corporation Law of the
Commonwealth of Massachusetts.
SECTION 3.9. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
SECTION 3.10. PRESENCE AT MEETINGS. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their discretion
provide for regular or special meetings of the Trustees. Regular meetings of the
Trustees may be held at such time and place as shall be determined from time to
time by the Trustees without further notice. Special meetings of the Trustees
may be called at any time by the Chairman and shall be called by the Chairman or
the Secretary upon the written request of any two (2) Trustees.
SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special meetings
of the Trustees, stating the place, date and time thereof, shall be given not
less than two (2) days before such meeting to each Trustee, personally, by
telegram, by mail, or by leaving such notice at his place of residence or usual
place of business. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the Trustee at
his address as it appears on the records of the Trust. Subject to the provisions
of the 1940 Act, notice or waiver of notice need not specify the purpose of any
special meeting.
SECTION 4.3. TELEPHONE MEETINGS. Subject to the provisions of the 1940 Act,
any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such committee,
as the case may be, by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings of
the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present, the
affirmative vote of a majority of the Trustees present shall be the act of the
Trustees, unless the concurrence of a greater proportion is expressly required
for such action by law, the Declaration or these By-Laws. If at any meeting of
the Trustees there be less than a quorum present, the Trustees present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall have been obtained.
SECTION 4.5. ACTION BY TRUSTEES WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required
3
<PAGE>
or permitted to be taken at any meeting of the Trustees may be taken without a
meeting if a consent in writing setting forth the action shall be signed by all
of the Trustees entitled to vote upon the action and such written consent is
filed with the minutes of proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and each
Trustee who is not an officer or employee of the Trust or of its investment
manager or underwriter or of any corporate affiliate of any of said persons
shall receive for services rendered as a Trustee of the Trust such compensation
as may be fixed by the Trustees. Nothing herein contained shall be construed to
preclude any Trustee from serving the Trust in any other capacity and receiving
compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other papers
shall be executed in the name and on behalf of the Trust and all checks, notes,
drafts and other obligations for the payment of money by the Trust shall be
signed, and all transfer of securities standing in the name of the Trust shall
be executed, by the Chairman, the President, any Vice President or the Treasurer
or by any one or more officers or agents of the Trust as shall be designated for
that purpose by vote of the Trustees; notwithstanding the above, nothing in this
Section 4.7 shall be deemed to preclude the electronic authorization, by
designated persons, of the Trust's Custodian (as described herein in Section
9.1) to transfer assets of the Trust, as provided for herein in Section 9.1.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
(a) The Trust shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Trust) by reason of the fact that he is or
was a Trustee, officer, employee, or agent of the Trust. The indemnification
shall be against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by him in
connection with the action, suit, or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or on behalf of the Trust to obtain a judgment or decree in its favor by
reason of the fact that he is or was a Trustee, officer, employee, or agent of
the Trust. The indemnification shall be against expenses, including attorneys'
fees actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Trust;
except that no indemnification shall be made in respect of any claim, issue, or
matter as to which the person has been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Trust, except to the extent
that the court in which the action or suit was brought, or a court of equity in
the county in which the Trust has its principal office, determines upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for those expenses which the court shall deem proper, provided such
Trustee, officer, employee or agent is not adjudged to be liable by reason of
his willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsection (a) or (b) or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
therewith.
4
<PAGE>
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists
of Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as described in
Section 17(h) and (i) of the Investment Company Act of 1940 ("disabling
conduct"). A person shall be deemed not liable by reason of disabling
conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition thereof
if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by the
Trust; and
(3) either, (i) such person provides a security for his undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available facts,
that there is reason to believe that such person ultimately will be found
entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding the office, and shall continue as to a person who has ceased to be
a Trustee, officer, employee, or agent and inure to the benefit of the heirs,
executors and administrators of such person; provided that no
5
<PAGE>
person may satisfy any right of indemnity or reimbursement granted herein or to
which he may be otherwise entitled except out of the property of the Trust, and
no Shareholder shall be personally liable with respect to any claim for
indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust purchase
insurance to indemnify any officer or Trustee against liability for any act for
which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the Trustees
of the Trust and may delegate to such committees, in the intervals between
meetings of the Trustees, any or all of the powers of the Trustees in the
management of the business and affairs of the Trust. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees at
the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all members of the Committee entitled to
vote upon the action and such written consent is filed with the records of the
proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute,
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acknowledge or verify any instrument in more than one capacity. The executive
officers of the Trust shall be elected annually by the Trustees and each
executive officer so elected shall hold office until his or her successor is
elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers
and may elect, or may delegate to the Chairman the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. TERM AND REMOVAL AND VACANCIES. Each officer of the Trust
shall hold office until his or her successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in their
judgment, the best interests of the Trust will be served thereby, but such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. POWERS AND DUTIES. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to these
By-Laws or, to the extent not so provided, as may be prescribed by the Trustees;
provided that no rights of any third party shall be affected or impaired by any
such By-Law or resolution of the Trustees unless such third party has knowledge
thereof.
SECTION 6.6. THE CHAIRMAN. The Chairman shall be the chief executive
officer of the Trust, shall preside at all meetings of the Shareholders and of
the Trustees, shall have general and active management of the business of the
Trust, shall see that all orders and resolutions of the Trustees are carried
into effect and, in connection therewith, shall be authorized to delegate to the
President or to one or more Vice Presidents such of his or her powers and duties
at such times and in such manner as he or she may deem advisable, shall be a
signatory on all Annual and Semi-Annual Reports as may be sent to Shareholders,
and shall perform such other duties as the Trustees may from time to time
prescribe.
SECTION 6.7. THE PRESIDENT. The President shall perform such duties as the
Trustees and the Chairman may from time to time prescribe and shall, in the
absence or disability of the Chairman, exercise the powers and perform the
duties of the Chairman. The President shall be authorized to delegate to one or
more Vice Presidents such of his or her powers and duties at such times and in
such manner as he or she may deem advisable.
SECTION 6.8. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by the
Trustees. The Vice President, or, if there shall be more than one, the Vice
Presidents in such order as may be determined from time to time by the Trustees
or the Chairman, shall, in the absence or disability of the President, exercise
the powers and perform the duties of the President, and shall perform such other
duties as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.9. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there shall be more than one, the Assistant Vice Presidents in such order
as may be determined from time to time by the Trustees or the Chairman, shall
perform such duties and have such powers as may be assigned them from time to
time by the Trustees or the Chairman.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings of the
Trustees and all meetings of the Shareholders and record all the proceedings of
the meetings of the Shareholders and of the Trustees in a book to be kept for
that purpose, and shall perform like duties for the standing committees when
required. He or she shall give, or cause to be given, notice of all meetings of
the Shareholders and special meetings of the Trustees, and shall perform such
other duties and have such powers as the Trustees or the Chairman may from time
to time prescribe. He or she shall keep in safe custody the seal of the Trust
and affix or cause the same to be affixed to any instrument requiring it, and,
when so affixed, it shall be attested by his or her signature or by the
signature of an Assistant Secretary.
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SECTION 6.11. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there shall be more than one, the Assistant Secretaries in such order as may be
determined from time to time by the Trustees or the Chairman, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such duties and have such other powers
as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He or she shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and he
or she shall render to the Trustees and the Chairman, whenever any of them
require it, an account of his or her transactions as Treasurer and of the
financial condition of the Trust, and he or she shall perform such other duties
as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in such order as may be
determined from time to time by the Trustees or the Chairman, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
Inasmuch as the computation of net income and net profits from the sales of
securities or other properties for federal income tax purposes may vary from the
computation thereof on the records of the Trust, the Trustees shall have power,
in their discretion, to distribute as income dividends and as capital gain
distributions, respectively, amounts sufficient to enable the Trust to avoid or
reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of each series
or class of Shares shall be in such form and of such design as the Trustees
shall approve, subject to the right of the Trustees to change such form and
design at any time or from time to time, and shall be entered in the records of
the Trust as they are issued. Each such certificate shall bear a distinguishing
number; shall exhibit the holder's name and certify the number of full Shares
owned by such holder; shall be signed by or in the name of the Trust by the
President, or a Vice President, and countersigned by the Secretary or an
Assistant Secretary or the Treasurer and an Assistant Treasurer of the Trust;
shall be sealed with the seal; and shall contain such recitals as may be
required by law. Where any certificate is signed by a Transfer Agent or by a
Registrar, the signature of such officers and the seal may be facsimile, printed
or engraved. The Trust may, at its option, determine not to issue a certificate
or certificates to evidence Shares owned of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Trust, such certificate or certificates shall,
nevertheless, be adopted by the Trust and be issued and
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delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall appear therein had
not ceased to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Trust alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give to
the Trust and to such Registrar, Transfer Agent and/or Transfer Clerk as may be
authorized or required to countersign such new certificate or certificates, a
bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be against
them or any of them on account of or in connection with the alleged loss, theft
or destruction of any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. APPOINTMENT AND DUTIES. The Trust shall at times employ a bank
or trust company having capital, surplus and undivided profits of at least five
million dollars ($5,000,000) as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these By-Laws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice and filed with the records of the meeting, whether before or after the
holding thereof, or actual attendance at the meeting of shareholders, Trustees
or committee, as the case may be, in person, shall be deemed equivalent to the
giving of such notice to such person.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1. LOCATION OF BOOKS AND RECORDS. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii) receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. The record date, in
any case, shall not be more than one hundred eighty (180) days, and in the case
of a meeting of Shareholders not less than ten (10) days, prior to the date on
which such meeting is to be held or the date on which such other particular
action requiring determination of Shareholders is to be taken, as the case may
be. In the case of a meeting of Shareholders, the meeting date set forth in the
notice to Shareholders accompanying the proxy statement shall be the date used
for purposes of calculating the 180 day or 10 day period, and any adjourned
meeting may be reconvened without a change in record date. In lieu of fixing a
record date, the Trustees may provide that the transfer books shall be closed
for a stated period but not to exceed, in any case, twenty (20) days. If the
transfer books are closed for the purpose of determining Shareholders entitled
to notice of a vote at a meeting of Shareholders, such books shall be closed for
at least ten (10) days immediately preceding the meeting.
SECTION 11.3. SEAL. The Trustees shall adopt a seal, which shall be in such
form and shall have such inscription thereon as the Trustees may from time to
time provide. The seal of the Trust may be affixed to any document, and the seal
and its attestation may be lithographed, engraved or otherwise printed on any
document with the same force and effect as if it had been imprinted and attested
manually in the same manner and with the same effect as if done by a
Massachusetts business corporation under Massachusetts law.
SECTION 11.4. FISCAL YEAR. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time to
time.
SECTION 11.5. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer or
officers or such other person or persons as the Trustees may from time to time
designate, or as may be specified in or pursuant to the agreement between the
Trust and the bank or trust company appointed as Custodian of the securities and
funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees; provided,
however, that no By-Law may be amended, adopted or repealed by the Trustees if
such amendment, adoption or repeal requires, pursuant to law, the Declaration,
or these By-Laws, a vote of the Shareholders. The Trustees shall in no event
adopt By-Laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
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ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Morgan Stanley Dean Witter Short-Term
Bond Fund, dated October 21, 1993, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name Morgan Stanley Dean Witter Short-Term Bond
Fund refers to the Trustees under the Declaration collectively as Trustees, but
not as individuals or personally; and no Trustee, Shareholder, officer, employee
or agent of Morgan Stanley Dean Witter Short-Term Bond Fund shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Morgan Stanley Dean Witter Short-Term Bond Fund, but the Trust
Estate only shall be liable.
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MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
OMNIBUS SELECTED DEALER AGREEMENT, INC.
Dear Sir or Madam:
We, Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") have
a distribution agreement (the "Distribution Agreement") with each of the
open-end investment companies listed in Schedule A attached hereto (each, a
"Fund"), pursuant to which we act as the Distributor for the sale of each
Fund's shares of common stock or beneficial interest, as the case may be,
(the "Shares"). Under the Distribution Agreement, we have the right to
distribute Shares for resale.
Each Fund is an open-end management investment company registered under
the Investment Company Act of 1940, as amended, and the Shares being offered
to the public are registered under the Securities Act of 1933, as amended
(the "Securities Act"). You have received a copy of the Distribution
Agreements between us and each Fund and reference is made herein to certain
provisions of such Distribution Agreements. The terms used herein, including
"Prospectus" and "Registration Statement" of each Fund and "Selected Dealer"
shall have the same meaning in this Agreement as in the Distribution
Agreements. As principal, we offer to sell Shares to your customers, upon
the following terms and conditions:
1. In all sales of Shares to the public you shall act on behalf of your
customers which for purposes of this Agreement are limited to customers for
which Nations Banc Investments, Inc. is the Introducing Broker, and in no
transaction shall you have any authority to act as agent for a Fund, for us
or for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the public offering price applicable to each order, as set forth in
the applicable current Prospectus. The procedure relating to the handling of
orders shall be subject to written instructions which we or the applicable
Fund shall forward from time to time to you. All orders are subject to
acceptance or rejection by us or a Fund in the sole discretion of either.
The Distributor of the Fund will promptly notify you in writing of any such
rejection.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable public offering
price and subject to the terms hereof and of the applicable Distribution
Agreement and Prospectus. In connection herewith, you agree to abide by the
terms of the applicable Distribution Agreement and Prospectus to the extent
required hereunder. Furthermore, you agree that (i) you will offer or
sell any of the Shares only under circumstances that will result in
compliance with all applicable Federal and state securities laws; (ii) you
will not furnish or cause to be furnished to any person any information
relating to the Shares which is inconsistent in any respect with the
information contained in the applicable Prospectus (as then amended or
supplemented) or cause any advertisements to be published by radio or
television or in any newspaper or posted in any public place or use any sales
promotional material without our consent and the consent of the applicable
Fund; and (iii) you will endeavor to obtain proxies from purchasers of
Shares. You also agree that you will be liable to Distributor for payment of
the purchase price for Shares purchased by customers and that you shall make
payment for such shares when due.
4. We will compensate you for sales of shares of the Funds and personal
services to Fund shareholders by paying you a sales charge and/or other
commission (which may be in the form of a gross sales credit and/or an
annual residual commission) and/or a service fee, each as separately agreed
by you and us with respect to each Fund.
5. If any Shares sold to your customers under the terms of this Agreement
are repurchased by us for the account of a Fund or are tendered for
redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right
to, and refund to us, any commission received by you with respect to such
Shares.
6. No person is authorized to make any representations concerning the
Shares or the Funds except those contained in the current applicable
Prospectus and in such printed information subsequently issued by us or a
Fund as information supplemental to such Prospectus. In selling Shares, you
shall rely solely on the representations contained in the applicable
Prospectus and supplemental information mentioned above. Any printed
information which we furnish you other than the Prospectus and the Funds'
periodic reports and
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proxy solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall have no
liability or responsibility to you in these respects unless expressly assumed
in connection therewith.
7. You are hereby authorized (i) to place orders directly with a Fund or
its agent for shares of the Fund to be sold by us subject to the applicable
terms and conditions governing the placement of orders for the purchase of
Fund Shares, as set forth in the Distribution Agreement, and (ii) to tender
Shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in the Distribution Agreement. We
will provide you with copies of any updates to the Distribution Agreement.
8. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement with respect to one or more Funds upon fifteen
days prior written notice to the other party.
9. I. You shall indemnify and hold us harmless from and against any and
all losses, costs, (including reasonable attorney's fees) claims, damages and
liabilities which arise as a result of action taken pursuant to instructions
from you, or on your behalf to: (a)(i) place orders for Shares of a Fund with
the Fund's transfer agent or direct the transfer agent to receive
instructions for the order of Shares, and (ii) accept monies or direct that
the transfer agent accept monies as payment for the order of such Shares, all
as contemplated by and in accordance with Section 3 of the applicable
Distribution Agreement; (b)(i) place orders for the redemption of Shares of a
Fund with the Fund's transfer agent or direct the transfer agent to receive
instruction for the redemption of such Shares and (ii) to pay redemption
proceeds or to direct that the transfer agent pay redemption proceeds in
connection with orders for the redemption of Shares, all as contemplated by
and in accordance with Section 4 of the applicable Distribution Agreement;
Distributor agrees to indemnify and hold harmless you and your affiliates,
officers, directors, control persons and employees from and against any and
all losses, costs (including reasonable attorney's fees), claims, damages and
liabilities which arise as a result of Distributor's failure to fulfill its
obligations hereunder and from any alleged inaccuracy, omission or
misrepresentation contained in any prospectus or any advertising, or sales
literature prepared by Distributor or the Fund provided, however, that in no
case, (i) is this indemnity in favor of you or us and any of other party's
such controlling persons to be deemed to protect us or any such controlling
persons against any liability to which we or any such controlling persons
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of our duties or by reason of reckless
disregard of our obligations and duties under this Agreement or the
applicable Distribution Agreement; or (ii) are you to be liable under the
indemnity agreement contained in this paragraph with respect to any claim
made against us or any such controlling persons, unless we or any such
controlling persons, as the case may be, shall have notified you in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon us
or such controlling persons (or after we or such controlling persons shall
have received notice of such service on any designated agent),
notwithstanding the failure to notify you of any such claim shall not relieve
you from any liability which you may have to the person against whom such
action is brought otherwise than on account of the indemnity agreement
contained in this paragraph.
II. You will be entitled to participate at your own expense in the
defense, or, if you so elect, to assume the defense, of any suit brought to
enforce any such liability, but if you elect to assume the defense, such
defense shall be conducted by counsel chosen by you and reasonably
satisfactory to us or such controlling person or persons, defendant or
defendants in the suit. In the event you elect to assume the defense of any
such suit and retain such counsel, we or such controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case you do not elect to assume
the defense of any such suit, you will reimburse us or such controlling
person or persons, defendant or defendants in the suit, for the reasonable
fees and expenses of any counsel retained by them. Each party shall promptly
notify the other party to this Agreement of the commencement of any
litigation or proceedings against it or any of its officers or directors in
connection with the issuance or sale of the Shares pursuant to this Agreement.
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III. If the indemnification provided for in this Section 9 is unavailable
or insufficient to hold harmless the Distributor, as provided above in
respect of any losses, claims, damages, liabilities or expenses (or actions
in respect thereof) referred to herein, then you shall contribute to the
amount paid or payable by us as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by you on the one
hand and us on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then you shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also your relative fault on the one hand and
our relative fault on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. You and we agree that it would not be just and
equitable if contribution were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by us as a
result of the losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to above shall be deemed to include any legal or
other expenses reasonably incurred by us in connection with investigating or
defending any such claim. Notwithstanding the provisions of this subsection
(III), you shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares distributed by you to the
public were offered to the public exceeds the amount of any damages which you
have otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
IV. Notwithstanding the provisions of subsections (I), (II) and (III), we
shall indemnify, defend and hold harmless you and your officers, directors,
employees, affiliates, agents, successors and assigns from and against any
and all claims and all related losses, expenses, damages, cost and
liabilities including reasonable attorneys' fees and expenses incurred in
investigation or defense, arising out of or related to any breach of any
representation, warranty or covenant by us contained in Section 15 of this
Agreement.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Shares. Neither party shall be under any liability to the
other party except for lack of good faith and for obligations expressly
assumed herein. Nothing contained in this paragraph is intended to operate
as, and the provisions of this paragraph shall not in any way whatsoever
constitute, a waiver by you of compliance with any provision of the
Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
12. Each party represents that it is a member in good standing of the
National Association of Securities Dealers, Inc. and, with respect to any
sales in the United States, each party hereby agrees to abide by the Rules of
Fair Practice of such Association relating to the performance of the
obligations hereunder.
13. We will inform you in writing as to the states in which we believe
the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume
no responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. Notwithstanding any other provision of this Agreement to the
contrary, we represent and warrant that the names and addresses of your
customers (or customers of your affiliates) which have or which may come to
our attention in connection with this Agreement are confidential and are your
exclusive property and shall not be utilized by us except in connection with
the functions performed by us in connection with this Agreement.
Notwithstanding the foregoing, should a customer request, that we or an
organization affiliated with us, provide services to such customer, we or
such affiliated organization shall in no way violate this representation and
warranty, nor be considered in breach of this Agreement.
15. We represent, warrant, and covenant to you that the marketing
materials, any communications distributed to the public and training
materials designed by us or our agents relating to the product sold under
this Agreement are true and accurate and do not omit to state a fact
necessary to make the
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information contained therein not misleading and comply with applicable
federal and state laws. We further represent, warrant, and covenant to you
that the performance by us of our obligations under this Agreement in no way
constitutes an infringement on or other violation of copyright, trade secret,
trademark, proprietary information or non-disclosure rights of any other
party.
16. We shall maintain a contingency disaster recovery plan, and, in the
event you are so required by any regulatory or governmental agency, we shall
make such plan available to you for inspection at your office upon reasonable
advance notice by you. Each party agrees that it will at all times conduct
its activities under this Agreement in an equitable, legal and professional
manner.
17. We understand that the performance of your and our obligations under
this Agreement is subject to examination during business hours by your
authorized representatives and auditors and by federal and state regulatory
agencies, and we agree that upon being given reasonable notice and proper
identification we shall submit or furnish at a reasonable time and place to
any such representative or regulatory agency reports, information, or other
data relating to this Agreement as may reasonably be required or requested by
you. We shall maintain and make available to you upon reasonable notice all
material, data, files, and records relating to this Agreement for a period of
not less than three years after the termination of this Agreement.
18. The sales, advertising and promotional materials designed by either
party or its agents relating to products sold under this Agreement shall
comply with applicable federal and state laws. Each party agrees that the
sales, advertising and promotional materials shall be made available to the
other party prior to distribution to your employees or customers.
19. Any controversy or claim between or among the parties hereto arising
out of or relating to this Agreement, including any claim based on or arising
from an alleged tort, shall be determined by binding arbitration in
accordance with the rules of the National Association of Securities Dealers,
Inc. Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to this Agreement may bring an action, including a
summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this Agreement applies in any court having jurisdiction over
such action.
20. All notices or other communications under this Agreement shall be in
writing and given as follows:
If to us: Morgan Stanley Dean Witter Distributors
Inc.
Attn: Barry Fink,
Two World Trade Center
New York, NY 10048
If to you: National Financial
Services Corporation
Attn: [Illegible]
4201 Congress Street, Suite 245
Boston, MA
or such other address as the parties may hereafter specify in writing. Each
such notice to any party shall be either hand-delivered or transmitted,
postage prepaid, by registered or certified United States mail with return
receipt requested, and shall be deemed effective only upon receipt.
4
<PAGE>
21. This Agreement shall become effective as of the date of your
acceptance hereof, provided that you return to us promptly a signed and dated
copy.
<TABLE>
<S><C>
MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
By /s/ [Illegible]
-----------------------------------------
(Authorized Signature)
</TABLE>
Please return one signed copy
of this agreement to:
Morgan Stanley Dean Witter Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: National Financial Services Corp.
---------------------------------------
By: /s/ [Illegible]
----------------------------------------------
Address: 200 Liberty Street
-----------------------------------------
New York, New York
-----------------------------------------
Date: October 17, 1998
--------------------------------------------
5
<PAGE>
SCHEDULE A
<TABLE>
<S> <C>
Dean Witter Global Asset Allocation Fund
Morgan Stanley Dean Witter American Value Fund
Morgan Stanley Dean Witter Balanced Growth Fund
Morgan Stanley Dean Witter Balanced Income Fund
Morgan Stanley Dean Witter California Tax-Free Income Fund
Morgan Stanley Dean Witter Capital Appreciation Fund
Morgan Stanley Dean Witter Capital Growth Securities
Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas" Portfolio
Morgan Stanley Dean Witter Convertible Securities Trust
Morgan Stanley Dean Witter Developing Growth Securities Trust
Morgan Stanley Dean Witter Diversified Income Trust
Morgan Stanley Dean Witter Dividend Growth Securities Inc.
Morgan Stanley Dean Witter Equity Fund
Morgan Stanley Dean Witter European Growth Fund Inc.
Morgan Stanley Dean Witter Federal Securities Trust
Morgan Stanley Dean Witter Financial Services Trust
Morgan Stanley Dean Witter Fund of Funds
Morgan Stanley Dean Witter Global Dividend Growth Securities
Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
Morgan Stanley Dean Witter Global Utilities Fund
Morgan Stanley Dean Witter Growth Fund
Morgan Stanley Dean Witter Hawaii Municipal Trust
Morgan Stanley Dean Witter Health Sciences Trust
Morgan Stanley Dean Witter High Yield Securities Inc.
Morgan Stanley Dean Witter Income Builder Fund
Morgan Stanley Dean Witter Information Fund
Morgan Stanley Dean Witter Intermediate Income Securities Inc.
Morgan Stanley Dean Witter International SmallCap Fund
Morgan Stanley Dean Witter Japan Fund
Morgan Stanley Dean Witter Limited Term Municipal Trust
Morgan Stanley Dean Witter Market Leader Trust
Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
Morgan Stanley Dean Witter Mid-Cap Growth Fund
Morgan Stanley Dean Witter Multi-State Municipal Series Trust
Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
Morgan Stanley Dean Witter New York Tax-Free Income Fund
Morgan Stanley Dean Witter Pacific Growth Fund Inc.
Morgan Stanley Dean Witter Precious Metals and Minerals Trust
Morgan Stanley Dean Witter S&P 500 Index Fund
Morgan Stanley Dean Witter S&P 500 Select Fund
Morgan Stanley Dean Witter Short-Term Bond Fund
Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
Morgan Stanley Dean Witter Special Value Fund
Morgan Stanley Dean Witter Strategist Fund
Morgan Stanley Dean Witter Tax-Exempt Securities Trust
Morgan Stanley Dean Witter U.S. Government Securities Trust
Morgan Stanley Dean Witter Utilities Fund
Morgan Stanley Dean Witter Value-Added Market Series
Morgan Stanley Dean Witter Value Fund
Morgan Stanley Dean Witter World Wide Income Trust
</TABLE>
A-1
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 6 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
June 9, 1999, relating to the financial statements and financial highlights
of Morgan Stanley Dean Witter Short-Term Bond Fund, formerly Dean Witter
Short-Term Bond Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Custodian and Independent
Accountants" and "Experts" in such Statement of Additional Information and to
the reference to us under the heading "Financial Highlights" in such
Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
June 21, 1999
