<PAGE>
PROSPECTUS - JUNE 23, 2000
Morgan Stanley Dean Witter
SHORT-TERM BOND FUND
[COVER PHOTO]
A MUTUAL FUND THAT SEEKS TO
PROVIDE A HIGH LEVEL OF CURRENT INCOME,
CONSISTENT WITH THE PRESERVATION OF CAPITAL
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon
the adequacy of this PROSPECTUS. Any representation to the contrary is a
criminal offense.
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
The Fund Investment Objective........................................ 1
Principal Investment Strategies............................. 1
Principal Risks............................................. 1
Past Performance............................................ 3
Fees and Expenses........................................... 4
Additional Investment Strategy Information.................. 4
Additional Risk Information................................. 5
Fund Management............................................. 6
Shareholder Information Pricing Fund Shares......................................... 7
How to Buy Shares........................................... 7
How to Exchange Shares...................................... 8
How to Sell Shares.......................................... 10
Distributions............................................... 11
Tax Consequences............................................ 12
Financial Highlights ............................................................ 13
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 seeks to
provide a high level of current income, consistent with the
preservation of capital.
[ICON] PRINCIPAL INVESTMENT STRATEGIES
--------------------------------------------------------------------------------
The Fund will normally invest at least 65% of its total
assets in bonds issued or guaranteed as to principal and
interest by the U.S. government, its agencies or
instrumentalities (including zero coupon securities), and
investment grade corporate and other types of bonds. In
selecting portfolio investments to purchase or sell, the
"Investment Manager," Morgan Stanley Dean Witter Advisors
Inc., considers both domestic and international economic
developments, interest rate trends and other factors and
seeks to maintain an overall weighted average maturity for
the Fund of three years or less.
MORTGAGE-BACKED SECURITIES. Certain of the U.S. government
securities in which the Fund may invest are mortgage-backed
securities. One type of mortgage-backed security, in which
the Fund may invest, is a mortgage pass-through security.
These securities represent a participation interest in a pool
of residential mortgage loans originated by U.S. governmental
or private lenders such as banks. They differ from
conventional debt securities, which provide for periodic
payment of interest in fixed amounts and principal payments
at maturity or on specified call dates. Mortgage pass-through
securities provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments
made by the individual borrowers on the pooled mortgage
loans. Mortgage pass-through securities may be collateralized
by mortgages with fixed rates of interest or adjustable
rates.
Bonds are fixed-income debt securities. The issuer of the
debt security borrows money from the investor who buys the
security. Most debt securities pay either fixed or adjustable
rates of interest at regular intervals until they mature, at
which point investors get their principal back. The Fund's
fixed-income investments may include zero coupon securities,
which are purchased at a discount and accrue interest, but
make no payments until maturity.
In addition, the Fund may invest in foreign, asset-backed and
restricted securities and "junk bonds."
In pursuing the Fund's investment objective, the Investment
Manager has considerable leeway in deciding which investments
it buys, holds or sells on a day-to-day basis -- and which
trading strategies it uses. For example, the Investment
Manager in its discretion may determine to use some permitted
trading strategies while not using others.
[ICON] PRINCIPAL RISKS
--------------------------------------------------------------------------------
There is no assurance that the Fund will achieve its
investment objective. The Fund's share price and yield will
fluctuate with changes in the market value of the Fund's
portfolio securities. 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
1
<PAGE>
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>
HOW INTEREST RATES AFFECT BOND PRICES PRICE PER $1,000 OF A BOND IF
INTEREST RATES:
------------------------------
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 5.875% $951 $920 $1,018 $1,054
----------------------------------------------------------------------
10 years 6.00% $910 $853 $1,038 $1,110
----------------------------------------------------------------------
30 years 6.125% $841 $748 $1,093 $1,264
----------------------------------------------------------------------
</TABLE>
Coupons reflect yields on Treasury securities as of
December 31, 1999. The table is not representative of price
changes for mortgage-backed securities principally because of
prepayments. In addition, the table is an illustration and
does not represent expected yields or share price changes of
any Morgan Stanley Dean Witter mutual fund.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities in
which the Fund may invest have different risk characteristics
than traditional debt securities. Although generally the
value of fixed-income securities increases during periods of
falling interest rates and decreases during periods of rising
interest rates, this is not always the case with
mortgage-backed securities.
This is due to the fact that principal on underlying
mortgages may be prepaid at any time, as well as other
factors. Generally, prepayments will increase during a period
of falling interest rates and decrease during a period of
rising interest rates. The rate of prepayments also may be
influenced by economic and other factors. Prepayment risk
includes the possibility that, as interest rates fall,
securities with stated interest rates may have the principal
prepaid earlier than expected, requiring the Fund to invest
the proceeds at generally lower interest rates.
Investments in mortgage-backed securities are made based
upon, among other things, expectations regarding the rate of
prepayments on underlying mortgage pools. Rates of
prepayment, faster or slower than expected by the Investment
Manager, could reduce the Fund's yield, increase the
volatility of the Fund and/or cause a decline in net asset
value. Mortgage-backed securities, especially privately
issued mortgage-backed securities, are more volatile and less
liquid than other traditional types of securities.
2
<PAGE>
[Sidebar]
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's shares has varied from year
to year over the past 5 calendar years.
AVERAGE ANNUAL
TOTAL RETURNS
This table compares the Fund's average annual total returns with those of a
broad measure of market performance over time.
[End Sidebar]
OTHER RISKS. The performance of the Fund also will depend on
whether or not the Investment Manager is successful in
pursuing the Fund's investment strategy. The Fund is also
subject to other risks from its permissible investments
including risks associated with investments in foreign,
asset-backed and restricted securities and "junk bonds." For
more information about these risks, see the "Additional Risk
Information" section.
Shares of the Fund are not bank deposits and are not
guaranteed or insured by the FDIC or any other government
agency.
[ICON] PAST PERFORMANCE
--------------------------------------------------------------------------------
The bar chart and table below provide some indication of the
risks of investing in the Fund. The Fund's past performance
does not indicate how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CALENDAR YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 11.86%
'96 4.54%
'97 6.41%
'98 6.97%
'99 2.73%
</TABLE>
Year-to-date total return as of March 31, 2000 was 0.81%.
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 0.27%
(quarter ended March 31, 1996).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
---------------------------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR PAST 5 YEARS (SINCE 1/10/94)
<S> <C> <C> <C>
---------------------------------------------------------------------------------
Short-Term Bond Fund 2.73% 6.46% 5.07%
---------------------------------------------------------------------------------
Lehman Brothers Mutual Fund Short
(1-5) Investment Grade Debt
Index(1) 2.49% 7.30% 5.89%(2)
---------------------------------------------------------------------------------
</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 For the Period January 31, 1994 to December 31, 1999.
3
<PAGE>
[Sidebar]
ANNUAL FUND
OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended April 30, 2000.
[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
is a no-load 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 0.20%*
----------------------------------------------------------------------
Total annual Fund operating expenses 0.90%*
----------------------------------------------------------------------
</TABLE>
* During the fiscal year ended April 30, 2000, the Investment Manager waived
its compensation and assumed operating expenses (except brokerage fees)
without limitation to the extent such compensation and expenses exceeded
0.80% of the Fund's daily net assets on an annualized basis. The
Investment Manager will continue to assume all operating expenses (except
brokerage fees) and waive its compensation to the extent they exceed 0.80%
of the Fund's daily net assets, on an annualized basis, until December 31,
2000. For the fiscal year ended April 30, 2000, taking the waiver of
expenses into account, the actual management fee was 0.60% of the Fund's
daily net assets and the actual other expenses were 0.20% of the Fund's
daily net assets.
EXAMPLE
This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other
mutual funds.
The example assumes that you invest $10,000 in the Fund, your
investment has a 5% return each year, and the Fund's
operating expenses remain the same. Although your actual
costs may be higher or lower, the tables below show your
costs at the end of each period based on these assumptions.
<TABLE>
<CAPTION>
EXPENSES OVER TIME
-----------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
$92 $287 $498 $1,108
-----------------------------------------------------------------------------------------------
</TABLE>
[ICON] ADDITIONAL INVESTMENT STRATEGY INFORMATION
--------------------------------------------------------------------------------
This section provides additional information relating to the
Fund's principal investment strategies.
FOREIGN SECURITIES. The Fund may invest up to 25% of its
total assets in investment grade fixed-income securities
issued by foreign governments or corporations.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed
securities. The securitization techniques used to develop
mortgage-backed securities are also applied to a broad range
of other assets. Various types of assets, primarily
automobile and credit card receivables and home equity loans,
are being securitized in pass-through structures similar to
the mortgage pass-through structures.
RESTRICTED SECURITIES AND JUNK BONDS. The Fund's investments
may 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
4
<PAGE>
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 involve risks in addition to the risks associated
with domestic securities. One additional risk may be currency
risk. While the price of Fund shares is quoted in U.S.
dollars, the Fund generally may convert U.S. dollars to a
foreign market's local currency to purchase a security in
that market. If the value of that local currency falls
relative to the U.S. dollar, the U.S. dollar value of the
foreign security will decrease. This is true even if the
foreign security's local price remains unchanged.
Foreign securities also have risks related to economic and
political developments abroad, including expropriation,
confiscatory taxation, exchange control regulation,
limitations on the use or transfer of Fund assets, and any
effects of foreign social, economic or political instability.
Foreign companies, in general, are not subject to the
regulatory requirements of U.S. companies and, as such, there
may be less publicly available information about these
companies. Moreover, foreign accounting, auditing and
financial reporting standards generally are different from
those applicable to U.S. companies. Finally, in the event of
a default of any foreign debt obligations, it may be more
difficult for the Fund to obtain or enforce a judgment
against the issuers of the securities.
Securities of foreign issuers may be less liquid than
comparable securities of U.S. issuers and, as such, their
price changes may be more volatile. Furthermore, foreign
exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their
U.S. counterparts. In addition, differences in clearance and
settlement procedures in foreign markets may occasion delays
in settlements of the Fund's trades effected in those
markets.
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.
5
<PAGE>
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.
[ICON] FUND MANAGEMENT
--------------------------------------------------------------------------------
The Fund has retained the Investment Manager -- Morgan
Stanley Dean Witter Advisors Inc. -- to provide
administrative services, manage its business affairs and
invest its assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment
Manager is a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three
primary businesses: securities, asset management and credit
services. Its main business office is located at Two World
Trade Center, New York, NY 10048.
The Fund'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, 2000,
the Fund paid total compensation to the Investment Manager
amounting to 0.60% of the Fund's average daily net assets.
This amount reflects the waiver of fees and assumption of
expenses. The Investment Manager has undertaken through
December 31, 2000, to continue to assume operating expenses
of the Fund (except brokerage fees) and waive its
compensation to the extent they exceed 0.80% of the Fund's
daily net assets on an annualized basis.
[Sidebar]
MORGAN STANLEY DEAN WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc., its
wholly-owned subsidiary, had approximately $150 billion in assets under
management as of May 31, 2000.
[End Sidebar]
6
<PAGE>
[Sidebar]
CONTACTING A
FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (877)937-MSDW (toll-free) for the telephone
number of the Morgan Stanley Dean Witter office nearest you. You may also access
our office locator on our Internet site at:
www.msdw.com/individual/funds
[End Sidebar]
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. With respect to
securities that are primarily listed on foreign exchanges,
the value of the Fund's portfolio securities may change on
days when you will not be able to purchase or sell your
shares.
An exception to the Fund's general policy of using market
prices concerns its short-term debt portfolio securities.
Debt securities with remaining maturities of sixty days or
less at the time of purchase may be valued at amortized cost.
However, if the cost does not reflect the securities' market
value, these securities will be valued at their fair value.
[ICON] HOW TO BUY SHARES
--------------------------------------------------------------------------------
You may open a new account to buy Fund shares or buy
additional Fund shares for an existing account by contacting
your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative. Your Financial Advisor
will assist you, step-by-step, with the procedures to invest
in the Fund. You may also purchase shares directly by calling
the Fund's transfer agent and requesting an application.
When you buy Fund shares, the shares are purchased at the
next share price calculated after we receive your purchase
order. 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.
7
<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 the Investment Manager to pay distribution fees for
the sale and distribution of Fund shares.
[ICON] HOW TO EXCHANGE SHARES
--------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of the
Fund for shares of other continuously offered Morgan Stanley
Dean Witter Funds if the Fund shares were acquired in an
exchange of shares initially purchased in a Multi-Class Fund
or an FSC Fund (subject to a front-end sales charge). In that
case, the shares may be subsequently re-exchanged for shares
of the same Class of any Multi-Class Fund or FSC Fund or for
shares of another No-Load Fund, a Money Market Fund, North
American Government Income Trust or Short-Term U.S. Treasury
Trust. Of course, if an exchange is not permitted, you may
sell shares of the Fund and buy another fund's shares with
the proceeds.
8
<PAGE>
See the inside back cover of this PROSPECTUS for each Morgan
Stanley Dean Witter Fund's designation as a Multi-Class Fund,
FSC Fund, No-Load Fund or a 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.
Exchanges may be made after shares of the Fund acquired by
purchase have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or
dividend reinvestment. The current prospectus for each fund
describes its investment objectives, policies and investment
minimums, and should be read before investment. Since
exchanges are available only into continuously offered Morgan
Stanley Dean Witter Funds, exchanges are not available into
any new Morgan Stanley Dean Witter Fund during its initial
offering period, or when shares of a particular Morgan
Stanley Dean Witter Fund are not being offered for purchase.
EXCHANGE PROCEDURES. You can process an exchange by
contacting your Morgan Stanley Dean Witter Financial Advisor
or other authorized financial representative. Otherwise, you
must forward an exchange privilege authorization form to the
Fund's transfer agent - Morgan Stanley Dean Witter Trust
FSB - and then write the transfer agent or call
(800) 869-NEWS to place an exchange order. You can obtain an
exchange privilege authorization form by contacting your
Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you hold
share certificates, no exchanges may be processed until we
have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a
Money Market Fund) is made on the basis of the next
calculated net asset values of the funds involved after the
exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next
calculated net asset value and the Money Market Fund's shares
are purchased at their net asset value on the following
business day.
The Fund may terminate or revise the exchange privilege upon
required notice. The check writing privilege is not available
for Money Market Fund shares you acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan
Stanley Dean Witter Trust FSB, we will employ reasonable
procedures to confirm that exchange instructions communicated
over the telephone are genuine. These procedures may include
requiring various forms of personal identification such as
name, mailing address, social security or other tax
identification number. Telephone instructions also may be
recorded.
Telephone instructions will be accepted if received by the
Fund's transfer agent between 9:00 a.m. and 4:00 p.m. Eastern
time on any day the New York Stock Exchange is open
for business. During periods of drastic economic or market
changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has
not been the case with the Fund in the past.
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.
9
<PAGE>
TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of
the Fund for shares of another Morgan Stanley Dean Witter
Fund there are important tax considerations. For tax
purposes, the exchange out of the Fund is considered a sale
of Fund shares - and the exchange into the other fund is
considered a purchase. As a result, you may realize a capital
gain or loss.
You should review the "Tax Consequences" section and consult
your own tax professional about the tax consequences of an
exchange.
LIMITATIONS ON EXCHANGES. Certain patterns of past exchanges
and/or purchase or sale transactions involving the Fund or
other Morgan Stanley Dean Witter Funds may result in the Fund
limiting or prohibiting, at its discretion, additional
purchases and/or exchanges. Determinations in this regard may
be made based on the frequency or dollar amount of the
previous exchanges or purchase or sale transactions. You will
be notified in advance of limitations on your exchange
privileges.
FOR FURTHER INFORMATION REGARDING EXCHANGE PRIVILEGES, YOU
SHOULD CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL
ADVISOR OR CALL (800) 869-NEWS.
[ICON] HOW TO SELL SHARES
--------------------------------------------------------------------------------
You can sell some or all of your Fund shares at any time.
Your shares will be sold at the next price calculated after
we receive your order to sell as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
--------------------------------------------------------------------------------
Contact your To sell your shares, simply call your Morgan Stanley Dean
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, NJ 07303. If you hold share
certificates, you must return the certificates, along with
the letter and any required additional documentation.
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A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
instructions.
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</TABLE>
10
<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]
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
--------------------------------------------------------------------------------
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
[ICON] $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.
Payment may be postponed or the right to sell your shares
suspended under unusual circumstances. If you request to sell
shares that were recently purchased by check, your sale will
not be effected until it has been verified that the check has
been honored.
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."
Normally, income dividends are declared on each day the New
York Stock Exchange is open for business, and are distributed
to shareholders monthly. Capital gains, if any, are usually
distributed in December. The Fund, however, may retain and
reinvest any long-
11
<PAGE>
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 information on your
dividends and capital gains for tax purposes.
TAXES ON SALES. Your sale of Fund shares normally is subject
to federal and state income tax and may result in a taxable
gain or loss to you. A sale also may be subject to local
income tax. Your exchange of Fund shares for shares of
another Morgan Stanley Dean 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.
12
<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 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.49 $ 9.49 $ 9.50 $ 9.54 $ 9.46
---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.51 0.56 0.65 0.61 0.63
Net realized and unrealized gain (loss) (0.29) -- -- (0.06) 0.05
-------- -------- -------- ------- -------
Total income from investment operations 0.22 0.56 0.65 0.55 0.68
---------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.51) (0.56) (0.66) (0.59) (0.45)
Paid-in-capital -- -- -- -- (0.15)
-------- -------- -------- ------- -------
Total dividends and distributions (0.51) (0.56) (0.66) (0.59) (0.60)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.20 $ 9.49 $ 9.49 $ 9.50 $ 9.54
---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 2.36% 6.00% 7.02% 5.88% 7.33%
---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:(1)
---------------------------------------------------------------------------------------------------------------------
Expenses 0.80% 0.31% -- 0.64% 0.37%
---------------------------------------------------------------------------------------------------------------------
Net investment income 5.43% 5.68% 6.52% 6.25% 6.54%
---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $118,694 $186,442 $107,699 $42,252 $33,178
---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 71% 58% 55% 67% 64%
---------------------------------------------------------------------------------------------------------------------
</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 0.90% and 5.33%, respectively, for the year ended
April 30, 2000; 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; and 1.29% and 5.61%, respectively, for the year ended April 30,
1996.
13
<PAGE>
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14
<PAGE>
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15
<PAGE>
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16
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers investors a wide
range of investment choices. Come on in and meet the family!
--------------------------------------------------------------------------------
GROWTH FUNDS
--------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
Next Generation Trust
Small Cap Growth Fund
Special Value Fund
Tax-Managed Growth Fund
21st Century Trend Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas"
Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
--------------------------------------------------------------------------------
GROWTH & INCOME FUNDS
--------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Equity Fund
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Market Index Fund
Total Return Trust
Value Fund
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
Global 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)
New York Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)
There may be funds created after this PROSPECTUS was published. Please consult
the inside back cover of a new fund's prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of funds are: NL - No-Load (Mutual) Fund; MM - Money
Market Fund; FSC - A mutual fund sold with a front-end sales charge and a
distribution (12b-1) fee.
<PAGE>
MORGAN STANLEY DEAN WITTER
SHORT-TERM BOND FUND
[Sidebar]
TICKER SYMBOL:
DWSBX
-------
[End Sidebar]
Additional information about the Fund's investments is
available in the Fund's ANNUAL AND SEMI-ANNUAL REPORTS TO
SHAREHOLDERS. In the Fund's ANNUAL REPORT, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its
last fiscal year. The Fund's Statement of Additional
Information also provides additional information about the
Fund. The Statement of Additional Information is incorporated
herein by reference (legally is part of this PROSPECTUS). For
a free copy of any of these documents, to request other
information about the Fund, or to make shareholder inquiries,
please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling
your Morgan Stanley Dean Witter Financial Advisor or by
visiting our Internet site at:
www.msdw.com/individual/funds
Information about the Fund (including the STATEMENT OF
ADDITIONAL INFORMATION) can be viewed and copied at the
Securities and Exchange Commission's Public Reference Room in
Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at
(202) 942-8090. Reports and other information about the Fund
are available on the EDGAR Database on the SEC's Internet
site (www.sec.gov), and copies of this information may be
obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected],
or by writing the Public Reference Section of the SEC,
Washington, DC 20549-0102.
