MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST, 497, 1999-10-04

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
497, 1999-10-04

Previous: CENTRAL EUROPEAN MEDIA ENTERPRISES LTD, SC 13D, 1999-10-04

Next: MUTUAL FUND VARIABLE ANNUITY TRUST, 485APOS, 1999-10-04

<PAGE>

Filed Pursuant to Rule 497(c)
Registration File No.: 33-81012

PROSPECTUS - SEPTEMBER 29, 1999

Morgan Stanley Dean Witter

TOTAL RETURN TRUST

A MUTUAL FUND THAT SEEKS HIGH TOTAL
RETURN FROM CAPITAL GROWTH AND INCOME

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

The Fund Investment Objective.............................. 1
Principal Investment Strategies................... 1
Principal Risks................................... 1
Past Performance.................................. 3
Fees and Expenses................................. 4
Additional Investment Strategy Information........ 5
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
Share Class Arrangements......................... 16
Financial Highlights ................................................ 23
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.

<PAGE>

THE FUND

[GRAPHIC OMITTED]
INVESTMENT OBJECTIVE
- --------------------------------

Morgan Stanley Dean Witter Total Return Trust seeks high total return from
capital growth and income.

[GRAPHIC OMITTED]
PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------

{sidebar}
GROWTH & INCOME
An investment objective having the goal of selecting securities with the
potential to rise in price and pay out income.
{end sidebar}

The Fund will normally invest at least 65% of its total assets in common
stocks and convertible securities of domestic and foreign companies. In
selecting investments to buy, hold or sell, the Fund's "Sub-Advisor," TCW
Funds Management, Inc., typically uses a "top-down" investment process that
considers the overall economic outlook, the development of industry/sector
preferences, and, lastly, specific stock selections. Generally, at least
85% of the Fund's total assets will be invested in companies that have a
market capitalization of at least $1 billion, and the Sub-Advisor expects
them to pay dividend or interest income. Up to 5% of the Fund's convertible
securities investments may be below investment grade.

Common stock is a share ownership or equity interest in a corporation. It
may or may not pay dividends, as some companies reinvest all of their
profits back into their businesses, while others pay out some of their
profits to shareholders as dividends. A convertible security is a bond,
preferred stock or other security that may be converted into a prescribed
amount of common stock at a particular time and price.

In addition, the Fund's investments may include fixed-income securities.

In pursuing the Fund's investment objective, the Sub-Advisor has
considerable leeway in deciding which investments it buys, holds or sells
on a day-to-day basis -- and which trading or investment strategies it
uses. For example, the Sub-Advisor in its discretion may determine to use
some permitted trading or investment strategies while not using others.

[GRAPHIC OMITTED]
PRINCIPAL RISKS
- --------------------------

There is no assurance that the Fund will achieve its investment objective.
The Fund's share price will fluctuate with changes in the market value of
the Fund's portfolio securities. When you sell Fund shares, they may be
worth less than what you paid for them and, accordingly, you can lose money
investing in this Fund.

Common Stocks. A principal risk of investing in the Fund is associated with
its common stock investments. In general, stock values fluctuate in
response to activities specific to the company as well as general market,
economic and political conditions. Stocks can fluctuate widely in response
to these factors.

<PAGE>

Convertible Securities. Any Fund investments in convertible securities
subject the Fund to the risks associated with both fixed-income securities
and common stocks. To the extent that a convertible security's investment
value is greater than its conversion value, its price will be likely to
increase when interest rates fall and decrease when interest rates rise, as
with a fixed-income security. If the conversion value exceeds the
investment value, the price of the convertible security will tend to
fluctuate directly with the price of the underlying equity security. A
portion of the convertible securities in which the Fund may invest may be
below investment grade. Securities below investment grade are commonly
known as "junk bonds" and have speculative characteristics.

Other Risks. The performance of the Fund also will depend on whether the
Sub-Advisor is successful in pursuing the Fund's investment strategy. The
Fund is also subject to other risks from its permissible investments
including the risks associated with its foreign and fixed-income
investments. 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.

<PAGE>

[GRAPHIC OMITTED]
PAST PERFORMANCE
- ----------------------------
The bar chart and table below provide some indication of the risks of
investing in the Fund. The Fund's past performance does not indicate how
the Fund will perform in the future.

ANNUAL TOTAL RETURNS -- CALENDAR YEARS

27.75% 20.53% 27.44% 16.86%
1995 '96 '97 '98

The bar chart reflects the performance of Class B shares; the performance
of the other Classes will differ because the Classes have different ongoing
fees. The performance information in the bar chart does not reflect the
deduction of sales charges; if these amounts were reflected, returns would
be less than shown. Year-to-date total return as of June 30, 1999 was
21.25%.

{sidebar}
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's Class B shares has
varied from year to year for the past 4 calendar years.
{end sidebar}

{sidebar}
AVERAGE ANNUAL
TOTAL RETURNS
This table compares the Fund's average annual returns with those of a broad
measure of market performance over time, as well as with an index of funds with
similar investment objectives. The Fund's returns include the maximum
applicable sales charge for each Class and assume you sold your shares at the
end of each period.
{end sidebar}

During the periods shown in the bar chart, the highest return for a
calendar quarter was 19.65% (quarter ended December 31, 1998) and the
lowest return for a calendar quarter was -11.54% (quarter ended September
30, 1998).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)

LIFE OF FUND
PAST 1 YEAR (SINCE 11/30/94)
- --------------------------------------------------------------------------------
<S> <C> <C>
Class A(1) 11.42% --
- --------------------------------------------------------------------------------
Class B 11.86% 22.24%
- --------------------------------------------------------------------------------
Class C(1) 15.67% --
- --------------------------------------------------------------------------------
Class D(1) 17.83% --
- --------------------------------------------------------------------------------
S&P 500 Index(2) 28.58% 30.24%
- --------------------------------------------------------------------------------
Lipper Growth and Income Funds Index(3) 13.58% 22.68%
- --------------------------------------------------------------------------------
</TABLE>

1 Classes A, C and D commenced operations on July 28, 1997.

2 The Standard & Poor's (Registered Trademark) 500 Composite Stock Price
Index is a broad-based index, the performance of which is based on the
average performance of 500 widely held common stocks. The performance of
the Index does not include any expenses, fees or charges. The Index is
unmanaged and should not be considered an investment.

3 The Lipper Growth and Income Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net
assets) in the Lipper Growth and Income 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.

<PAGE>

[GRAPHIC OMITTED]
FEES AND EXPENSES
- -----------------------------
The table below briefly describes the fees and expenses that you may pay if
you buy and hold shares of the Fund. The Fund offers four Classes of
shares: Classes A, B, C and D. Each Class has a different combination of
fees, expenses and other features. The Fund does not charge account or
exchange fees. See the "Share Class Arrangements" section for further fee
and expense information.

{sidebar}
SHAREHOLDER FEES
These fees are paid directly from your investment.
{end sidebar}

{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 July 31, 1999.
{end sidebar}

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
SHAREHOLDER FEES
- ------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.25%(1) None None None
- ------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering
price or net asset value at redemption) None(2) 5.00%(3) 1.00%(4) None
- ------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------------------------------------------------
Management fee 0.75% 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.24% 0.84% 0.66% None
- ------------------------------------------------------------------------------------------------
Other expenses 0.31% 0.31% 0.31% 0.31%
- ------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.30% 1.90% 1.72% 1.06%
- ------------------------------------------------------------------------------------------------
</TABLE>

1 Reduced for purchases of $25,000 and over.

2 Investments that are not subject to any sales at the time of purchase are
subject to a contingent deferred sales charge ("CDSC") of 1.00% that will
be imposed if you sell your shares within one year after purchase, except
for certain specific circumstances.

3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion
of the CDSC.

4 Only applicable if you sell your shares within oneyear after purchase.

<PAGE>

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
depending upon whether or not you sell your shares at the end of each
period.

IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
- ------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------- --------------------------------------------
CLASS A $650 $915 $1,200 $2,010 $650 $915 $1,200 $2,010
- ------------------------------------------------- --------------------------------------------
CLASS B $693 $897 $1,226 $2,222 $193 $597 $1,026 $2,222
- ------------------------------------------------- --------------------------------------------
CLASS C $275 $542 $933 $2,030 $175 $542 $933 $2,030
- ------------------------------------------------- --------------------------------------------
CLASS D $108 $337 $585 $1,294 $108 $337 $585 $1,294
- ------------------------------------------------- --------------------------------------------
</TABLE>

Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of the
maximum front-end sales charges permitted by the NASD.

[GRAPHIC OMITTED]
ADDITIONAL INVESTMENT STRATEGY INFORMATION
- ---------------------------------------------------------
This section provides additional information relating to the Fund's
principal strategies.

Foreign Securities. The Fund may invest up to 35% of its assets in equity
or investment grade fixed-income securities (including depository receipts)
of foreign companies.

Fixed-Income Securities. The Fund also may invest up to 35% of its assets
in investment grade corporate debt securities and fixed-income securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.

Defensive Investing. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its assets in cash or money market instruments in a defensive
posture when the Sub-Advisor believes it is advisable to do so. Although
taking a defensive posture is designed to protect the Fund from an
anticipated market downturn, it could have the effect of reducing the
benefit from any upswing in the market. When the Fund takes a defensive
position, it may not achieve its investment objective.

Portfolio Turnover. The Fund may engage in active and frequent trading of
portfolio securities to achieve its principal investment strategies. The
portfolio turnover rate is

<PAGE>

not expected to exceed 300% annually under normal circumstances. A high
turnover rate, such as 300%, will increase Fund brokerage costs. It also
may increase the Fund's capital gains, which are passed along to Fund
shareholders as distributions. This, in turn, may increase your tax
liability as a Fund shareholder. See the sections on "Distributions" and
"Tax Consequences."

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.

[GRAPHIC OMITTED]
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) may involve risks in addition to the risks associated
with domestic securities. One additional risk is currency risk. While the
price of Fund shares is quoted in U.S. dollars, the Fund generally converts
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 expropriations, 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.

<PAGE>

Many European countries have adopted or are in the process of adopting a
single European currency, referred to as the "euro." The long-term
consequences of the euro conversion for foreign exchange rates, interest
rates and the value of European securities the Fund may purchase are
unclear. The consequences may adversely affect the value and/or increase
the volatility of securities held by the Fund.

Fixed-Income Securities. Principal risks of investing in the Fund are also
associated with its fixed-income investments. All fixed-income securities
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/or repay the principal on its debt.

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.

Year 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of the Investment Manager, the
Sub-Advisor and the Fund's other service providers, as well as 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, Sub-Advisor and their
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
also result in production problems for individual companies and overall
economic uncertainties. Earnings or revenues 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.

<PAGE>

[GRAPHIC OMITTED]
FUND MANAGEMENT
- ----------------------------

{sidebar}
MORGAN STANLEY DEAN WITTER ADVISORS INC.

The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company
Inc., its wholly-owned subsidiary, has more than $136 billion in assets
under management or administration as of August 31, 1999.

{end sidebar}

Effective June 28, 1999, the Fund has retained the Investment Manager -
Morgan Stanley Dean Witter Advisors Inc. - to provide administrative
services, manage its business affairs and supervise the investment of its
assets. The Investment Manager has, in turn, contracted with the
Sub-Advisor - TCW Funds Management, Inc. - to invest the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. Prior to June 28, 1999, TCW Funds Management, Inc. acted as the
Fund's advisor and Morgan Stanley Dean Witter Services Company Inc., a
wholly-owned subsidiary of the Investment Manager, served as the Fund's
manager. The Investment Manager is a wholly-owned subsidiary of Morgan
Stanley Dean Witter & Co., a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services. Its main business office
is located at Two World Trade Center, New York, New York 10048.

The Sub-Advisor is a wholly-owned subsidiary of TCW Group, Inc., whose
direct and indirect subsidiaries provide a variety of trust, investment
management and investment advisory services. The Sub-Advisor's main
business office is located at 865 South Figueroa Street, Suite 1800, Los
Angeles, California 90017.

James A. Tilton, a Managing Director of the Sub-Advisor and Thomas K.
McKissick, also a Managing Director of the Sub-Advisor and a member of the
Equity Policy Committee of the TCW Group, are the primary portfolio
managers of the Fund. Mr. Tilton and Mr. McKissick have been portfolio
managers of the Fund since its inception in November 1994. Mr. Tilton has
been a portfolio manager with affiliates of the Sub-Advisor since 1980. Mr.
McKissick has been employed by the TCW Group since 1985, first as an equity
analyst and since 1990 as a portfolio manager in the TCW Group's Large Cap
Equity Group.

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. The Investment Manager pays the
Sub-Advisor monthly compensation equal to 40% of this fee. For the fiscal
period August 1, 1998 through June 25, 1999, the Fund accrued aggregate
total compensation to Morgan Stanley Dean Witter Services Company Inc. (at
that time the Fund's manager) and TCW Funds Management, Inc. (at that time
acting as the Fund's advisor, rather than sub-advisor) in the amount of
0.75% of the Fund's average daily net assets (0.45% to Morgan Stanley Dean
Witter Services Company Inc. and 0.30% to TCW Funds Management, Inc.). For
the fiscal period June 28, 1999 through July 31, 1999 the Fund accrued
aggregate total compensation to the Investment Manager in the amount of
0.75% of the Fund's average daily net assets.

<PAGE>

SHAREHOLDER INFORMATION

[GRAPHIC OMITTED]
PRICING FUND SHARES
- -------------------------------
The price of Fund shares (excluding sales charges), called "net asset
value," is based on the value of the Fund's portfolio securities. The net
asset value of each Class, however, will differ because the Classes have
different ongoing distribution fees.

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 and/or
Sub-Advisor 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.

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 are valued at
amortized cost. However, if the cost does not reflect the securities'
market value, these securities will be valued at their fair value.

[GRAPHIC OMITTED]
HOW TO BUY SHARES
- ------------------------------

{sidbar}
CONTACTING A FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would
like to contact a Financial Advisor, call (800) THE-DEAN for the telephone
number of the Morgan Stanley Dean Witter office nearest you. You may also
access our office locator on our Internet site at:
www.msdw.com/individual/funds
{end sidebar}

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.

Because every investor has different immediate financial needs and
long-term investment goals, the Fund offers investors four Classes of
shares: Classes A, B, C and D. Class D shares are only offered to a
limited group of investors. Each Class of shares offers a distinct
structure of sales charges, distribution and service fees, and other
features that are designed to address a variety of needs. Your Financial
Advisor or other authorized financial representative can help you decide
which Class may be most appropriate for you. When purchasing Fund shares,
you must specify which Class of shares you wish to purchase.

<PAGE>

When you buy Fund shares, the shares are purchased at the next share price
calculated (less any applicable front-end sales charge for Class A shares)
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.

{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.

Investment Options for Certain Institutional and Other Investors/Class D
Shares. To be eligible to purchase Class D shares, you must qualify under
one of the investor categories specified in the "Share Class Arrangements"
section of this Prospectus.

Subsequent Investments Sent Directly to the Fund. In addition to buying
additional Fund shares for an existing account by contacting your Morgan
Stanley Dean Witter Financial Advisor, you may send a check directly to the
Fund. To buy additional shares in this manner:

o Write a "letter of instruction" to the Fund specifying the name(s) on the
account, the account number, the social security or tax identification
number, the Class of shares you wish to purchase and the investment
amount (which would include any applicable front-end sales charge). The
letter must be signed by the account owner(s).

o Make out a check for the total amount payable to: Morgan Stanley Dean
Witter Total Return Trust.

o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O.
Box 1040, Jersey City, NJ 07303.

<PAGE>

[GRAPHIC OMITTED]
HOW TO EXCHANGE SHARES
- ------------------------------------

Permissible Fund Exchanges. You may exchange shares of any Class of the
Fund for the same Class of any other continuously offered Multi-Class Fund,
or for shares of a No-Load Fund, a Money Market Fund, North American
Government Income Trust or Short-Term U.S. Treasury Trust, without the
imposition of an exchange fee. See the inside back cover of this Prospectus
for each Morgan Stanley Dean Witter Fund's designation as a Multi-Class
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
(subject to a front-end sales charge) are treated as Class A shares of a
Multi-Class Fund.

Exchanges may be made after shares of the Fund acquired by purchase have
been held for thirty days. There is no waiting period for exchanges of
shares acquired by exchange or dividend reinvestment. The current
Prospectus for each Fund describes its investment objective, 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

<PAGE>

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.

CDSC Calculations on Exchanges. See the "Share Class Arrangements" section
of this Prospectus for a further discussion of how applicable contingent
deferred sales charges (CDSCs) are calculated for shares of one Fund that
are exchanged for shares of another.

For further information regarding exchange privileges, you should contact
your Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.

<PAGE>

[GRAPHIC OMITTED]
HOW TO SELL SHARES
- -------------------------------
You can sell some or all of your Fund shares at any time. If you sell Class
A, Class B or Class C shares, your net sale proceeds are reduced by the
amount of any applicable CDSC. Your shares will be sold at the next price
calculated after we receive your order to sell as described below.

OPTIONS PROCEDURES

- ------------------------------------------------------------------------------------------------------------------
<S> <C>

Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter
Financial Advisor or Financial Advisor other authorized financial representative.
[GRAPHIC OMITTED] --------------------------------------------------------------------------------------------
Payment will be sent to the address to which the account
is registered or deposited in your brokerage account.
- -------------------------------------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction" that includes:
[GRAPHIC OMITTED] o your account number;
o the dollar amount or the number of shares you wish to sell;
o the Class of shares you wish to sell; and
o the signature of each owner as it appears on the account.
--------------------------------------------------------------------------------------------
If you are requesting payment to anyone other than the registered owner(s) or that
payment be sent to any address other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature guarantee. You can 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.
--------------------------------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account is registered, or
otherwise according to your instructions.
- ------------------------------------------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter Family of Funds has a total
Withdrawal Plan market value of at least $10,000, you may elect to withdraw amounts of $25 or more,
[GRAPHIC OMITTED] 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.
--------------------------------------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC may be waived under
certain circumstances. See the Class B waiver categories listed in the "Share Class
Arrangements" section of this Prospectus.
--------------------------------------------------------------------------------------------
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 instruction 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.

<PAGE>

Payment may be postponed or the right to sell your shares suspended,
however, 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.

Reinstatement Privilege. If you sell Fund shares and have not previously
exercised the reinstatement privilege, you may, within 35 days after the
date of sale, invest any portion of the proceeds in the same Class of Fund
shares at their net asset value and receive a pro rata credit for any CDSC
paid in connection with the 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
EasyInvestSM, 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.

[GRAPHIC OMITTED]
DISTRIBUTIONS
- ------------------------

{sidebar}
TARGETED DIVIDENDS(SM)
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of 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}

The Fund passes substantially all of its earnings from income and capital
gains along to its investors as "distributions." The Fund earns income from
stocks and 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 are passed along as "capital gain
distributions."

The Fund declares income dividends separately for each Class. Distributions
paid on Class A and Class D shares will be higher than for Class B and
Class C because distribution fees that Class B and Class C pay are higher.
Normally, income dividends are distributed to

<PAGE>

shareholders annually. Capital gains, if any, are usually distributed in
December. The Fund, however, may retain and reinvest any long-term capital
gains. The Fund may at times make payments from sources other than income
or capital gains that represent a return of a portion of your investment.

Distributions are reinvested automatically in additional shares of the same
Class 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.

[GRAPHIC OMITTED]
TAX CONSEQUENCES
- ----------------------------
As with any investment, you should consider how your Fund investment will
be taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.

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:

o The Fund makes distributions; and

o You sell Fund shares, including an exchange to another Morgan
Stanley Dean Witter Fund.

Taxes on Distributions. Your 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 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.

<PAGE>

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.

[GRAPHIC OMITTED]
SHARE CLASS ARRANGEMENTS
- -------------------------------------
The Fund offers several Classes of shares having different distribution
arrangements designed to provide you with different purchase options
according to your investment needs. Your Morgan Stanley Dean Witter
Financial Advisor or other authorized financial representative can help you
decide which Class may be appropriate for you.

The general public is offered three Classes: Class A shares, Class B shares
and Class C shares, which differ principally in terms of sales charges and
ongoing expenses. A fourth Class, Class D shares, is offered only to a
limited category of investors. Shares that you acquire through reinvested
distributions will not be subject to any front-end sales charge or CDSC --
contingent deferred sales charge. Sales personnel may receive different
compensation for selling each Class of shares. The sales charges applicable
to each Class provide for the distribution financing of shares of that
Class.

The chart below compares the sales charge and maximum annual 12b-1 fee
applicable to each Class:

MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
A Maximum 5.25% initial sales charge reduced for purchase of $25,000 or
more; shares sold without an initial sales charge are generally
subject to a 1.0% CDSC during the first year 0.25%
- -----------------------------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to 0% after six years 1.0%
- -----------------------------------------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.0%
- -----------------------------------------------------------------------------------------------------------
D None None
- -----------------------------------------------------------------------------------------------------------
</TABLE>

CLASS A SHARES Class A shares are sold at net asset value plus an initial
sales charge of up to 5.25%. The initial sales charge is reduced for
purchases of $25,000 or more according to the schedule below. Investments
of $1 million or more are not subject to an initial sales charge, but are
generally subject to a contingent deferred sales charge, or CDSC, of 1.0%
on sales made within one year after the last day of the month of purchase.
The CDSC will be assessed in the same manner and with the same CDSC waivers
as with Class B shares. Class A shares are also subject to a distribution
(12b-1) fee of up to 0.25% of the average daily net assets of the Class.

<PAGE>

The offering price of Class A shares includes a sales charge (expressed as
a percentage of the offering price) on a single transaction as shown in the
following table:

{sidebar}
FRONT-END SALES CHARGE OR FSC
An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges -- the Combined Purchase Privilege, Right of Accumulation
and Letter of Intent.
{end sidebar}

<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
----------------------------------------------
PERCENTAGE OF APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION PUBLIC OFFERING PRICE OF NET AMOUNT INVESTED
- -------------------------------------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.25% 5.54%
- -------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
- -------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
- -------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
- -------------------------------------------------------------------------------------
$250,000 but less than $1 million 2.00% 2.04%
- -------------------------------------------------------------------------------------
$1 million and over 0 0
- -------------------------------------------------------------------------------------
</TABLE>

The reduced sales charge schedule is applicable to purchases of Class A
shares in a single transaction by:

o A single account (including an individual, trust or fiduciary account).

o Family member accounts (limited to husband, wife and children under the
age of 21).

o Pension, profit sharing or other employee benefit plans of companies and
their affiliates.

o Tax-exempt organizations.

o Groups organized for a purpose other than to buy mutual fund shares.

Combined Purchase Privilege. You also will have the benefit of reduced
sales charges by combining purchases of Class A shares of the Fund in a
single transaction with purchases of Class A shares of other Multi-Class
Funds and shares of FSC Funds.

Right of Accumulation. You also may benefit from a reduction of sales
charges if the cumulative net asset value of Class A shares of the Fund
purchased in a single transaction, together with shares of other Funds you
currently own which were previously purchased at a price including a
front-end sales charge (including shares acquired through reinvestment of
distributions), amounts to $25,000 or more. Also, if you have a cumulative
net asset value of all your Class A and Class D shares equal to at least $5
million (or $25 million for certain employee benefit plans), you are
eligible to purchase Class D shares of any Fund subject to the Fund's
minimum initial investment requirement.

<PAGE>

You must notify your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative (or Morgan Stanley Dean Witter Trust
FSB if you purchase directly through the Fund), at the time a purchase
order is placed, that the purchase qualifies for the reduced charge under
the Right of Accumulation. Similar notification must be made in writing
when an order is placed by mail. The reduced sales charge will not be
granted if: (i) notification is not furnished at the time of the order; or
(ii) a review of the records of Dean Witter Reynolds or other authorized
dealer of Fund shares or the Fund's transfer agent does not confirm your
represented holdings.

Letter of Intent. The schedule of reduced sales charges for larger
purchases also will be available to you if you enter into a written "letter
of intent." A letter of intent provides for the purchase of Class A shares
of the Fund or other Multi-Class Funds or shares of FSC Funds within a
thirteen month period. The initial purchase under a letter of intent must
be at least 5% of the stated investment goal. To determine the applicable
sales charge reduction, you may also include: (1) the cost of shares of
other Morgan Stanley Dean Witter Multi-Class Funds which were previously
purchased at a price including a front-end sales charge during the 90-day
period prior to the distributor receiving the letter of intent, and (2) the
cost of shares of other Funds you currently own acquired in exchange for
shares of Funds purchased during that period at a price including a
front-end sales charge. You can obtain a letter of intent by contacting
your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative, or by calling (800) 869-NEWS. If you do not
achieve the stated investment goal within the thirteen-month period, you
are required to pay the difference between the sales charges otherwise
applicable and sales charges actually paid, which may be deducted from your
investment.

Other Sales Charge Waivers. In addition to investments of $1 million or
more, your purchase of Class A shares is not subject to a front-end sales
charge (or a CDSC upon sale) if your account qualifies under one of the
following categories:

o A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.

o Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including mandatory sale or transfer
restrictions on termination) approved by the Fund's distributor
pursuant to which they pay an asset-based fee for investment advisory,
administrative and/or brokerage services.

o Employer-sponsored employee benefit plans, whether or not qualified
under the Internal Revenue Code, for which Morgan Stanley Dean Witter
Trust FSB serves as trustee or Dean Witter Reynolds' Retirement Plan
Services serves as recordkeeper under a written Recordkeeping Services
Agreement ("MSDW Eligible Plans") which have at least 200 eligible
employees.

o An MSDW Eligible Plan whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible
employees.

<PAGE>
o A client of a Morgan Stanley Dean Witter Financial Advisor who joined
us from another investment firm within six months prior to the date of
purchase of Fund shares, and you used the proceeds from the sale of
shares of a proprietary mutual fund of that Financial Advisor's
previous firm that imposed either a front-end or deferred sales charge
to purchase Class A shares, provided that: (1) you sold the shares not
more than 60 days prior to the purchase of Fund shares, and (2) the
sale proceeds were maintained in the interim in cash or a money market
fund.

o Current or retired Directors/Trustees of the Morgan Stanley Dean Witter
Funds, such persons' spouses and children under the age of 21, and trust
accounts for which any of such persons is a beneficiary.

o Current or retired directors, officers and employees of Morgan Stanley
Dean Witter & Co. and any of its subsidiaries, such persons' spouses and
children under the age of 21 and trust accounts for which any of such
persons is a beneficiary.

CLASS B SHARES Class B shares are offered at net asset value with no
initial sales charge but are subject to a contingent deferred sales charge,
or CDSC, as set forth in the table below. For the purpose of calculating
the CDSC, shares are deemed to have been purchased on the last day of the
month during which they were purchased.

{sidebar}
CONTINGENT DEFERRED SALES CHARGE OR CDSC
A fee you pay when you sell shares of certain Morgan Stanley Dean Witter
Funds purchased without an initial sales charge. This fee declines the
longer you hold your shares as set forth in the table.
{end sidebar}

<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------------------------------------------------------------
<S> <C>
First 5.0%
- ------------------------------------------------------------------------------
Second 4.0%
- ------------------------------------------------------------------------------
Third 3.0%
- ------------------------------------------------------------------------------
Fourth 2.0%
- ------------------------------------------------------------------------------
Fifth 2.0%
- ------------------------------------------------------------------------------
Sixth 1.0%
- ------------------------------------------------------------------------------
Seventh and thereafter None
- ------------------------------------------------------------------------------
</TABLE>

Each time you place an order to sell or exchange shares, shares with no
CDSC will be sold or exchanged first, then shares with the lowest CDSC will
be sold or exchanged next. For any shares subject to a CDSC, the CDSC will
be assessed on an amount equal to the lesser of the current market value or
the cost of the shares being sold.

CDSC Waivers. A CDSC, if otherwise applicable, will be waived in the case
of:

o Sales of shares held at the time you die or become disabled (within
the definition in Section 72(m)(7) of the Internal Revenue Code which
relates to the ability to engage in gainful employment), if the shares
are: (i) registered either in your name (not a trust) or in the names
of you and your spouse as joint tenants with right of survivorship; or
(ii) held in a qualified corporate or self-employed retirement plan,
IRA or 403(b) Custodial Account, provided in either case that the sale
is requested within one year of your death or initial determination of
disability.

<PAGE>
o Sales in connection with the following retirement plan
"distributions:" (i) lump-sum or other distributions from a qualified
corporate or self-employed retirement plan following retirement (or,
in the case of a "key employee" of a "top heavy" plan, following
attainment of age 59 1/2); (ii) distributions from an IRA or 403(b)
Custodial Account following attainment of age 59 1/2; or (iii) a
tax-free return of an excess IRA contribution (a "distribution" does
not include a direct transfer of IRA, 403(b) Custodial Account or
retirement plan assets to a successor custodian or trustee).

o Sales of shares held for you as a participant in a MSDW Eligible Plan.

o Sales of shares in connection with the Systematic Withdrawal Plan of
up to 12% annually of the value of each Fund from which plan sales are
made. The percentage is determined on the date you establish the
Systematic Withdrawal Plan and based on the next calculated share
price. You may have this CDSC waiver applied in amounts up to 1% per
month, 3% per quarter, 6% semi-annually or 12% annually. Shares with
no CDSC will be sold first, followed by those with the lowest CDSC. As
such, the waiver benefit will be reduced by the amount of your shares
that are not subject to a CDSC. If you suspend your participation in
the plan, you may later resume plan payments without requiring a new
determination of the account value for the 12% CDSC waiver.

All waivers will be granted only following the Fund's distributor receiving
confirmation of your entitlement. If you believe you are eligible for a
CDSC waiver, please contact your Financial Advisor or call (800) 869-NEWS.

Distribution Fee. Class B shares are subject to an annual 12b-1 fee of 1.0%
of the lesser of: (a) the average daily aggregate gross purchases by all
shareholders of the Fund's Class B shares since the inception of the Fund
(not including reinvestments of dividends or capital gains distributions),
less the average daily aggregate net asset value of the Fund's Class B
shares sold by all shareholders since the Fund's inception upon which a
CDSC has been imposed or waived, or (b) the average daily net assets of
Class B.

Conversion Feature. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales charge.
The ten year period runs from the last day of the month in which the shares
were purchased, or in the case of Class B shares acquired through an
exchange, from the last day of the month in which the original Class B
shares were purchased; the shares will convert to Class A shares based on
their relative net asset values in the month following the ten year period.
At the same time, an equal proportion of Class B shares acquired through
automatically reinvested distributions will convert to Class A shares on
the same basis. (Class B shares held before May 1, 1997, however, will
convert to Class A shares in May 2007.)

In the case of Class B shares held in a MSDW Eligible Plan, the plan is
treated as a single investor and all Class B shares will convert to Class A
shares on the conversion date of the Class B shares of a Morgan Stanley
Dean Witter Fund purchased by that plan.

<PAGE>

Currently, the Class B share conversion is not a taxable event; the
conversion feature may be cancelled if it is deemed a taxable event in the
future by the Internal Revenue Service.

If you exchange your Class B shares for shares of a Money Market Fund, a
No-Load Fund, North American Government Income Trust or Short-Term U.S.
Treasury Trust, the holding period for conversion is frozen as of the last
day of the month of the exchange and resumes on the last day of the month
you exchange back into Class B shares.

Exchanging Shares Subject to a CDSC. There are special considerations when
you exchange Fund shares that are subject to a CDSC. When determining the
length of time you held the shares and the corresponding CDSC rate, any
period (starting at the end of the month) during which you held shares of a
fund that does not charge a CDSC will not be counted. Thus, in effect the
"holding period" for purposes of calculating the CDSC is frozen upon
exchanging into a fund that does not charge a CDSC.

For example, if you held Class B shares of the Fund in a regular account
for one year, exchanged to Class B of another Morgan Stanley Dean Witter
Multi-Class Fund for another year, then sold your shares, a CDSC rate of 4%
would be imposed on the shares based on a two year holding period -- one
year for each Fund. However, if you had exchanged the shares of the Fund
for a Money Market Fund (which does not charge a CDSC) instead of the
Multi-Class Fund, then sold your shares, a CDSC rate of 5% would be imposed
on the shares based on a one year holding period. The one year in the Money
Market Fund would not be counted. Nevertheless, if shares subject to a CDSC
are exchanged for a Fund that does not charge a CDSC, you will receive a
credit when you sell the shares equal to the distribution (12b-1) fees, if
any, you paid on those shares while in that Fund up to the amount of any
applicable CDSC.

In addition, shares that are exchanged into or from a Morgan Stanley Dean
Witter Fund subject to a higher CDSC rate will be subject to the higher
rate, even if the shares are re-exchanged into a Fund with a lower CDSC
rate.

CLASS C SHARES Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on sales made within one
year after the last day of the month of purchase. The CDSC will be assessed
in the same manner and with the same CDSC waivers as with Class B shares.

Distribution Fee. Class C shares are subject to an annual distribution
(12b-1) fee of up to 1.0% of the average daily net assets of that Class.
The Class C shares' distribution fee may cause that Class to have higher
expenses and pay lower dividends than Class A or Class D shares. Unlike
Class B shares, Class C shares have no conversion feature and, accordingly,
an investor that purchases Class C shares may be subject to distribution
(12b-1) fees applicable to Class C shares for an indefinite period.

<PAGE>

CLASS D SHARES Class D shares are offered without any sales charge on
purchases or sales and without any distribution (12b-1) fee. Class D shares
are offered only to investors meeting an initial investment minimum of $5
million ($25 million for MSDW Eligible Plans) and the following investor
categories:

o Investors participating in the Investment Manager's mutual fund asset
allocation program (subject to all of its terms and conditions, including
mandatory sale or transfer restrictions on termination) pursuant to which
they pay an asset-based fee.

o Employee benefit plans maintained by Morgan Stanley Dean Witter & Co.
or any of its subsidiaries for the benefit of certain employees of
Morgan Stanley Dean Witter & Co. and its subsidiaries.

o Certain unit investment trusts sponsored by Dean Witter Reynolds.

o Certain other open-end investment companies whose shares are distributed
by the Fund's distributor.

Meeting Class D Eligibility Minimums. To meet the $5 million ($25 million
for MSDW Eligible Plans) initial investment to qualify to purchase Class D
shares you may combine: (1) purchases in a single transaction of Class D
shares of the Fund and other Morgan Stanley Dean Witter Multi-Class Funds
and/or (2) previous purchases of Class A and Class D shares of Multi-Class
Funds and shares of FSC Funds you currently own, along with shares of
Morgan Stanley Dean Witter Funds you currently own that you acquired in
exchange for those shares.

NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a cash
payment representing an income dividend or capital gain and you reinvest
that amount in the applicable Class of shares by returning the check within
30 days of the payment date, the purchased shares would not be subject to
an initial sales charge or CDSC.

PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company Act
of 1940 with respect to the distribution of Class A, Class B and Class C
shares. The Plan allows the Fund to pay distribution fees for the sale and
distribution of these shares. It also allows the Fund to pay for services
to shareholders of Class A, Class B and Class C shares. Because these fees
are paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment in these Classes and may cost you
more than paying other types of sales charges.

<PAGE>

FINANCIAL HIGHLIGHTS

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

FOR THE PERIOD
JULY 28, 1997*
THROUGH
YEARS ENDED JULY 31 1999 1998 JULY 31, 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A++
- ------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA
- ------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.78 $16.59 $16.07
- ------------------------------------------------------------------------------------------------
Income (loss) from investment operations

Net investment income (loss) -- (0.01) 0.01

Net realized and unrealized gain 4.47 1.34 0.51
--------- ------- --------
Total income from investment operations 4.47 1.33 0.52
- ------------------------------------------------------------------------------------------------
Less distributions from net realized gain (0.89) (1.14) --

Net asset value, end of period $20.36 $16.78 $16.59
- ------------------------------------------------------------------------------------------------
TOTAL RETURN+ 27.78% 8.94% 3.24%(1)
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 1.30%(3) 1.31% 1.31%(2)
- ------------------------------------------------------------------------------------------------
Net investment income (loss) (0.10)%(3) (0.07)% 4.08%(2)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $4,079 $1,254 $10
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 79% 93% 198%
- ------------------------------------------------------------------------------------------------
</TABLE>

* The date shares were first issued.

++ The per share amounts were computed using an average number of shares
outstanding during the period.

+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

<PAGE>

YEARS ENDED JULY 31 1999++ 1998++
- --------------------------------------------------------------------------------
<S> <C> <C>
CLASS B
- --------------------------------------------------------------------------------
SELECTED PER SHARE DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $16.68 $16.59
- ------------------------------------------ ------ ------
Income (loss) from investment operations

Net investment income (loss) (0.12) (0.08)
Net realized and unrealized gain 4.43 1.31
----- -----
Total income from investment operations 4.31 1.23
- --------------------------------------------------------------------------------
Less dividends and distributions from

Net investment income -- --
Net realized gain (0.89) (1.14)
------ ------
Total dividends and distributions (0.89) (1.14)
- --------------------------------------------------------------------------------
Net asset value, end of period $20.10 $16.68
- --------------------------------------------------------------------------------
TOTAL RETURN+ 27.04% 8.25%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Expenses 1.90%(4) 1.90%
- --------------------------------------------------------------------------------
Net investment income (loss) (0.70)%(4) (0.50)%
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period, in thousands $194,763 $152,358
- --------------------------------------------------------------------------------
Portfolio turnover rate 79% 93%
- --------------------------------------------------------------------------------

FOR THE PERIOD
NOVEMBER 30,
1994*
THROUGH
YEARS ENDED JULY 31 1997** 1996 JULY 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS B
- -------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.00 $11.75 $10.00
- -------------------------------------------------------------------------------------------------
Income (loss) from investment operations

Net investment income (loss) 0.04 0.15 0.21
Net realized and unrealized gain 5.81 0.80 1.68
---- ---- ----
Total income from investment operations 5.85 0.95 1.89
- -------------------------------------------------------------------------------------------------
Less dividends and distributions from

Net investment income (0.06) (0.21) (0.14)
Net realized gain (1.20) (0.49) --
------ ------ ------
Total dividends and distributions (1.26) (0.70) (0.14)
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $16.59 $12.00 $11.75
- -------------------------------------------------------------------------------------------------
TOTAL RETURN+ 51.66% 8.23% 19.04%(1)
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 2.05% 1.98%(3) 0.94%(2)(3)
- -------------------------------------------------------------------------------------------------
Net investment income (loss) 0.28% 1.30%(3) 3.19%(2)(3)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $117,041 $48,524 $36,018
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 198% 261% 91%(1)
- -------------------------------------------------------------------------------------------------
</TABLE>

* Commencement of operations.

** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.

++ The per share amounts were computed using an average number of shares
outstanding during the period.

+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.

(3) If the Fund had borne all of its expenses that were reimbursed or waived
by Morgan Stanley Dean Witter Services Company Inc. (the then current
Manager) and TCW Funds Management Inc. (the then current Adviser), the
above annualized expense and net investment income ratios would have been
2.21% and 1.07%, respectively, for the year ended July 31, 1996 and 2.66%
and 1.47%, respectively, for the period ended July 31, 1995.

(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.

<PAGE>

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
YEARS ENDED JULY 31 1999 1998 JULY 31, 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS C++
- -------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.66 $16.59 $16.07
- -------------------------------------------------------------------------------------------------
Income (loss) from investment operations

Net investment income (loss) (0.09) (0.12) 0.01
Net realized and unrealized gain 4.44 1.33 0.51
---- ---- ----
Total income from investment operations 4.35 1.21 0.52
- -------------------------------------------------------------------------------------------------
Less distributions from net realized gain (0.89) (1.14) --
Net asset value, end of period $20.12 $16.66 $16.59
- -------------------------------------------------------------------------------------------------
TOTAL RETURN+ 27.33% 8.12% 3.24%(1)
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 1.72%(3) 2.06% 2.06%(2)
- -------------------------------------------------------------------------------------------------
Net investment income (loss) (0.52)%(3) (0.70)% 2.75%(2)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $1,609 $700 $38
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 79% 93% 198%
- -------------------------------------------------------------------------------------------------
</TABLE>

* The date shares were first issued.

++ The per share amounts were computed using an average number of shares
outstanding during the period.

+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

<PAGE>

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
YEARS ENDED JULY 31 1999 1998 JULY 31, 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS D++
- -------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.83 $16.59 $16.07
- -------------------------------------------------------------------------------------------------
Income (loss) from investment operations

Net investment income (loss) 0.02 0.06 0.01
Net realized and unrealized gain 4.50 1.32 0.51
---- ---- ----
Total income from investment operations 4.52 1.38 0.52
- -------------------------------------------------------------------------------------------------
Less distributions from net realized gain (0.89) (1.14) --
Net asset value, end of period $20.46 $16.83 $16.59
- -------------------------------------------------------------------------------------------------
TOTAL RETURN+ 28.08% 9.20% 3.24%(1)
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 1.06%(3) 1.06% 1.06%(2)
- -------------------------------------------------------------------------------------------------
Net investment income 0.14%(3) 0.34% 4.33%(2)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $1,990 $11 $10
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 79% 93% 198%
- -------------------------------------------------------------------------------------------------
</TABLE>

* The date shares were first issued.

++ The per share amounts were computed using an average number of shares
outstanding during the period.

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

(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

<PAGE>

NOTES

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

<PAGE>

NOTES

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

<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
Small Cap Growth Fund
Special Value Fund

THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust

GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas"
Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH & 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
Global Utilities Fund
Utilities Fund

GLOBAL FUNDS
Global Dividend Growth Securities
- --------------------------------------------------------------------------------

INCOME FUNDS

GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust

DIVERSIFIED INCOME FUNDS
Diversified Income Trust

CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund(NL)

GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust

TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust(FSC)
Limited Term Municipal Trust(NL)
Multi-State Municipal Series Trust(FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------

MONEY MARKET FUNDS

TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund(MM)
U.S. Government Money Market Trust(MM)

TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust(MM)
New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)

There may be Funds created after this Prospectus was published. Please
consult the inside back cover of a new Fund's prospectus for its
designations, e.g., Multi-Class Fund or Money Market Fund.

Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except
for North American Government Income Trust and Short-Term U.S. Treasury
Trust, is a Multi-Class Fund. A Multi-Class Fund is a mutual fund offering
multiple Classes of shares. The other types of Funds are: NL -- No-Load
(Mutual) Fund; MM -- Money Market Fund; FSC -- A mutual fund sold with a
front-end sales charge and a distribution (12b-1) fee.

<PAGE>

PROSPECTUS - SEPTEMBER 29, 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
providesadditional information about the Fund. The Statement of Additional
Information is incorporated herein by reference (legally is part of this
Prospectus). For a free copy of any of these documents, to request other
information about the Fund, or to make shareholder inquiries, please call:

(800) 869-NEWS

You also may obtain information about the Fund by calling your Morgan
Stanley Dean Witter Financial Advisor or by visiting our Internet site at:

WWW.MSDW.COM/INDIVIDUAL/FUNDS

Information about the Fund (including the Statement of Additional
Information) can be viewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, DC. Information about the
Reference Room's operations may be obtained by calling the SEC at (800)
SEC-0330. Reports and other information about the Fund are available on the
SEC's Internet site (www.sec.gov) and copies of this information may be
obtained, upon payment of a duplicating fee, by writing the Public
Reference Section of the SEC, Washington, DC 20549-6009.

TICKER SYMBOLS:

Class A: TRFAX Class C: TRFCX
- -------------- --------------

Class B: TRFBX Class D: TRFDX
- -------------- --------------

(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-8600)

Morgan Stanley Dean Witter

TOTAL RETURN TRUST

A MUTUAL FUND THAT SEEKS TO
PROVIDE CURRENT INCOME AND
MODERATE CAPITAL GROWTH

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
MORGAN STANLEY
DEAN WITTER
SEPTEMBER 29, 1999 TOTAL RETURN TRUST

- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus dated September 29, 1999 for Morgan Stanley Dean Witter Total Return
Trust may be obtained without charge from the Fund at its address or telephone
number listed below or from Dean Witter Reynolds at any of its branch offices.

Morgan Stanley Dean Witter Total Return Trust
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 ........................................ 7
III. Management of the Fund ....................................................... 9
A. Board of Trustees ............................................................ 9
B. Management Information ....................................................... 9
C. Compensation ................................................................. 13
IV. Control Persons and Principal Holders of Securities .......................... 15
V. Management, Investment Advice and Other Services ................................ 16
A. Investment Manager and Sub-Advisor ........................................... 16
B. Principal Underwriter ........................................................ 16
C. Services Provided by the Investment Manager, the Sub-Advisor
and Fund Expenses Paid by Third Parties ...................................... 17
D. Dealer Reallowances .......................................................... 18
E. Rule 12b-1 Plan .............................................................. 18
F. Other Service Providers ...................................................... 22
VI. Brokerage Allocation and Other Practices ........................................ 23
A. Brokerage Transactions ....................................................... 23
B. Commissions .................................................................. 23
C. Brokerage Selection .......................................................... 24
D. Directed Brokerage ........................................................... 24
E. Regular Broker-Dealers ....................................................... 24
VII. Capital Stock and Other Securities ............................................ 25
VIII. Purchase, Redemption and Pricing of Shares ................................... 25
A. Purchase/Redemption of Shares ................................................ 25
B. Offering Price ............................................................... 26
IX. Taxation of the Fund and Shareholders ........................................... 27
X. Underwriters .................................................................... 29
XI. Calculation of Performance Data ................................................. 29
XII. Financial Statements ............................................................ 30
</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 Total Return Trust, 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.

"Sub-Advisor " -- TCW Funds Management, Inc. a wholly-owned subsidiary of
TCW.

"TCW " -- The TCW Group, Inc., a preeminent investment management and
investment advisory services firm.

"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 June 29, 1994 as a Massachusetts business trust under the name "TCW/DW Total
Return Trust." On February 25, 1999 the Fund's Trustees adopted an Amendment to
the Fund's Declaration of Trust changing the name of the Fund to Morgan Stanley
Dean Witter Total Return Trust, effective June 28, 1999.

II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------

A. CLASSIFICATION

The Fund is a "non-diversified" mutual fund and, as sucth, its investments
are not required to meet certain diversification requirements under federal
securities law. Compared with "diversified" funds, the Fund may invest a
greater percentage of its assets in the securities of an individual corporation
or governmental entity. Thus, the Fund's assets may be concentrated in fewer
securities than other Funds. A decline in the value of these investments would
cause the Fund's overall value to decline to a greater degree. The Fund's
investments, however, are currently diversified and may remain diversified in
the future.

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."

MONEY MARKET SECURITIES. 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 and 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 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 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 deposit 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;

Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grade by Moody's
Investor's 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

4
<PAGE>

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 and/or Sub-Advisor 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.

ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.

A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payments in cash on the
security during the year.

INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments primarily
in commercial real estate properties. Investment in real estate investment
trusts may be the most practical available means for the Fund to invest in the
real estate industry (the Fund is prohibited from investing in real estate
directly). As a shareholder in a real estate investment trust, the Fund would
bear its ratable share of the real estate investment trust's expenses,
including its advisory and administration fees. At the same time the Fund would
continue to pay its own management fees, investment advisory fees and other
expenses, as a result of which the Fund and its shareholders in effect will be
absorbing duplicate levels of fees with respect to investments in real estate
investment trusts.

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

5
<PAGE>

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 25% 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. 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 and/or Sub-Advisor 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.

An increase in the percentage of the Fund's assets committed to the
purchase of securities on a "when, as and if issued" basis may increase the
volatility of its net asset value. The Fund may also sell securities on a
"when, as and if issued" basis provided that the issuance of the security will
result automatically from the exchange or conversion of a security owned by the
Fund at the time of sale.

PRIVATE PLACEMENTS AND RESTRICTED SECURITIES. 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

6
<PAGE>

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 and/or
Sub-Advisor, 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 invest up to 5% of the
value of its net assets in warrants, including not more than 2% in warrants not
listed on either the New York or American Stock Exchange. 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. The Fund may invest up to 5% of the value of its net assets in
rights.

YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the Sub-Advisor 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 Sub-Advisor, 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.

C. FUND POLICIES/INVESTMENT RESTRICTIONS

The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act
of 1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the
Fund. The Investment Company Act defines a majority as the lesser of (a) 67% or
more of the shares present at a meeting of shareholders, if the holders of 50%
of the outstanding shares of the Fund are present or represented by proxy; or
(b) more than 50% of the outstanding shares of the Fund. For purposes of the
following restrictions: (i) all percentage limitations apply immediately after
a purchase or initial investment; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.

7
<PAGE>

The Fund will:

1. Seek high total return from capital growth and income.

The Fund may not:

1. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.

2. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.

3. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.

4. 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.

5. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.

6. 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).

7. 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 initial or variation margin for futures are
not deemed to be pledges of assets.

8. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) purchasing any securities on
a when-issued or delayed delivery basis; (c) purchasing or selling any
financial futures contracts; (d) borrowing money; or (e) lending
portfolio securities.

9. Make loans of money or securities, except: (a) by the purchase of
portfolio securities in which the Fund may invest consistent with its
investment objective and policies; (b) by investment in repurchase
agreements; or (c) by lending its portfolio securities.

10. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or sell financial or stock index futures contracts or
options thereon.

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 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 the purpose of exercising control or management of any
other issuer.

As a non-fundamental policy, the Fund may not, as to 75% of its total
assets, purchase more than 10% of the voting securities of any issuer.

8
<PAGE>

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 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 or the Sub-Advisor's parent company,
TCW. These are the "disinterested" 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 or the Sub-Advisor, and with the 91 Morgan Stanley Dean
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
Trustee December, 1998); Director or Trustee of the Morgan
c/o Kmart Corporation Stanley Dean Witter Funds and Discover Brokerage
3100 West Big Beaver Road Index Series; formerly Chairman and Chief
Troy, Michigan Executive Officer of Levitz Furniture 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
Chairman of the Board Officer of the Morgan Stanley Dean Witter Funds
Chief Executive Officer and Trustee and Discover Brokerage Index Series; formerly
Two World Trade Center Chairman, Chief Executive Officer and Director of
New York, New York the Investment Manager, the 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).
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ----------------------------------------------------
<S> <C>
Edwin J. Garn (66) ........................ Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds and Discover Brokerage Index Series;
c/o Huntsman Corporation formerly United States Senator (R-Utah)
500 Huntsman Way (1974-1992) and Chairman, Senate Banking
Salt Lake City, Utah Committee (1980-1986); formerly Mayor of Salt
Lake 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.

Wayne E. Hedien (65) ...................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds and Discover Brokerage Index
c/o Mayer, Brown & Platt Series; Director of The PMI Group, Inc. (private
Counsel to the Independent Trustees mortgage insurance); Trustee and Vice Chairman
1675 Broadway of The Field Museum of Natural History; formerly
New York, New York associated with the Allstate Companies
(1966-1994), most recently as Chairman of The
Allstate Corporation (March, 1993-December,
1994) and Chairman and Chief Executive Officer of
its wholly-owned subsidiary, Allstate Insurance
Company (July, 1989-December, 1994); director
of various other business and charitable
organizations.

Dr. Manuel H. Johnson (50) ................ Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of
c/o Johnson Smick International, Inc. the Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Chairman of the Audit
Washington, D.C. Committee and Director or Trustee of the Morgan
Stanley Dean Witter Funds 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
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan
237 Park Avenue Stanley Dean Witter Funds and Discover Brokerage
New York, New York Index Series; formerly Vice President, Bankers
Trust Company and BT Capital Corporation
(1984-1988); director of various business
organizations.
</TABLE>

10
<PAGE>

John L. Schroeder (69) .................... Retired; Chairman of the Deriatives Committee
Trustee and Director or Trustee of the Morgan Stanley
c/o Mayer, Brown & Platt Dean Witter Funds and Discover Brokerage Index
Counsel to the Independent Trustees Series; Director of Citizens Utilities Company
1675 Broadway (telecommunications, gas, electric and water
New York, New York utilities company); formerly Executive Vice
President and Chief Investment Officer of Home
Insurance Company (August, 1991-September,
1995).

Mitchell M. Merin (46) .................... President and Chief Operating Officer of Asset
President Management of MSDW (since December, 1998);
Two World Trade Center President and Director (since April, 1997) and
New York, New York Chief Executive Officer (since June, 1998) of the
Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and
Director of the Distributor (since June, 1998);
Chairman and Chief Executive Officer (since June,
1998) and Director (since January, 1998) of the
Transfer Agent; Director of various MSDW
subsidiaries; President of the Morgan Stanley Dean
Witter Funds 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
Vice President, Secretary and General Counsel (since February,
Secretary and General Counsel 1997) and Director (since July, 1998) of the
Two World Trade Center Investment Manager and MSDW Services
New York, New York Company; Senior Vice President (since March,
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.
</TABLE>

11
<PAGE>

Thomas K. McKissick (37) .................. Managing Director of the Sub-Advisor; Managing
Vice President Director, Equities of Trust Company of the West
865 South Figueroa Street and TCW Asset Management Company.
Los Angeles, California

Thomas F. Caloia (53) ..................... First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW
Two World Trade Center Services Company; Treasurer of the Morgan
New York, New York Stanley Dean Witter Funds 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, 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, and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer
Agent, are Vice Presidents of the Fund.

In addition, 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,
and Natasha Kassian, a staff attorney of the Investment Manager, are Assistant
Secretaries of the Fund.

INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the Independent
Directors/Trustees. The Morgan Stanley Dean Witter Funds seek as Independent
Directors/Trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' Boards, such individuals may reject other
attractive assignments because the Funds make substantial demands on their
time. All of the Independent Directors/Trustees serve as members of the Audit
Committee. In addition, three of the Directors/Trustees, including two
Independent Directors/Trustees, serve as members of the Derivatives Committee
and the Insurance Committee.

The Independent Directors/Trustees are charged with recommending to the
full Board approval of management, advisory and administration contracts, Rule
12b-1 plans and distribution and underwriting agreements; continually reviewing
Fund performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage
and allocations, as well as other matters that arise from time to time. The
Independent Directors/Trustees are required to select and nominate individuals
to fill any Independent Director/Trustee vacancy on the Board of any Fund that
has a Rule 12b-1 plan of distribution. Most of the Morgan Stanley Dean Witter
Funds have a Rule 12b-1 plan.

The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional

12
<PAGE>

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.

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS/TRUSTEES
FOR ALL MORGAN STANLEY DEAN WITTER FUNDS. The Independent Directors/Trustees
and the Funds' management believe that having the same Independent
Directors/Trustees for each of the Morgan Stanley Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Directors/Trustees for each of the Funds or
even of sub-groups of Funds. They believe that having the same individuals
serve as Independent Directors/Trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility
of separate groups of Independent Directors/Trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same Independent
Directors/Trustees serve on all Fund Boards enhances the ability of each Fund
to obtain, at modest cost to each separate Fund, the services of Independent
Directors/Trustees, of the caliber, experience and business acumen of the
individuals who serve as Independent Directors/Trustees of the Morgan Stanley
Dean Witter Funds.

TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties.
It also provides that all third persons shall look solely to the Fund property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.

C. COMPENSATION

The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or
a Committee meeting, or a meeting of the Independent Trustees and/or more than
one Committee meeting, take place on a single day, the Trustees are paid a
single meeting fee by the Fund. The Fund also reimburses such Trustees for
travel and other out-of-pocket expenses incurred by them in connection with
attending such meetings. Trustees and officers of the Fund who are or have been
employed by the Investment Manager or an affiliated company receive no
compensation or expense reimbursement from the Fund for their services as
Trustee. Dr. Johnson serves as Chairman of the Audit Committee.

At their June 8, 1999 meeting, shareholders elected or re-elected, as
appropriate, the following eight individuals to the Fund's Board of Trustees to
serve for indefinite terms: Michael Bozic, Charles A. Fiumefreddo, Edwin Jacob
(Jake) Garn, Wayne E. Hedien, Dr. Manuel H. Johnson, Michael E. Nugent, Philip
J. Purcell and John L. Schroeder. Messrs. Fiumefreddo, Johnson, Nugent and
Schroeder previously served as Trustees of the Fund and were previously elected
by shareholders. Messrs. Bozic, Garn, Hedien and Purcell previously held
directorships or trusteeships with the other Morgan Stanley Dean Witter Funds
and were elected to replace Messrs. Argue, DeMartini, Larkin and Stern who
resigned as Trustees. Messrs. Bozic, Garn, Hedien and Purcell commenced service
at the time the new

13
<PAGE>

Investment Management Agreement took effect on June 28, 1999. Prior to the
effectiveness of the election of Messrs. Bozic, Garn, Hedien and Purcell and
the resignation of Messrs. Argue, DeMartini, Larkin and Stern, the Fund paid
each Independent Trustee an annual fee of $2,800 plus a per meeting fee of $200
for meetings of the Board of Trustees or committees of the Board attended by
the Trustee. The fee paid by the Fund to the Chairman of the Audit Committee
and the Chairman of the Independent Trustees remained unchanged.

The following table illustrates the compensation that the Fund paid to
those of its Independent Trustees who were Trustees of the Fund on July 31,
1999, for the fiscal year ended on that date.

FUND COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------- --------------
<S> <C>
Michael Bozic ................. $ 300
Edwin J. Garn ................. 300
Wayne Hedien .................. 300
Dr. Manuel H. Johnson ......... 5,313
Michael E. Nugent ............. 5,208
John L. Schroeder ............. 5,908
</TABLE>

At such time as the Fund has paid fees to the Independent Trustees for a
full fiscal year at the lower current compensation rates set forth above, and
assuming that during such fiscal year the Fund holds the same number of
meetings of the Board, the Independent Trustees and the Committees as were held
by the other Morgan Stanley Dean Witter Funds during the calendar year ended
December 31, 1998, it is estimated that the compensation paid to each current
Independent Trustee during such fiscal year will be $1,650, with and an
additional $750 to Dr. Johnson who serves as Chairman of the Audit Committee
and an additional $500 each to Messrs. Nugent and Schroeder, who serve as
Chairmen of the Insurance Committee and the Derivatives Committee respectively.

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.

14
<PAGE>

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.

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 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>
FOR ALL ADOPTING FUNDS
---------------------------------
ESTIMATED
CREDITED
YEARS ESTIMATED RETIREMENT BENEFITS ESTIMATED ANNUAL
OF SERVICE AT PERCENTAGE OF ACCRUED AS EXPENSES BENEFITS UPON RETIREMENT
NAME OF RETIREMENT ELIGIBLE BY ALL FROM ALL
INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION ADOPTING FUNDS ADOPTING FUNDS(2)
- --------------------------- --------------- --------------- --------------------- -------------------------
<S> <C> <C> <C> <C>
Michael Bozic ............. 10 60.44% $22,377 $52,250
Edwin J. Garn ............. 10 60.44 35,225 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>

- ----------
(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.

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

IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------

The following persons owned 5% or more of the outstanding Class A Shares
of the Fund as of September 8, 1999: James P. Rogers, 172 Torrey Pines Terrace,
Del Mar, CA 92014 -- 29.752%; Dean Witter Reynolds Inc. as custodian for Joseph
Sirotkin IRA rollover dated 8/7/92, 2001 Tonnelle Avenue, North Bergen, NJ
07047 -- 16.975%; Mark A. Susz revocable trust dated 5/1/97, Mark A. Susz,
trustee, 400 West 49th, Terrace Unit 2188, Kansas City, MO 64112 -- 10.639%.
The following persons owned 5% or more of the outstanding Class C Shares of the
Fund as of September 8, 1999: Mountain Movers Inc., C/O John Hercher, 7373
South Alton Way, Englewood, CO 80112 -- 5.338%; Jeffrey L. Stratton and Carol
S. Stratton, as joint tenants, 12152 Southwick Circle, Knoxville, TN 37922 --
5.180%. The following persons owned 5% or more of the Class D Shares of the
Fund on September 8, 1999: Mark A. Susz revocable trust dated 5/7/97, Mark
A.Susz trustee, 400 West 49th, Kansas City, MO 64112 -- 97.961%.

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.

15
<PAGE>

V. MANAGEMENT, INVESTMENT ADVICE AND OTHER SERVICES
- -------------------------------------------------------------------------------

A. INVESTMENT MANAGER AND SUB-ADVISOR

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.

The Sub-Advisor is TCW Funds Management, Inc., a wholly-owned
subsidiary of TCW, whose direct and indirect subsidiaries provide a variety of
trust, investment management and investment advisory services. The Sub-Advisor
is headquartered at 865 South Figueroa Street, Suite 1800, Los Angeles,
California 90017. Robert A. Day, who is Chairman of the Board of Directors of
TCW, may be deemed to be a control person of the Sub-Advisor by virtue of the
aggregate ownership by Mr. Day and his family of more than 25% of the
outstanding voting stock of TCW. The Sub-Advisor was retained to provide
sub-advisory services to the Fund effective June 28, 1999.

Pursuant to an Investment Management Agreement (the "Management
Agreement") with the Investment Manager, the Fund has retained the Investment
Manager to provide administrative services, manage its business affairs and
supervise the investment of the Fund's assets. The Fund pays the Investment
Manager monthly compensation calculated daily at the annual rate of 0.75% of
the Fund's average daily net assets. The management fee is allocated among the
Classes pro rata based on the net assets of the Fund attributable to each
Class. The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.

Under a Sub-Advisory Agreement (the "Sub-Advisory Agreement") between
the Sub-Advisor and the Investment Manager, the Sub-Advisor provides the Fund
with investment advice and portfolio management relating to the Fund's
investments in securities, subject to the overall supervision of the Investment
Manager. The Investment Manager pays the Sub-Advisor monthly compensation equal
to 40% of the Investment Manager's fee.

Prior to June 28, 1999, the Fund was managed by MSDW Services Company,
pursuant to a management agreement between the Fund and MSDW Services Company
and was advised by TCW Funds Management, Inc. pursuant to an advisory agreement
between the Fund and TCW Funds Management, Inc. As part of an overall
consolidation of the TCW/DW Family of Funds and the Morgan Stanley Dean Witter
Family of Funds, the Fund's Board of Trustees recommended on February 25, 1999
and shareholders of the Fund approved on June 8, 1999 the Investment Management
Agreement between the Fund and the Investment Manager. The Board also
recommended and shareholders also approved the Sub-Advisory Agreement between
the Investment Manager and TCW Funds Management, Inc. The fee rate under the
Management Agreement with the Investment Manager is identical to the total
aggregate fee rate in effect under the previous management and advisory
agreements. For the fiscal years ended July 31, 1997 and 1998 MSDW Services
Company accrued total compensation under the old management agreement in the
amounts of $320,431 and $641,236, respectively. For the same periods, TCW Funds
Management, Inc. accrued total compensation in its capacity of adviser to the
Fund in the amounts of $213,621 and $427,491, respectively. For the fiscal
period August 1, 1998 through June 25, 1999, MSDW Services Company accrued
total compensation under the old management agreement in the amount of
$671,221. For the fiscal period August 1, 1998 through June 25, 1999, TCW Funds
Management, Inc. accrued total compensation in its former capacity as adviser
to the Fund in the amount of $447,480. For the fiscal period June 26, 1999,
through July 31, 1999, the Investment Manager accrued total compensation under
the new Investment Management Agreement in the amount of $151,303. Combined,
such total fee paid by the Fund for the fiscal year ended July 31, 1999, was
$1,270,004.

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

16
<PAGE>

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, THE SUB-ADVISOR AND FUND
EXPENSES PAID BY THIRD PARTIES

The Investment Manager supervises the investment of the Fund's assets. 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 oversee the management of the assets of the
Fund in a manner consistent with its investment objective.

Under the terms of the Management Agreement, the Investment Manager also
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.

Pursuant to the Sub-Advisory Agreement, the Sub-Advisor has been retained,
subject to the overall supervision of the Investment Manager, to continuously
furnish investment advice concerning individual security selections, asset
allocations and overall economic trends.

Expenses not expressly assumed by the Investment Manager or the
Sub-Advisor under the Management Agreement and the Sub-Advisory Agreement or by
the Distributor, will be paid by the Fund. These expenses will be allocated
among the four Classes of shares pro rata based on the net assets of the Fund
attributable to each Class, except as described below. 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 or the Sub-Advisor; all
expenses incident to any dividend, withdrawal or redemption options; charges
and

17
<PAGE>

expenses of any outside service used for pricing of the Fund's shares; fees and
expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Investment Manager or the Sub-Advisor
(not including compensation or expenses of attorneys who are employees of the
Investment Manager or the Sub-Advisor); 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 12b-1 fees relating to a
particular Class will be allocated directly to that Class. In addition, other
expenses associated with a particular Class (except advisory or custodial fees)
may be allocated directly to that Class, provided that such expenses are
reasonably identified as specifically attributable to that Class and the direct
allocation to that Class is approved by the Trustees.

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 who are not parties to the Management Agreement or the Sub-Advisory
Agreement or are "independent Trustees," which votes must be cast in person at
a meeting called for the purpose of voting on such approval.

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 each Class, other
than Class D, pays the Distributor compensation accrued daily and payable
monthly at the following annual rates: 0.25% and 1.0% of the average daily net
assets of Class A and Class C, respectively, and, with respect to Class B, 1.0%
of the lesser of: (a) the average daily aggregate gross sales of the Fund's
Class B shares since the inception of the Fund (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares redeemed since the Fund's inception
upon which a contingent deferred sales charge has been imposed or upon which
such charge has been waived; or (b) the average daily net assets of Class B
shares.

18
<PAGE>

The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the last three fiscal
years ended July 31, in approximate amounts as provided in the table below (the
Distributor did not retain any of these amounts).

<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A .......... FSCs:(1) $ 5,300 FSCs:(1) $ 14,513 FSCs:(1) $ 0(2)
CDSCs: $ 0 CDSCs: $ 0 CDSCs: $ 0(2)
Class B .......... CDSCs: $315,135 CDSCs: $316,290 CDSCs: $180,978
Class C .......... CDSCs: $ 911 CDSCs: $ 494 CDSCs: $ 0(2)
</TABLE>

- ----------
(1) FSCs apply to Class A only.

(2) This Class commenced operations on July 28, 1997.

The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.

Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. Class B shares of the Fund
accrued amounts payable to the Distributor under the Plan, during the fiscal
year ended July 31, 1999, of $1,395,453. This amount is equal to 0.84% of the
average daily net assets of Class B for the fiscal year and was calculated
pursuant to clause (a) of the compensation formula under the Plan. For the
fiscal year ended July 31, 1999, Class A and Class C shares of the Fund accrued
payments under the Plan amounting to $4,996 and $5,667, respectively, which
amounts are equal to 0.24% and 0.66% of the average daily net assets of Class A
and Class C, respectively, for the fiscal year.

The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.

With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for
the sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value
of the respective accounts for which they are the Financial Advisors or dealers
of record in all cases. On orders of $1 million or more (for which no sales
charge was paid) or net asset value purchases by employer-sponsored employee
benefit plans, whether or not qualified under the Internal Revenue Code, for
which the Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement ("MSDW Eligible Plans"), MSDW Advisors compensates Financial
Advisors by paying them, from its own funds, a gross sales credit of 1.0% of
the amount sold.

With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends

19
<PAGE>

or distributions) of the amount sold in all cases. In the case of Class B
shares purchased on or after July 28, 1997 by MSDW Eligible Plans, Dean Witter
Reynolds compensates its Financial Advisors by paying them, from its own funds,
a gross sales credit of 3.0% of the amount sold.

With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.

With respect to Class D shares other than shares held by participants in
MSDW Advisor's mutual fund asset allocation program, MSDW Advisors compensates
Dean Witter Reynolds' Financial Advisors by paying them, from its own funds,
commissions for the sale of Class D shares, currently a gross sales credit of
up to 1.0% of the amount sold. There is a chargeback of 100% of the amount paid
if the Class D shares are redeemed in the first year and a chargeback of 50% of
the amount paid if the Class D shares are redeemed in the second year after
purchase. The Manager also compensates Dean Witter Reynolds' Financial Advisors
by paying them, from its own funds, an annual residual commission, currently up
to 0.10% of the current value of the respective accounts for which they are the
Financial Advisors of record (not including accounts of participants in the
Investment Manager's mutual fund asset allocation program).

The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds'
Fund-associated distribution-related expenses, including sales compensation,
and overhead and other branch office distribution-related expenses including
(a) the expenses of operating Dean Witter Reynolds' branch offices in
connection with the sale of Fund shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares; and (d) other expenses relating to branch
promotion of Fund sales.

The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on
behalf of the Fund and, in the case of Class B shares, opportunity costs, such
as the gross sales credit and an assumed interest charge thereon ("carrying
charge"). In the Distributor's reporting of the distribution expenses to the
Fund, in the case of Class B shares, such assumed interest (computed at the
"broker's call rate") has been calculated on the gross credit as it is reduced
by amounts received by the Distributor under the Plan and any contingent
deferred sales charges received by the Distributor upon redemption of shares of
the Fund. No other interest charge is included as a distribution expense in the
Distributor's calculation of its distribution costs for this purpose. The
broker's call rate is the interest rate charged to securities brokers on loans
secured by exchange-listed securities.

The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.25%, in the case of
Class A, and 1.0%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C
will be reimbursable under the Plan. With respect to Class A, in the case of
all expenses other than expenses representing the service fee, and, with
respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including, a majority of
the Independent Trustees. Expenses representing the service fee (for Class A)
or a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives (for Class C) may be reimbursed without
prior determination. In the event that the Distributor proposes that monies
shall be reimbursed for other than such expenses, then in making quarterly
determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses

20
<PAGE>

to be incurred on behalf of the Fund, together with a report explaining the
purposes and anticipated benefits of incurring such expenses. The Trustees will
determine which particular expenses, and the portions thereof, that may be
borne by the Fund, and in making such a determination shall consider the scope
of the Distributor's commitment to promoting the distribution of the Fund's
Class A and Class C shares.

Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended July 31, 1999 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $9,853,813 on behalf of Class B since the inception of the Plan. It
is estimated that this amount was spent in approximately the following ways:
(i) 21.10% ($2,078,615)--advertising and promotional expenses; (ii) 1.98%
($195,464)--printing and mailing of prospectuses for distribution to other than
current shareholders; and (iii) 76.92% ($7,579,734)--other expenses, including
the gross sales credit and the carrying charge, of which 6.60% ($499,918)
represents carrying charges, 38.67% ($2,931,044) represents commission credits
to Dean Witter Reynolds branch offices and other selected broker-dealers for
payments of commissions to Financial Advisors and other authorized financial
representatives, and 54.73% ($4,148,772) represents overhead and other branch
office distribution-related expenses. The amounts accrued by Class A and a
portion of the amounts accrued by Class C under the Plan were service fees
during the fiscal year ended July 31, 1999. The remainder of the amounts
accrued by Class C were for expenses which relate to compensation of sales
personnel and associated overhead expenses.

In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $4,988,978 as of July 31, 1999 (the end of the
Fund's fiscal year), which was equal to 2.56% of the net assets of Class B on
such date. Because there is no requirement under the Plan that the Distributor
be reimbursed for all distribution expenses with respect to Class B shares or
any requirement that the Plan be continued from year to year, this excess
amount does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan and the proceeds of CDSCs paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees
or CDSCs, may or may not be recovered through future distribution fees or
CDSCs.

In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales commission credited to Morgan Stanley Dean Witter Financial
Advisors and other authorized financial representatives at the time of sale may
be reimbursed in the subsequent calendar year. The Distributor has advised the
Fund that unreimbursed expenses representing a gross sales commission credited
to Morgan Stanley Dean Witter Financial Advisors and other authorized financial
representatives at the time of sale totaled $0.0 in the case of Class C at
December 31, 1998 (end of the calendar year), which amount was equal to 0% of
the net assets of Class C on such date, and that there were no such expenses
that may be reimbursed in the subsequent year in the case of Class A on such
date. No interest or other financing charges will be incurred on any Class A or
Class C distribution expenses incurred by the Distributor under the Plan or on
any unreimbursed expenses due to the Distributor pursuant to the Plan.

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 Manager, Dean Witter Reynolds,

21
<PAGE>

MSDW Advisors 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 that: (a) the Plan is essential in order to
give Fund investors a choice of alternatives for payment of distribution and
service charges and 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 (b) without the compensation to individual brokers and the
reimbursement of distribution and account maintenance expenses of Dean Witter
Reynolds' branch offices made possible by the 12b-1 fees, Dean Witter Reynolds
could not establish and maintain an effective system for distribution,
servicing of Fund shareholders and maintenance of shareholder accounts; and (3)
what services had been provided and were continuing to be provided under the
Plan to the Fund and its shareholders. Based upon their review, the Trustees,
including each of the Independent Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.

The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.

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, 100 Church 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, NY
10036, serves as the independent accountants of the Fund. The independent
accountants are responsible for auditing the annual financial statements of the
Fund.

(3) AFFILIATED PERSONS

The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses
and reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records

22
<PAGE>

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

A. BROKERAGE TRANSACTIONS

Subject to the general supervision of the Trustees, the Investment Manager
and/or Sub-Advisor are responsible for decisions to buy and sell securities for
the Fund, the selection of brokers and dealers to effect the transactions, and
the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded 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. On occasion, the Fund may also purchase certain money
market instruments directly from an issuer, in which case no commissions or
discounts are paid.

During the fiscal years ended July 31, 1997, 1998 and 1999, the Fund paid
a total of $354,603, $337,545 and $442,986, respectively, in 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 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 July 31, 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 year ended July 31, 1997, the Fund paid $43,448 in
brokerage commissions to Dean Witter Reynolds. During the fiscal years ended
1998 and 1999 there were no brokerage fees paid to Dean Witter Reynolds. During
the period June 1 through July 31, 1997 and during the fiscal years ended July
31, 1998 and 1999, the Fund paid a total of $1,850, $8,215 and $20,882,
respectively, in 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. During the fiscal years ended July 31, 1998 and 1999, the
brokerage commissions paid to Morgan Stanley & Co. represented approximately
2.43% and 4.71%, respectively, of the total brokerage commissions paid by the
Fund for this period and were paid on account of transactions having an
aggregate dollar value equal to approximately 2.14% and 2.74%, respectively, of
the aggregate dollar value of all portfolio transactions of the Fund during the
year for which commissions were paid.

23
<PAGE>

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. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid
in all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager and/or Sub-Advisor from obtaining
a high quality of brokerage and research services. In seeking to determine the
reasonableness of brokerage commissions paid in any transaction, the Investment
Manager and/or Sub-Advisor relies upon its experience and knowledge regarding
commissions generally charged by various brokers and on its judgment in
evaluating the brokerage and research services received from the broker
effecting the transaction. These determinations are necessarily subjective and
imprecise, as in most cases an exact dollar value for those services is not
ascertainable.

In seeking to implement the Fund's policies, the Investment Manager and
the Sub-Advisor effect transactions with those brokers and dealers who the
Investment Manager and/or Sub-Advisor believes provide the most favorable
prices and are capable of providing efficient executions. If the Investment
Manager and/or Sub-Advisor 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 and the Sub-Advisor.
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 and/or Sub-Advisor
from brokers and dealers may be of benefit to the Investment Manager and/or
Sub-Advisor in the management of accounts of some of their other clients and
may not in all cases benefit the Fund directly.

The Investment Manager and the Sub-Advisor currently serve as investment
advisors 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 and the Sub-Advisor to cause purchase and
sale transactions to be allocated among the Fund and others whose assets they
manage in such manner as they deem 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 and the Sub-Advisor utilize a pro rata allocation
process based on the size of the funds involved and the number of shares
available from the public offering.

D. DIRECTED BROKERAGE

During the fiscal year ended July 31, 1999, the Fund paid $185,729 in
brokerage commissions in connection with transactions in the aggregate amount
of $101,826,842 to brokers because of research services provided.

E. REGULAR BROKER-DEALERS

During the fiscal year ended July 31, 1999, the Fund purchased common
stock issued by Goldman Sachs Group Inc. and Merrill Lynch, Pierce, Fenner &
Smith Inc., which issuers were among the ten brokers or dealers which executed
transactions for or with the Fund in the largest dollar amounts during the
fiscal year. At July 31, 1999, the Fund held common stock issued by Goldman
Sachs Group Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. with market
values of $546,656 and $3,934,013, respectively.

24
<PAGE>

VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------

The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. All shares of beneficial interest of
the Fund are of $0.01 par value and are equal as to earnings, assets and voting
privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses, if such
proposal is submitted separately to Class A shareholders. Also, Class A, Class
B and Class C bear expenses related to the distribution of their respective
shares.

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. In addition, under certain circumstances the shareholders may call a
meeting to remove Trustees and the Fund is required to provide assistance in
communicating with shareholders about such a meeting. The voting rights of
shareholders are not cumulative, so that holders of more than 50 percent of the
shares voting can, if they choose, elect all Trustees being selected, while the
holders of the remaining shares would be unable to elect any Trustees.

Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.

All of the Trustees have been elected by the shareholders of the Fund,
most recently at a Special Meeting of Shareholders held on June 8, 1999. The
Trustees themselves have the power to alter the number and the terms of office
of the Trustees (as provided for in the Declaration of Trust), and they may at
any time lengthen or shorten their own terms or make their terms of unlimited
duration and appoint their own successors, provided that always at least a
majority of the Trustees has been elected by the shareholders of the Fund.

VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------

A. PURCHASE/REDEMPTION OF SHARES

Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.

TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Fund 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

25
<PAGE>

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 continuously offered 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.

TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
Fund shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the
length of time shares subject to the charge have been held), any transfer
involving less than all of the shares in an account will be made on a pro rata
basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior to
the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.

EXCHANGING SHARES OF CLASSES WITH A CDSC

When exchanging shares of a Class of the Fund that imposes a CDSC, shares
that are not subject to a CDSC because they were (i) purchased more than one
year ago (for Class A and Class C) or six years ago (for Class B) or (ii)
acquired through reinvestment of dividends or distributions (all such shares
referred to as "Free Shares") will be exchanged first. After exchanging such
Free Shares the shares subject to a CDSC that were held the longest will be
exchanged next. Shares purchased during the same month are deemed to be held
for the same length of time. (For shares held for the same length of time but
subject to different CDSC rates, the shares with the lower CDSC rate will be
exchanged first.) When exchanging shares subject to a CDSC, you should know
that the CDSC rate will be calculated on such exchanged shares based on the
lesser of: (a) the purchase price of those shares; or (b) their current net
asset value at the time of the exchange. Accordingly, any appreciation in value
on such exchanged shares is not subject to a CDSC. When exchanging a portion of
shares deemed to be held for the same length of time, shares representing any
appreciation in value (and therefore, such shares will not be subject to any
CDSC) will be exchanged first.

B. OFFERING PRICE

The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's Distributor, Dean
Witter Reynolds and other authorized dealers as described in Section "V.
Management, Investment Advice and Other Services--F. Rule 12b-1 Plan."

The price of Fund shares, called "net asset value," is based on the value
of the Fund's portfolio securities. Net asset value per share of each Class is
calculated by dividing the value of the portion of the Fund's securities and
other assets attributable to that Class, less the liabilities attributable to
that Class, by the number of shares of that Class outstanding. The assets of
each Class of shares are invested in a single portfolio. The net asset value of
each Class, however, will differ because the Classes have different ongoing
fees.

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 or the Sub-Advisor that sale or

26
<PAGE>

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.

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.

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

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.

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

27
<PAGE>

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 and/or Sub-Advisor 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 maximum tax on long-term capital
gains applicable to individuals is 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.

Subject to certain exceptions, a corporate shareholder may be eligible for
a 70% dividends received deduction to the extent that the Fund earns and
distributes qualifying dividends from its investments. Distributions of net
capital gains by the Fund will not be eligible for the dividends received
deduction.

Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of 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, the portion taxable as
long-term capital gains and the amount of any dividends eligible for the
federal dividends received deduction for corporations.

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 sale or redemption of
shares within six months of the date of their purchase will be treated as a
long-term capital loss to the extent of any distributions of net long-term
capital gains with respect to such shares during the six-month period.

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

28
<PAGE>

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 any other continuously offered
Morgan Stanley Dean Witter Fund 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
- --------------------------------------------------------------------------------

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

From time to time, the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. 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. The ending
redeemable value is reduced by any contingent deferred sales charge ("CDSC") at
the end of the one, five, ten year or other period. 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 (which in the case of Class A shares is reduced by the Class A
initial sales charge), 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. Based on this calculation, the average annual total returns for Class B
for the one year period ended July 31, 1999 and from November 30, 1994, the
date of inception, through July 31, 1999 were 22.04% and 23.40%, respectively.
The average annual total returns of Class A for the fiscal year ended July 31,
1999 and for the period July 28, 1997 (inception of the Class) through July 31,
1999 were 21.07% and 16.63%, respectively. The average annual total returns of
Class C for the fiscal year ended July 31, 1999 and for the period July 28,
1997 (inception of the Class) through July 31, 1999 were 26.33% and 19.14%,
respectively. The average annual total returns of Class D for the fiscal year
ended July 31, 1999 and for the period July 28, 1997 (inception of the Class)
through July 31, 1999 were 28.08% and 20.08%, respectively.

In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction
of the CDSC for each of Class B and Class C which, if reflected, would reduce
the performance quoted. For example, the average annual total return of the
Fund may be calculated in the manner described above, but without deduction for
any applicable sales charge. Based on this calculation, the average annual
total returns of Class B for the one year period ended July 31, 1999 and from
November 30, 1994 through July 31, 1999 were 27.04% and 23.60%, respectively.
The average annual total returns of Class A for the fiscal year ended July 31,
1999 and for the period July 28, 1997 through July 31, 1999 were 27.78% and
19.80%, respectively. The average annual total returns of Class C for the
fiscal year ended July 31, 1999 and for the period July 28, 1997 through July
31, 1999 were 27.33% and 19.14%, respectively. The average annual total returns
of Class D for the fiscal year ended July 31, 1999 and for the period July 28,
1997 through July 31, 1999 were 28.08% and 20.08%, respectively.

29
<PAGE>

In addition, the Fund may compute its aggregate total return for each
Class 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 (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on this calculation, the total returns
for Class B for the one year period ended July 31, 1999 and the date of
inception through July 31, 1999 were 27.04% and 168.70%, respectively. The
total returns of Class A for the fiscal year ended July 31, 1999 and for the
period July 28, 1997 through July 31, 1999 were 27.78% and 43.71%,
respectively. The total returns of Class C for the fiscal year ended July 31,
1999 and for the period July 28, 1997 through July 31, 1999 were 27.33% and
42.12%, respectively. The total returns of Class D for the fiscal year ended
July 31, 1999 and for the period July 28, 1997 through July 31, 1999 were
28.08% and 44.38%, respectively.

The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1
to the Fund's aggregate total return to date (expressed as a decimal and
without taking into account the effect of any applicable CDSC) and multiplying
by $9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as
the case may be. Investments of $10,000, $50,000 and $100,000 in each Class at
inception of the Class would have grown to the following amounts at July 31,
1999:

<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ------------------------------------
CLASS DATE $10,000 $50,000 $100,000
- ----------------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Class A ......... 7/28/97 $13,617 $68,981 $139,399
Class B ......... 11/30/94 26,870 134,350 268,700
Class C ......... 7/28/97 14,212 71,060 142,120
Class D ......... 7/28/97 14,438 72,190 144,380
</TABLE>

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
July 31, 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.

30
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1999

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- --------------
<S> <C> <C>
COMMON STOCKS (97.0%)
Aerospace (8.2%)
109,900 Boeing Co. ................................ $ 4,986,712
8,400 Northrop Grumman Corp. .................... 605,850
1,785 United Technologies Corp. ................. 119,037
1,000 Honeywell, Inc. ........................... 119,812
567,700 Wyman-Gordon Co.* ......................... 10,821,781
------------
16,653,192
------------
Air Freight/Delivery Services (1.1%)
49,000 FDX Corp.* ................................ 2,195,812
------------
Auto Parts: O.E.M. (2.2%)
249,298 Delphi Automotive Systems Corp. 4,487,364
------------
Beverages -- Non-Alcoholic (2.5%)
2,000 Coca Cola Co. ............................. 120,625
127,850 PepsiCo, Inc. ............................. 5,002,131
------------
5,122,756
------------
Computer Communications (3.4%)
111,150 Cisco Systems, Inc.* ...................... 6,905,194
------------
Computer Hardware (2.3%)
113,200 Dell Computer Corp.* ...................... 4,627,050
------------
Computer Software (6.2%)
83,000 Microsoft Corp.* .......................... 7,117,250
88,500 Siebel Systems, Inc.* ..................... 5,215,969
------------
12,333,219
------------
Discount Chains (2.2%)
103,400 Wal-Mart Stores, Inc. ..................... 4,368,650
------------
Diversified Financial Services (2.2%)
15,100 American Express Co. ...................... 1,989,425
57,000 Citigroup Inc. ............................ 2,540,062
------------
4,529,487
------------
Electric Utilities (1.0%)
31,000 Montana Power Co. ......................... 2,098,312
------------
Electronic Production Equipment (1.1%)
31,200 Applied Materials, Inc.* .................. 2,242,500
------------
Finance Companies (1.4%)
13,500 Fannie Mae ................................ 931,500
32,000 Freddie Mac ............................... 1,836,000
------------
2,767,500
------------

</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------
<S> <C> <C>
Food Chains (2.7%)
111,500 Albertson's, Inc. ......................... $ 5,540,156
------------
Insurance Brokers/Services (0.9%)
25,100 Marsh & McLennan Companies,
Inc. ...................................... 1,907,600
------------
Integrated Oil Companies (7.8%)
43,800 Chevron Corp. ............................. 3,996,750
72,100 Exxon Corp. ............................... 5,722,937
95,600 Royal Dutch Petroleum Co. (ADR)
(Netherlands) ............................. 5,831,600
3,600 Texaco, Inc. .............................. 224,325
------------
15,775,612
------------
Investment Bankers/
Brokers/Services (2.2%)
8,500 Goldman Sachs Group, Inc. ................. 546,656
57,800 Merrill Lynch & Co., Inc. ................. 3,934,013
------------
4,480,669
------------
Investment Managers (1.3%)
73,000 Price (T.) Rowe Associates, Inc. .......... 2,545,875
------------
Life Insurance (0.7%)
28,300 Hartford Life, Inc. (Class A) ............. 1,432,688
------------
Major Banks (1.7%)
2,910 Bank of America Corp. ..................... 193,151
15,100 Morgan (J.P.) & Co., Inc. ................. 1,930,913
34,500 Wells Fargo & Co. ......................... 1,345,500
------------
3,469,564
------------
Major Pharmaceuticals (5.5%)
8,700 Johnson & Johnson ......................... 801,488
54,800 Lilly (Eli) & Co. ......................... 3,596,250
36,000 Merck & Co., Inc. ......................... 2,436,750
59,800 Schering-Plough Corp. ..................... 2,930,200
18,800 Warner-Lambert Co. ........................ 1,240,800
------------
11,005,488
------------
Major U.S. Telecommunications (2.2%)
12,500 Ameritech Corp. ........................... 915,625
59,850 AT&T Corp. ................................ 3,108,459
3,000 Bell Atlantic Corp. ....................... 191,250
2,700 GTE Corp. ................................. 198,956
1,400 SBC Communications, Inc. .................. 80,063
------------
4,494,353
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

31
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1999, continued

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- --------------
<S> <C> <C>
Media Conglomerates (1.0%)
2,000 Disney (Walt) Co. ..................... $ 55,250
27,400 Time Warner Inc. ...................... 1,972,800
-----------
2,028,050
-----------
Military/Gov't/Technical (2.1%)
61,000 Raytheon Co. (Class B) ................ 4,289,063
-----------
Motor Vehicles (0.9%)
29,900 General Motors Corp. .................. 1,822,031
-----------
Multi-Line Insurance (1.4%)
23,750 American International Group, Inc. 2,757,969
-----------
Multi-Sector Companies (1.9%)
36,200 General Electric Co. .................. 3,945,800
-----------
Oil/Gas Transmission (1.6%)
79,300 Williams Companies, Inc. .............. 3,335,556
-----------
Oilfield Services/Equipment (7.4%)
254,000 Baker Hughes Inc. ..................... 8,842,375
131,700 Halliburton Co. ....................... 6,074,663
-----------
14,917,038
-----------
Package Goods/Cosmetics (0.1%)
1,700 Procter & Gamble Co. .................. 153,850
-----------
Paper (3.0%)
167,200 Fort James Corp. ...................... 6,102,800
-----------
Property -- Casualty Insurers (1.4%)
21,900 Progressive Corp. ..................... 2,797,725
-----------
Real Estate Investment Trusts (2.3%)
300,600 Indymac Mortgage Holdings, Inc. 4,753,238
-----------
Restaurants (4.0%)
112,800 McDonald's Corp. ...................... 4,702,350
83,210 Tricon Global Restaurants, Inc.* ...... 3,385,607
-----------
8,087,957
-----------
Semiconductors (5.4%)
81,800 Intel Corp. ........................... 5,644,200
35,000 Texas Instruments, Inc. ............... 5,040,000
-----------
10,684,200
-----------
Telecommunications Equipment (3.9%)
87,500 Motorola, Inc. ........................ 7,984,375
-----------
Wholesale Distributors (1.8%)
78,500 Grainger (W.W.), Inc. ................. 3,709,126
-----------
TOTAL COMMON STOCKS
(Identified Cost $143,478,487) ........ 196,351,819
-----------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ---------------
<S> <C> <C>
SHORT-TERM INVESTMENT (2.3%)
REPURCHASE AGREEMENT
$ 4,732 The Bank of New York 5.00%
due 08/02/99 (dated 07/30/99;
proceeds $4,733,739) (a)
(Identified Cost $4,731,767) .......... $ 4,731,767
------------
</TABLE>

<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $148,210,254) (b)......... 99.3% 201,083,586
OTHER ASSETS IN EXCESS OF
LIABILITIES ............................ 0.7 1,357,445
----- -----------
NET ASSETS ............................. 100.0% $202,441,031
===== ============
</TABLE>

- --------------------------------
ADR American Depository Receipt.

* Non-income producing security.

(a) Collateralized by $4,459,344 Government National Mortgage Assoc.
6.50% due 06/15/28 valued at $4,077,338 and $730,796 U.S.
Treasury Note 6.50% due 10/15/06 valued at $760,420.

(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$55,724,391 and the aggregate gross unrealized depreciation is
$2,851,059, resulting in net unrealized appreciation of
$52,873,332.

SEE NOTES TO FINANCIAL STATEMENTS

32
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $148,210,254).................................. $201,083,586
Receivable for:
Shares of beneficial interest sold ............................ 4,358,502
Dividends ..................................................... 170,691
Deferred organizational expenses ................................. 10,176
Prepaid expenses and other assets ................................ 97,891
------------
TOTAL ASSETS .................................................. 205,720,846
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ..................... 2,066,400
Investments purchased ......................................... 892,688
Management fee ................................................ 131,346
Plan of distribution fee ...................................... 129,662
Accrued expenses and other payables .............................. 59,719
------------
TOTAL LIABILITIES ............................................. 3,279,815
------------
NET ASSETS .................................................... $202,441,031
============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................................. $135,577,506
Net unrealized appreciation ...................................... 52,873,332
Accumulated undistributed net realized gain ...................... 13,990,193
------------
NET ASSETS .................................................... $202,441,031
============
CLASS A SHARES:
Net Assets ....................................................... $ 4,079,450
Shares Outstanding (unlimited authorized, $.01 par value)......... 200,373
NET ASSET VALUE PER SHARE ..................................... $ 20.36
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) .............. $ 21.49

CLASS B SHARES:
Net Assets ....................................................... $194,763,303
Shares Outstanding (unlimited authorized, $.01 par value)......... 9,690,075
NET ASSET VALUE PER SHARE ..................................... $ 20.10

CLASS C SHARES:
Net Assets ....................................................... $ 1,608,779
Shares Outstanding (unlimited authorized, $.01 par value)......... 79,957
NET ASSET VALUE PER SHARE ..................................... $ 20.12

CLASS D SHARES:
Net Assets ....................................................... $ 1,989,499
Shares Outstanding (unlimited authorized, $.01 par value)......... 97,256
NET ASSET VALUE PER SHARE ..................................... $ 20.46
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

33
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued

STATEMENT OF OPERATIONS
For the year ended July 31, 1999

<TABLE>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Dividends (net of $16,189 foreign withholding tax)......... $ 1,941,524
Interest .................................................. 82,050
------------
TOTAL INCOME ........................................... 2,023,574
------------
EXPENSES
Plan of distribution fee (Class A shares) ................. 4,996
Plan of distribution fee (Class B shares) ................. 1,395,453
Plan of distribution fee (Class C shares) ................. 5,667
Management fee ............................................ 671,221
Investment advisory fee ................................... 447,480
Transfer agent fees and expenses .......................... 185,025
Investment management fee ................................. 151,303
Shareholder reports and notices ........................... 88,654
Registration fees ......................................... 73,731
Professional fees ......................................... 65,411
Organizational expenses ................................... 30,328
Trustees' fees and expenses ............................... 26,722
Custodian fees ............................................ 17,327
Other ..................................................... 16,431
------------
TOTAL EXPENSES ......................................... 3,179,749
------------
NET INVESTMENT LOSS .................................... (1,156,175)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ......................................... 14,349,364
Net change in unrealized appreciation ..................... 26,980,524
------------
NET GAIN ............................................... 41,329,888
------------
NET INCREASE .............................................. $ 40,173,713
============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

34
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1999 JULY 31, 1998
--------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss ................................... $ (1,156,175) $ (717,671)
Net realized gain ..................................... 14,349,364 10,549,425
Net change in unrealized appreciation ................. 26,980,524 1,702,988
------------ ------------
NET INCREASE ....................................... 40,173,713 11,534,742
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares ........................................ (78,538) (7,061)
Class B shares ........................................ (8,017,342) (9,224,024)
Class C shares ........................................ (36,827) (24,164)
Class D shares ........................................ (597) (712)
------------ ------------
TOTAL DISTRIBUTIONS ................................ (8,133,304) (9,255,961)
------------ ------------
Net increase from transactions in shares of beneficial
interest ............................................ 16,076,667 34,945,345
------------ ------------
NET INCREASE ....................................... 48,117,076 37,224,126

NET ASSETS:
Beginning of period ................................... 154,323,955 117,099,829
------------ ------------
END OF PERIOD
(Including undistributed net investment income of $0
and $3,083, respectively)........................... $202,441,031 $154,323,955
============ ============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

35
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999

1. ORGANIZATION AND ACCOUNTING POLICIES

Morgan Stanley Dean Witter Total Return Trust (the "Fund"), formerly TCW/DW
Total Return Trust, is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a non-diversified, open-end management investment
company. The Fund's investment objective is high total return from capital
growth and income. The Fund seeks to achieve its objective by investing
primarily in equity and equity-related securities issued by domestic and
foreign companies. The Fund was organized as a Massachusetts business trust on
June 29, 1994 and commenced operations on November 30, 1994. On July 28, 1997,
the Fund converted to a multiple class share structure.

The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares, are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.

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) an equity security listed or traded on the
New York, American or other domestic or foreign 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 securities are traded on more than one exchange, the securities
are valued on the exchange designated as the primary market pursuant to
procedures adopted by the Trustees); (2) all other 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; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") or TCW Funds Management, Inc. (the "Sub-Advisor") 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; and (4)
short-term debt securities having a maturity date of more than sixty days at
time of purchase are

36
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued

valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.

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

C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date
such items are recognized. Distribution fees are allocated directly to the
respective class.

D. 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.

E. 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.

F. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $127,000 which have been
reimbursed for the full amount thereof. Such expenses have been deferred and
are being amortized on the straight-line method over a period not to exceed
five years from the commencement of operations.

37
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued

2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS

Pursuant to a new Investment Management Agreement that took effect June 28,
1999, the Fund pays the Investment Manager a management fee, accrued daily and
payable monthly, by applying the annual rate of 0.75% to the net assets of the
Fund determined as of the close of each business day.

Under the terms of the Agreement, in addition to managing the Fund's
Investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.

Under a New Sub-Advisory Agreement that took effect June 28, 1999 between the
Investment Manager and the Sub-Advisor, the Sub-Advisor provides the Fund with
investment advice and portfolio management relating to the Fund's investments
in securities, subject to the overall supervision of the Investment Manager. As
compensation for its services provided pursuant to the Sub-Advisory Agreement,
the Investment Manager pays the Sub-Advisor compensation equal to 40% of its
monthly compensation.

Prior to June 28, 1999, pursuant to a Management Agreement with Morgan Stanley
Dean Witter Services Company Inc. (the "Former Manager"), the Fund paid the
Former Manager a management fee, accrued daily and payable monthly, by applying
the annual rate of 0.45% to the net assets of the Fund determined as of the
close of each business day.

Under the terms of the Management Agreement, the Manager maintained certain of
the Fund's books and records and furnished, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and
paid the salaries of all personnel, including officers of the Fund who were
employees of the Manager. The Manager also bore the cost of telephone services,
heat, light, power and other utilities provided to the Fund.

Prior to June 28, 1999, pursuant to an Investment Advisory Agreement with the
current Sub-Advisor, the Fund paid an advisory fee, accrued daily and payable
monthly, by applying the annual rate of 0.30% to the net assets of the Fund
determined as of the close of each business day.

Under the terms of the Investment Advisory Agreement, the Fund had retained the
current Sub-Advisor to invest the Fund's assets, including placing orders for
the purchase and sale of portfolio securities. The current Sub-Advisor obtained
and evaluated such information and advice relating to the economy, securities
markets, and specific securities as it considered necessary or useful to
continuously manage the

38
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued

assets of the Fund in a manner consistent with its investment objective. In
addition, the current Sub-Advisor paid the salaries of all personnel, including
officers of the Fund, who were employees of the current Sub-Advisor.

3. PLAN OF DISTRIBUTION

Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value of
the Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived; or (b) the average daily net
assets of Class B; and (iii) Class C - up to 1.0% of the average daily net
assets of Class C. In the case of Class A shares, amounts paid under the Plan
are paid to the Distributor for services provided. In the case of Class B and
Class C shares, amounts paid under the Plan are paid to the Distributor for (1)
services provided and the expenses borne by it and others in the distribution
of the shares of these Classes, including the payment of commissions for sales
of these Classes and incentive compensation to, and expenses of, Morgan Stanley
Dean Witter Financial Advisors and others who engage in or support distribution
of the shares or who service shareholder accounts, including overhead and
telephone expenses; (2) printing and distribution of prospectuses and reports
used in connection with the offering of these shares to other than current
shareholders; and (3) preparation, printing and distribution of sales
literature and advertising materials. In addition, the Distributor may utilize
fees paid pursuant to the Plan, in the case of Class B shares, to compensate
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other selected broker-dealers for their opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses.

In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the Distributor
under the Plan and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated,
the

39
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued

Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $4,988,978 at July 31, 1999.

In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended July 31, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
0.66%, respectively.

The Distributor has informed the Fund that for the year ended July 31, 1999, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $315,135 and $911, respectively and
received $5,300 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense
of the Fund.

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended July 31, 1999 aggregated
$134,004,115 and $131,986,747, respectively.

For the year ended July 31, 1999, the Fund incurred brokerage commissions of
$20,882 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund.

Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At July 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $300.

40
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued

5. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1999 JULY 31, 1998
--------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold .................................. 262,041 $ 5,265,953 77,071 $ 1,323,814
Reinvestment of distributions ......... 4,229 73,536 473 7,061
Redeemed .............................. (140,633) (2,838,266) (3,432) (58,689)
-------- ------------- ------ -------------
Net increase - Class A ................ 125,637 2,501,223 74,112 1,272,186
-------- ------------- ------ -------------
CLASS B SHARES
Sold .................................. 2,294,287 41,396,214 3,642,674 60,041,237
Reinvestment of distributions ......... 423,058 7,289,285 553,040 8,234,768
Redeemed .............................. (2,161,664) (37,861,050) (2,117,176) (35,250,499)
---------- ------------- ---------- -------------
Net increase - Class B ................ 555,681 10,824,449 2,078,538 33,025,506
---------- ------------- ---------- -------------
CLASS C SHARES
Sold .................................. 48,860 970,933 42,555 699,553
Reinvestment of distributions ......... 2,093 36,001 1,578 23,504
Redeemed .............................. (13,007) (236,796) (4,433) (76,116)
---------- ------------- ---------- -------------
Net increase - Class C ................ 37,946 770,138 39,700 646,941
---------- ------------- ---------- -------------
CLASS D SHARES
Sold .................................. 96,551 1,980,260 -- --
Reinvestment of distributions ......... 34 597 47 712
---------- ------------- ---------- -------------
Net increase - Class D ................ 96,585 1,980,857 47 712
---------- ------------- ---------- -------------
Net increase in Fund .................. 815,849 $ 16,076,667 2,192,397 $ 34,945,345
========== ============= ========== =============
</TABLE>

6. FEDERAL INCOME TAX STATUS

At July 31, 1999, the Fund had temporary book/tax differences attributable to
capital loss deferrals on wash sales and permanent book/tax differences
primarily attributable to a net operating loss. To reflect reclassifications
arising from the permanent differences, paid-in-capital was charged $1,156,175,
accumulated undistributed net realized gain was credited $3,083 and net
investment loss was credited $1,153,092.

41
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JULY 31, 1999 JULY 31, 1998 JULY 31, 1997
------------------ --------------- ---------------
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $16.78 $16.59 $16.07
------- ------- --------
Income (loss) from investment operations:
Net investment income (loss) ..................... -- (0.01) 0.01
Net realized and unrealized gain ................. 4.47 1.34 0.51
------- ------- --------
Total income from investment operations ........... 4.47 1.33 0.52
------- ------- --------
Less distributions from net realized gain ......... (0.89) (1.14) --
------- ------- --------
Net asset value, end of period .................... $20.36 $16.78 $16.59
======= ======= ========
TOTAL RETURN+ ..................................... 27.78 % 8.94 % 3.24%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.30 %(3) 1.31 % 1.31%(2)
Net investment income (loss) ...................... (0.10)%(3) (0.07)% 4.08%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $4,079 $1,254 $10
Portfolio turnover rate ........................... 79 % 93 % 198%
</TABLE>

- -------------
* The date shares were first issued.

++ The per share amounts were computed using an average number of shares
outstanding during the period.

+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS

42
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31,
------------------------------------------------------------------
1999++ 1998++ 1997** 1996
------------------ --------------- -------------- ----------------
<S> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ........ $16.68 $16.59 $12.00 $11.75
---------- ---------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss) ............... (0.12) (0.08) 0.04 0.15
Net realized and unrealized gain ........... 4.43 1.31 5.81 0.80
---------- ---------- --------- ---------
Total income from investment operations ..... 4.31 1.23 5.85 0.95
---------- ---------- --------- ---------
Less dividends and distributions from:
Net investment income ...................... -- -- (0.06) (0.21)
Net realized gain .......................... (0.89) (1.14) (1.20) (0.49)
---------- ---------- ---------- ---------
Total dividends and distributions ........... (0.89) (1.14) (1.26) (0.70)
---------- ---------- ---------- ---------
Net asset value, end of period .............. $20.10 $16.68 $16.59 $12.00
========== ========== ========== =========
TOTAL RETURN+ ............................... 27.04 % 8.25 % 51.66% 8.23%

RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... 1.90 %(4) 1.90 % 2.05% 1.98%(3)
Net investment income (loss) ................ (0.70)%(4) (0.50)% 0.28% 1.30%(3)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ..... $194,763 $152,358 $117,041 $48,524
Portfolio turnover rate ..................... 79 % 93 % 198% 261%

<CAPTION>
FOR THE PERIOD
NOVEMBER 30, 1994*
THROUGH
JULY 31, 1995
----------------------
<S> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ........ $10.00
-------------
Income (loss) from investment operations:
Net investment income (loss) ............... 0.21
Net realized and unrealized gain ........... 1.68
-------------
Total income from investment operations ..... 1.89
-------------
Less dividends and distributions from:
Net investment income ...................... (0.14)
Net realized gain .......................... --
-------------
Total dividends and distributions ........... (0.14)
-------------
Net asset value, end of period .............. $11.75
=============
TOTAL RETURN+ ............................... 19.04%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... 0.94%(2)(3)
Net investment income (loss) ................ 3.19%(2)(3)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ..... $36,018
Portfolio turnover rate ..................... 91%(1)
</TABLE>

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

** Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class B shares.

++ The per share amounts were computed using an average number of shares
outstanding during the period.

+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.
<PAGE>

(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS

43
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JULY 31, 1999 JULY 31, 1998 JULY 31, 1997
------------------ --------------- ---------------
<S> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $16.66 $16.59 $16.07
------- ------- --------
Income (loss) from investment operations:
Net investment income (loss) ..................... (0.09) (0.12) 0.01
Net realized and unrealized gain ................. 4.44 1.33 0.51
------- ------- --------
Total income from investment operations ........... 4.35 1.21 0.52
------- ------- --------
Less distributions from net realized gain ......... (0.89) (1.14) --
------- ------- --------
Net asset value, end of period .................... $20.12 $16.66 $16.59
======= ======= ========
TOTAL RETURN+ ..................................... 27.33 % 8.12 % 3.24%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.72 %(3) 2.06 % 2.06%(2)
Net investment income (loss) ...................... (0.52)%(3) (0.70)% 2.75%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $1,609 $700 $38
Portfolio turnover rate ........................... 79 % 93 % 198%
</TABLE>

- -------------
* The date shares were first issued.

++ The per share amounts were computed using an average number of shares
outstanding during the period.

+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.

(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS

44
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JULY 31, 1999 JULY 31, 1998 JULY 31, 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $16.83 $16.59 $16.07
-------- ------- --------
Income (loss) from investment operations:
Net investment income (loss) ..................... 0.02 0.06 0.01
Net realized and unrealized gain ................. 4.50 1.32 0.51
-------- ------- --------
Total income from investment operations ........... 4.52 1.38 0.52
-------- ------- --------
Less distributions from net realized gain ......... (0.89) (1.14) --
-------- -------- --------
Net asset value, end of period .................... $20.46 $16.83 $16.59
======== ======== ========
TOTAL RETURN+ ..................................... 28.08% 9.20% 3.24%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.06%(3) 1.06% 1.06%(2)
Net investment income ............................. 0.14%(3) 0.34% 4.33%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $1,990 $11 $10
Portfolio turnover rate ........................... 79% 93% 198%
</TABLE>

- -------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS

45
<PAGE>

MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Total
Return Trust (the "Fund"), formerly TCW/DW Total Return Trust, at July 31,
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 periods indicated, 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 July 31, 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
September 10, 1999

1999 FEDERAL TAX NOTICE (unaudited)

For the year ended July 31, 1999, the Fund paid to its shareholders $0.46
per share from long-term capital gains. For such period, 30.65% of the
income paid qualified for the dividends received deduction available to
corporations.