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Filed Pursuant to Rule 497(e)
Registration File No.: 33-87472
MORGAN STANLEY DEAN WITTER
INFORMATION FUND
PROSPECTUS -- JULY 29, 1998
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MORGAN STANLEY DEAN WITTER INFORMATION FUND (THE "FUND") IS AN OPEN-END,
DIVERSIFIED MANAGEMENT INVESTMENT COMPANY, WHOSE INVESTMENT OBJECTIVE IS
LONG-TERM CAPITAL APPRECIATION. THE FUND SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING AT LEAST 65% OF ITS TOTAL ASSETS IN COMMON STOCKS AND
SECURITIES CONVERTIBLE INTO COMMON STOCKS OF DOMESTIC AND FOREIGN COMPANIES
WHICH ARE INVOLVED IN ALL AREAS, AND EMERGING AREAS, OF THE COMMUNICATIONS AND
INFORMATION INDUSTRY. SEE "INVESTMENT OBJECTIVE AND POLICIES."
The Fund offers four classes of shares (each, a "Class"), each with a different
combination of sales charges, ongoing fees and other features. The different
distribution arrangements permit an investor to choose the method of purchasing
shares that the investor believes is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares and other
relevant circumstances. (See "Purchase of Fund Shares--Alternative Purchase
Arrangements.")
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated July 29, 1998, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary........................................................ 2
Summary of Fund Expenses ................................................. 4
Financial Highlights...................................................... 5
The Fund and its Management............................................... 8
Investment Objective and Policies......................................... 8
Risk Considerations....................................................... 10
Investment Restrictions................................................... 15
Purchase of Fund Shares................................................... 15
Shareholder Services...................................................... 24
Redemptions and Repurchases............................................... 26
Dividends, Distributions and Taxes........................................ 27
Performance Information................................................... 28
Additional Information.................................................... 28
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
MORGAN STANLEY DEAN WITTER
INFORMATION FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR
(800) 869-NEWS (TOLL-FREE)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Morgan Stanley Dean Witter Distributors Inc., Distributor
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PROSPECTUS SUMMARY
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<S> <C>
THE The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
FUND open-end, diversified management investment company investing at least 65% of its total assets in
common stocks and securities convertible into common stocks of domestic and foreign companies
which are involved in all areas, and emerging areas, of the communications and information industry.
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SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page 28). The Fund offers four Classes of shares,
each with a different combination of sales charges, ongoing fees and other features (see pages 15-23).
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MINIMUM The minimum initial investment for each Class is $1,000 ($100 if the account is opened through
PURCHASE EasyInvest(SM)); Class D shares are only available to persons investing $5 million ($25 million for
certain qualified plans) or more and to certain other limited categories of investors. For the purpose
of meeting the minimum $5 million (or $25 million) investment for Class D shares, and subject to the
$1,000 minimum initial investment for each Class of the Fund, an investor's existing holdings of
Class A shares and shares of funds for which Morgan Stanley Dean Witter Advisors Inc. serves as
investment manager ("Morgan Stanley Dean Witter Funds") that are sold with a front-end sales
charge, and concurrent investments in Class D shares of the Fund and other Morgan Stanley Dean
Witter Funds that are multiple class funds, will be aggregated. The minimum subsequent investment
is $100 (see page 15).
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INVESTMENT The investment objective of the Fund is long-term capital appreciation (see page 8).
OBJECTIVE
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INVESTMENT Morgan Stanley Dean Witter Advisors Inc., the Investment Manager of the Fund, and its wholly-owned
MANAGER subsidiary, Morgan Stanley Dean Witter Services Company Inc., serve in various investment
management, advisory, management and administrative capacities to 101 investment companies and
other portfolios with net assets under management of approximately $115.2 billion at June 30, 1998
(see page 8).
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MANAGEMENT The Investment Manager receives a monthly fee at the annual rate of 0.75% of the portion of the
FEE Fund's average daily net assets not exceeding $500 million and 0.725% of the portion of the Fund's
average daily net assets exceeding $500 million. (see page 8).
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DISTRIBUTOR AND Morgan Stanley Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution
DISTRIBUTION plan pursuant to Rule 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the
FEE distribution fees paid by the Class A, Class B and Class C shares of the Fund to the Distributor. The
entire 12b-1 fee payable by Class A and a portion of the 12b-1 fee payable by each of Class B and
Class C equal to 0.25% of the average daily net assets of the Class are currently each characterized
as a service fee within the meaning of the National Association of Securities Dealers, Inc. guidelines.
The remaining portion of the 12b-1 fee, if any, is characterized as an asset-based sales charge (see
pages 15 and 22).
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ALTERNATIVE Four classes of shares are offered:
PURCHASE
ARRANGEMENTS o Class A shares are offered with a front-end sales charge, starting at 5.25% and reduced for larger
purchases. Investments of $1 million or more (and investments by certain other limited categories of
investors) are not subject to any sales charge at the time of purchase but a contingent deferred sales
charge ("CDSC") of 1.0% may be imposed on redemptions within one year of purchase. The Fund is
authorized to reimburse the Distributor for specific expenses incurred in promoting the distribution
of the Fund's Class A shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan.
Reimbursement may in no event exceed an amount equal to payments at an annual rate of 0.25% of
average daily net assets of the Class (see pages 15, 18 and 22).
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</TABLE>
2
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<TABLE>
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<S> <C>
o Class B shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC
(scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be imposed on
any redemption of shares if after such redemption the aggregate current value of a Class B account with the
Fund falls below the aggregate amount of the investor's purchase payments made during the six years
preceding the redemption. A different CDSC schedule applies to investments by certain qualified plans.
Class B shares are also subject to a 12b-1 fee assessed at the annual rate of 1.0% of the lesser of: (a)
the average daily net sales of the Fund's Class B shares or (b) the average daily net assets of Class B.
All shares of the Fund held prior to July 28, 1997 have been designated Class B shares. Shares held before
May 1, 1997 will convert to Class A shares in May, 2007. In all other instances, Class B shares convert to
Class A shares approximately ten years after the date of the original purchase (see pages 15, 20 and 22).
o Class C shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC
of 1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of the Fund's Class C shares and servicing
shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount
equal to payments at an annual rate of 1.0% of average daily net assets of the Class (see pages 15 and 22).
o Class D shares are offered only to investors meeting an initial investment minimum of $5 million ($25
million for certain qualified plans) and to certain other limited categories of investors. Class D shares
are offered without a front-end sales charge or CDSC and are not subject to any 12b-1 fee (see pages 15 and
22).
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DIVIDENDS AND Dividends and capital gains will be distributed annually. The Fund may, however, determine to retain all or
CAPITAL GAINS a part of any net long-term capital gains in any year for reinvestment. Dividends and capital gains
DISTRIBUTIONS distributions paid on shares of a Class are automatically reinvested in additional shares of the same Class
at net asset value unless the shareholder elects to receive cash. Shares acquired by dividend or
distribution reinvestment will not be subject to any sales charge or CDSC (see pages 24 and 27).
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REDEMPTION Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A, Class B or
Class C shares. An account may be involuntarily redeemed if the total value of the account is less than
$100 or, if the account was opened through EasyInvest(SM), if after twelve months the shareholder has
invested less than $1,000 in the account (see page 26).
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RISK The net asset value of the Fund's shares will fluctuate with changes in the market value of the Fund's
CONSIDERATIONS portfolio securities. The market value of the Fund's portfolio securities will increase or decrease due to
economic or market factors affecting companies and/or industries in which the Fund invests. In addition,
the value of the Fund's fixed-income and convertible securities generally increases or decreases due to
economic and market factors, as well as changes in prevailing interest rates. Generally, a rise in interest
rates will result in a decrease in value while a drop in interest rates will result in an increase in
value. There are also certain risks associated with the Fund's investments in the communications and
information industry (see page 10). The Fund will invest in the securities of foreign issuers which entails
certain additional risks. The Fund may also invest in options and futures transactions in order to hedge
its portfolio securities and may enter into forward foreign currency exchange contracts in connection with
its foreign securities investments and may purchase securities on a when-issued, delayed delivery or "when,
as and if issued" basis, which involve certain special risks (see pages 10-14).
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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
3
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The fees and expenses set forth in the table are based on the
expenses and fees for the fiscal year ended March 31, 1998.
<TABLE>
<CAPTION>
Class A Class B Class C Class D
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<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) ............................................ 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments .............. None None None None
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds) ............ None(2) 5.00%(3) 1.00%(4) None
Redemption Fees ............................................. None None None None
Exchange Fee ................................................ None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fees (5) ......................................... 0.75% 0.75% 0.75% 0.75%
12b-1 Fees (6) (7) .......................................... 0.23% 1.00% 1.00% None
Other Expenses (5) .......................................... 0.30% 0.30% 0.30% 0.30%
Total Fund Operating Expenses (8) ........................... 1.28% 2.05% 2.05% 1.05%
</TABLE>
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(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares").
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on
redemptions made within one year after purchase, except for certain
specific circumstances (see "Purchase of Fund Shares--Initial Sales
Charge Alternative--Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) Management fees and other expenses are based on the Fund's actual
aggregate expenses.
(6) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1 fee
payable by Class A and a portion of the 12b-1 fee payable by each of
Class B and Class C equal to 0.25% of the average daily net assets of the
Class are currently each characterized as a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD")
guidelines and are payments made for personal service and/or maintenance
of shareholder accounts. The remainder of the 12b-1 fee, if any, is an
asset-based sales charge, and is a distribution fee paid to the
Distributor to compensate it for the services provided and the expenses
borne by the Distributor and others in the distribution of the Fund's
shares (see "Purchase of Fund Shares--Plan of Distribution").
(7) Upon conversion of Class B shares to Class A shares, such shares will be
subject to the lower 12b-1 fee applicable to Class A shares. No sales
charge is imposed at the time of conversion of Class B shares to Class A
shares. Class C shares do not have a conversion feature and, therefore,
are subject to an ongoing 1.00% distribution fee (see "Purchase of Fund
Shares--Alternative Purchase Arrangements").
(8) There were no outstanding shares of Class A, Class C or Class D prior to
July 28, 1997.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
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EXAMPLES
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1)
a 5% annual return and (2) redemption at the end of each time period:
Class A .............................................................. $65 $91 $119 $199
Class B .............................................................. $71 $94 $130 $238
Class C .............................................................. $31 $64 $110 $238
Class D .............................................................. $11 $33 $ 58 $128
You would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Class A .............................................................. $65 $91 $119 $199
Class B .............................................................. $21 $64 $110 $238
Class C .............................................................. $21 $64 $110 $238
Class D .............................................................. $11 $33 $ 58 $128
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER OR LESS
THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of Distribution"
and "Redemptions and Repurchases" in this Prospectus.
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.
4
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FINANCIAL HIGHLIGHTS
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The following per share data and ratios for a share of beneficial interest
outstanding throughout each period have been audited by PricewaterhouseCoopers
LLP, independent accountants. The financial highlights should be read in
conjunction with the statements and notes thereto and the unqualified report of
the independent accountants, which are contained in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, which may be obtained without
charge upon request to the Fund.
<TABLE>
<CAPTION>
For the Period
For the Year For the Year November 28, 1995*
Ended Ended through
March 31, 1998**++ March 31, 1997 March 31, 1996
------------------ -------------- --------------
<S> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE :
Net asset value, beginning of period ............ $ 8.94 $ 10.67 $ 10.00
---------- --------- ---------
Net investment loss ............................. (0.18) (0.13) (0.01)
Net realized and unrealized gain (loss) ......... 5.18 (1.60) 0.69
---------- ---------- ---------
Total from investment operations ................ 5.00 (1.73) 0.68
---------- ---------- ---------
Less dividends in excess of net investment income -- -- (0.01)
---------- ---------- ---------
Net asset value, end of period .................. $ 13.94 $ 8.94 $ 10.67
========== ========== =========
TOTAL INVESTMENT RETURN+ ......................... 56.10% (16.31)% 6.77%(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses ........................................ 2.05% 2.01% 2.31%(2)
Net investment loss ............................. (1.54)% (1.16)% (0.51)%(2)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands ......... $267,384 $213,726 $207,321
Portfolio turnover rate ......................... 218% 132% 8%(1)
Average commission rate paid .................... $ 0.0498 $ 0.0527 $ 0.0496
</TABLE>
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* 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.
5
<PAGE>
FINANCIAL HIGHLIGHTS--Continued
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<TABLE>
<CAPTION>
For the Period
July 28, 1997*
through
March 31, 1998++
----------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE :
Net asset value, beginning of period ............ $ 11.43
-------
Net investment loss ............................. (0.08)
Net realized and unrealized gain ................ 2.67
-------
Total from investment operations ................ 2.59
-------
Net asset value, end of period .................. $ 14.02
=======
TOTAL INVESTMENT RETURN+ ......................... 22.66%(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses ........................................ 1.27%(2)
Net investment loss ............................. (0.93)%(2)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands......... $ 206
Portfolio turnover rate ......................... 218%
Average commission rate paid .................... $0.0498
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE :
Net asset value, beginning of period ............ $ 11.43
-------
Net investment loss ............................. (0.14)
Net realized and unrealized gain ................ 2.65
-------
Total from investment operations ................ 2.51
-------
Net asset value, end of period .................. $ 13.94
=======
TOTAL INVESTMENT RETURN+ ......................... 21.96%(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses ........................................ 2.05%(2)
Net investment loss ............................. (1.72)%(2)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands......... $ 249
Portfolio turnover rate ......................... 218%
Average commission rate paid .................... $0.0498
</TABLE>
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* 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.
6
<PAGE>
FINANCIAL HIGHLIGHTS--Continued
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<TABLE>
<CAPTION>
For the Period
July 28, 1997*
through
March 31, 1998++
-----------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE :
Net asset value, beginning of period ............ $ 11.43
-------
Net investment loss ............................. (0.07)
Net realized and unrealized gain ................ 2.67
-------
Total from investment operations ................ 2.60
-------
Net asset value, end of period .................. $ 14.03
=======
TOTAL INVESTMENT RETURN+ ......................... 22.75%(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses ........................................ 1.04%(2)
Net investment loss ............................. (0.82)%(2)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands ......... $ 1,464
Portfolio turnover rate ......................... 218%
Average commission rate paid .................... $0.0498
</TABLE>
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* 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.
7
<PAGE>
THE FUND AND ITS MANAGEMENT
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Morgan Stanley Dean Witter Information Fund (the "Fund") (formerly named Dean
Witter Information Fund) is an open-end, diversified management investment
company. The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of Massachusetts on
December 8, 1994.
Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors" or the
"Investment Manager"), whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment 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. The Investment Manager, which was incorporated in July, 1992 under
the name Dean Witter InterCapital Inc., changed its name to Morgan Stanley Dean
Witter Advisors Inc. on June 22, 1998.
MSDW Advisors, and its wholly-owned subsidiary, Morgan Stanley Dean
Witter Services Company Inc. ("MSDW Services"), serve in various investment
management, advisory, management and administrative capacities to a total of
101 investment companies, 28 of which are listed on the New York Stock
Exchange, with combined assets of approximately $110.8 billion as of June 30,
1998. The Investment Manager also manages and advises portfolios of pension
plans, other institutions and individuals which aggregated approximately $4.4
billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. MSDW Advisors has retained MSDW Services to perform the
aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by the
Investment Manager to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the
Fund and for expenses of the Fund assumed by the Investment Manager, the Fund
pays the Investment Manager monthly compensation calculated daily by applying
the annual rate of 0.75% to the net assets of the Fund not exceeding $500
million and 0.725% to the net assets of the Fund exceeding $500 million. For
the fiscal year ended March 31, 1998, the Fund accrued total compensation to
the Investment Manager amounting to an annual rate of 0.75% of the Fund's
average daily net assets and the total expenses of Class B amounted to 2.05% of
the average daily net assets of Class B. Shares of Class A, Class C and Class D
were first issued on July 28, 1997. The expenses of the Fund include: the fee
of the Investment Manager; the fee pursuant to the Plan of Distribution (see
"Purchase of Fund Shares"); taxes; transfer agent, custodian and auditing fees;
certain legal fees; and printing and other expenses relating to the Fund's
operations which are not expressly assumed by the Investment Manager under its
Investment Management Agreement with the Fund.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is long-term capital appreciation. This
objective is fundamental and may not be changed without shareholder approval.
There is no assurance that the objective will be achieved.
The Fund seeks to achieve its investment objective by investing under
normal circumstances at least 65% of its total assets in common stocks and
securities convertible into common stocks of domestic or foreign companies
which are involved in all areas, including emerging areas, of the
communications and information industry. The Fund will not have more than 10%
of its total assets invested in convertible securities determined as of the
time of purchase. Under normal circumstances, the Fund will invest in equity
securities of issuers located in at least three countries, one of which is the
United States.
The communications and information industry is experiencing widespread
changes and expansion due to rapidly changing technologies (including enabling
technologies), industry migration in search of new markets, communications
needs in developing countries, competitive pressures and changes in
governmental regulation. Additionally, a number of traditional communications
industries have either converged or evolved into new corporate forms and some
of these industries are only beginning to emerge. The Investment Manager
believes that as technologies develop, many of the traditional distinctions and
characteristics of these industries will blur. The Investment Manager believes
that the communications and information industry will continue to grow in the
future and that the Fund's investment policies as
8
<PAGE>
outlined below are designed to take advantage of the investment opportunities
present in this industry.
Companies in the communications and information industry will be
considered those companies engaged in designing, developing, manufacturing or
providing the following products and services, or the enabling technology with
respect thereto, throughout the world: regular telephone service;
communications equipment and services (including equipment and services for
both data and voice transmission); electronic components and equipment;
broadcasting (including television and radio, satellite, microwave and cable
television and narrow-casting); computer equipment, enabling software, mobile
communications and cellular radio/paging; electronic mail and other electronic
data transmission services; local and wide area networking and linkage of word
and data processing systems; publishing and information systems, including the
storage and transmission of information; video text and teletext; and emerging
technologies combining telephone, television and/or computer systems; the
creation, packaging, distribution, and ownership of entertainment and
information programming throughout the world including but not limited to
pre-recorded music, feature length motion pictures, made for T.V. movies,
television series, documentaries, educational tutorials, animation, game shows,
sports programming, news programs, and live events such as professional
sporting events, concerts and theatrical exhibitions and academic courses or
tutorials; television and radio broadcasting via VHF, UHF, satellite and
microwave transmission, cable television programming and systems, and broadcast
and cable networks, wireless cable television and other emerging distribution
technologies, home video, and interactive/ multimedia programming including
financial services, education, home shopping, video games and multiplayer
games; publishing including newspapers, magazines and books, advertising
agencies and niche advertising mediums such as in-store or direct mail,
emerging technologies combining television, telephone and computer systems,
computer hardware and software, and equipment used in the creation and
distribution of entertainment programming such as that required in the
provision of broadcast, cable or telecommunications services.
Companies considered to be in communications and information industry
will be those which derive at least 35% of their revenues or earnings from the
aforementioned respective activities, or devote at least 35% of their assets to
such respective activities.
Up to 35% of the Fund's total assets may be invested in investment grade
fixed-income securities, U.S. Government securities (including zero coupon
securities) or money market instruments. With respect to corporate fixed-income
securities, the term "investment grade" means securities which are rated Baa or
higher by Moody's Investors Services, Inc. ("Moody's") or BBB or higher by
Standard & Poor's Corporation ("S&P") or, if not rated, are deemed by the
Investment Manager to be of comparable quality.
Investments in fixed-income securities rated either BBB by S&P or Baa by
Moody's (the lowest credit ratings designated "investment grade") have
speculative characteristics and, therefore, changes in economic conditions or
other circumstances are more likely to weaken their capacity to make principal
and interest payments than would be the case with investments in securities
with higher credit ratings. If a fixed-income or convertible security held by
the Fund is rated BBB or Baa and is subsequently downgraded by a rating agency,
or otherwise falls below investment grade the Fund will sell such securities as
soon as is practicable without undue market or tax consequences to the Fund.
See the Appendix to the Statement of Additional Information for a discussion of
ratings of fixed-income securities.
The Fund may invest up to 50% of its total assets in the securities of
foreign issuers. The Fund will not invest 25% or more of its total assets in
any one foreign country.
Money market instruments in which the Fund may invest are securities
issued or guaranteed by the U.S. Government or its agencies (Treasury bills,
notes and bonds); obligations of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more; Eurodollar
certificates of deposit; obligations of savings banks and savings and loan
associations having total assets of $1 billion or more; fully insured
certificates of deposit; and commercial paper rated within the two highest
grades by Moody's or S&P or, if not rated, issued by a company having an
outstanding debt issue rated AA by S&P or Aa by Moody's.
There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the Fund's
securities holdings. During such periods, the Fund may adopt a temporary
"defensive" posture in which greater than 35% of its total assets is invested
in money market instruments or cash.
CONVERTIBLE SECURITIES. The Fund may invest in investment grade convertible
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities rank
senior to common stocks in a corporation's capital structure and, therefore,
entail less risk than the corporation's common stock. The value of a
convertible security is a function of its "investment value" (its value as if
it did not
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have a conversion privilege), and its "conversion value" (the security's worth
if it were to be exchanged for the underlying security, at market value,
pursuant to its conversion privilege).
FOREIGN SECURITIES. As noted above, the Fund may invest in securities of
foreign companies. Such investments may also be in the form of American
Depository Receipts (ADRs), European Depository Receipts (EDRs) or other
similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a United States bank or trust company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a similar arrangement.
Generally, ADRs, in registered form, are designed for use in the United States
securities markets and EDRs, in bearer form, are designed for use in European
securities markets. The Fund's investments in unlisted foreign securities are
subject to the Fund's overall policy limiting its investment in illiquid
securities to 15% or less of its net assets.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in the
market value of the Fund's portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors affecting companies and/or industries in which the
Fund invests, which factors cannot be predicted. Additionally, the value of the
Fund's fixed-income and convertible securities may increase or decrease due to
changes in prevailing interest rates. Generally, a rise in interest rates will
result in a decrease in value, while a drop in interest rates will result in an
increase in value.
COMMUNICATIONS AND INFORMATION INDUSTRY. The Fund concentrates its investments
in the communications and information industry. Because of this concentration,
the value of the Fund's shares may be more volatile than that of investment
companies that do not similarly concentrate their investments. The
communications and information industry may be subject to greater changes in
governmental policies and governmental regulation than in many other industries
in the United States and worldwide. Regulatory approval requirements, ownership
restrictions and restrictions on rates of return and types of services that may
be offered may materially affect the products and services of this industry.
Additionally, the products and services of companies in this industry may be
subject to faster obsolescence as a result of greater competition, advancing
technological developments, and changing market and consumer preferences. As a
result, the stocks of companies in this industry may exhibit greater price
volatility than those of companies in other industries.
FOREIGN SECURITIES. Foreign securities investments may be affected by changes
in currency rates or exchange control regulations, changes in governmental
administration or economic or monetary policy (in the United States and abroad)
or changed circumstances in dealings between nations. Fluctuations in the
relative rates of exchange between different currencies will affect the value
of the Fund's investments denominated in foreign currency. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S. dollar
value of the Fund's assets denominated in that currency and thereby impact upon
the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade. The foreign currency transactions
of the Fund will be conducted on a spot basis or through forward foreign
currency exchange contracts (described below). The Fund will incur certain
costs in connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, restrictions on foreign investment and
repatriation of capital, limitations on the use or transfer of Fund assets and
any effects of foreign social, economic or political instability. Foreign
companies are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about such companies.
Moreover, foreign companies are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable
to U.S. companies. Additionally, there may be less investment community
research and coverage with respect to certain foreign 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
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign markets
may occasion delays in settlements of the
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Fund's trades effected in such markets. As such, the inability to dispose of
portfolio securities due to settlement delays could result in losses to the
Fund due to subsequent declines in value of such securities and the inability
of the Fund to make intended security purchases due to settlement problems
could result in a failure of the Fund to make potentially advantageous
investments. To the extent the Fund purchases Eurodollar certificates of
deposit issued by foreign branches of domestic U.S. banks, consideration will
be given to their domestic marketability, the lower reserve requirements
normally mandated for overseas banking operations, the possible impact of
interruptions in the flow of international currency transactions and future
international political and economic developments which might adversely affect
the payment of principal or interest.
Many European countries are about to adopt a single European currency,
the euro (the "Euro Conversion"). The consequences of the Euro Conversion for
foreign exchange rates, interest rates and the value of European securities
eligible for purchase by the Fund are presently unclear. Such consequences may
adversely affect the value and/or increase the volatility of securities held by
the Fund.
CONVERTIBLE SECURITIES. To the extent that a convertible security's investment
value is greater than its conversion value, its price will be primarily a
reflection of such investment value and its price will be likely to increase
when interest rates fall and decrease when interest rates rise, as with a
fixed-income security (the credit standing of the issuer and other factors may
also have an effect on the convertible security's value). If the conversion
value exceeds the investment value, the price of the convertible security will
rise above its investment value and, in addition, will generally sell at some
premium over its conversion value. (This premium represents the price investors
are willing to pay for the privilege of purchasing a fixed-income security with
a possibility of capital appreciation due to the conversion privilege.) At such
times the price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000
and expect that their systems will be adapted before that date, but there can
be no assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Fund's investments may be
adversely affected.
The risks of other investment techniques which may be utilized by the
Fund described under "Other Investment Policies," "Options and Futures
Transactions" and "Forward Foreign Currency Exchange Contracts" are described
below.
OTHER INVESTMENT POLICIES
WARRANTS AND STOCK 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. The Fund may also invest in stock
rights. Warrants are, in effect, an option to purchase equity securities at a
specific price, generally valid for a specific period of time, and have no
voting rights, pay no dividends and have no rights with respect to the
corporations issuing them. The Fund may acquire warrants and stock rights
attached to other securities without reference to the foregoing limitations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which may
be viewed as a type of secured lending by the Fund, and which 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 at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. While repurchase agreements involve certain risks not
associated with direct investments in debt securities, including risks of
defaults or bankruptcy of the selling institution, the Fund follows procedures
designed to minimize those risks. These procedures include effecting repurchase
transactions only with large, well-capitalized and well--
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established financial institutions and maintaining adequate collateralization.
See the Statement of Additional Information for a further discussion of such
investments.
PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined to be
liquid pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are generally referred
to as private placements or restricted securities. Limitations on the resale of
such 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 such securities for resale and the
risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, 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," such security will
not be included within the category "illiquid securities," which under current
policy 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From time
to time, in the ordinary course of business, 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 such 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 the commitment. 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 the
Fund's net asset value.
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, leveraged buyout or debt restructuring. If the anticipated
event does not occur and the securities are not issued, the Fund will have lost
an investment opportunity. 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.
INVESTMENT IN OTHER INVESTMENT VEHICLES. Under the Investment Company Act of
1940, as amended, the Fund generally may invest up to 10% of its total assets
in shares of investment companies, including foreign investment companies, and
up to 5% of its total assets in any one investment company. The Fund may not
own more than 3% of the outstanding voting securities of any investment
company. Investment in foreign investment companies may be the sole or most
practical means by which the Fund may participate in certain foreign securities
markets. As a shareholder in an investment company, the Fund would bear its
ratable share of that entity's expenses, including its advisory and
administration fees. At the same time the Fund would continue to pay its own
investment management 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 other investment companies.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at any
time by the Fund (subject to certain notice provisions described in the
Statement of Additional Information), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account pursuant
to applicable regulations and that are equal to at least the market value,
determined daily, of the loaned securities. 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,
loans of portfolio securities will only be made to firms deemed by the
Investment Manager to be creditworthy and when the income which can be earned
from such loans justifies the attendant risks.
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
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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.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on portfolio
securities and on the U.S. dollar or foreign currencies which are or may in the
future be listed on securities exchanges or are written in over-the-counter
transactions ("OTC options"). Listed options are issued or guaranteed by the
exchange on which they trade or by a clearing corporation such as the Options
Clearing Corporation. OTC options are purchased from or sold (written) to
dealers or financial institutions which have entered into direct agreements
with the Fund. The Fund is permitted to write covered call options on portfolio
securities and the U.S. dollar or foreign currencies, without limit, in order
to aid it in achieving its investment objective. The Fund may also write
covered put options; however, the aggregate value of the obligations underlying
the puts determined as of the date the options are sold will not exceed 20% of
the Fund's net assets.
The Fund may purchase listed and OTC call and put options on securities
and stock indexes in amounts equalling up to 5% of its total assets. The Fund
may purchase call options to close out a covered call position or to protect
against an increase in the price of a security it anticipates purchasing. The
Fund may purchase put options on securities which it holds in its portfolio
only to protect itself against a decline in the value of the security. The Fund
may also purchase put options to close out written put positions in a manner
similar to call option closing purchase transactions. There are no other limits
on the Fund's ability to purchase call and put options.
The Fund may also purchase and sell futures contracts that are currently
traded, or may in the future be traded, on U.S. and foreign commodity exchanges
on underlying portfolio securities, on any of the foreign currencies ("currency
futures"), on U.S. or foreign fixed-income securities ("interest rate futures")
and on such indexes of U.S. or foreign equity, fixed-income or convertible
securities as may exist or come into being ("index futures"). The Fund will
purchase or sell interest rate futures contracts for the purpose of hedging its
fixed-income portfolio (or anticipated portfolio) against changes in prevailing
interest rates. The Fund may purchase or sell index futures or currency futures
for the purpose of hedging some or all of its portfolio (or anticipated
portfolio) securities against changes in their prices (or the currency in which
they are denominated).
The Fund, for hedging purposes, also may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its position
as writer of an option, or as a buyer or seller of a futures contract, only if
a liquid secondary market exists for options or futures contracts of that
series. There is no assurance that such a market will exist, particularly in
the case of OTC options, as such options may generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer. Also,
exchanges may limit the amount by which the price of many futures contracts may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.
The futures contracts and options transactions to be engaged in by the
Fund are only for the purpose of hedging the Fund's portfolio securities and
are not speculative in nature; however, there are risks inherent in the use of
such instruments. One such risk is that the Investment Manager could be
incorrect in its expectations as to the direction or extent of various interest
rate or price movements or the time span within which the movements take place.
For example, if the Fund sold futures contracts for the sale of securities in
anticipation of an increase in interest rates, and then interest rates went
down instead, causing bond prices to rise, the Fund would lose money on the
sale. Another risk which will arise in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities, currencies and indexes subject to futures contracts (and thereby
the futures contract prices) may correlate
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imperfectly with the behavior of the dollar cash prices of the Fund's portfolio
securities and their denominated currencies. See the Statement of Additional
Information for a further discussion of such risks.
FORWARD FOREIGN CURRENCY EXCHANGE
CONTRACTS
The Fund may enter into forward foreign currency exchange contracts ("forward
contracts") in connection with its foreign securities investments.
A forward contract involves an obligation to purchase or sell a currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar or
other currency which is being used for the security purchase (by the Fund or
the counterparty) and the foreign currency in which the security is denominated
during the period between the date on which the security is purchased or sold
and the date on which payment is made or received.
At other times, when, for example, the Investment Manager believes that a
particular foreign currency may suffer a substantial decline against the U.S.
dollar or some other foreign currency, the Fund may enter into a forward
contract to sell, for a fixed amount of dollars or other currency, the amount
of foreign currency approximating the value of some or all of the Fund's
securities holdings (or securities which the Fund has purchased for its
portfolio) denominated in such foreign currency. Under identical circumstances,
the Fund may enter into a forward contract to sell, for a fixed amount of U.S.
dollars or other currency, an amount of foreign currency other than the
currency in which the securities to be hedged are denominated approximating the
value of some or all of the portfolio securities to be hedged. This method of
hedging, called "cross-hedging," will be selected by the Investment Manager
when it is determined that the foreign currency in which the portfolio
securities are denominated has insufficient liquidity or is trading at a
discount as compared with some other foreign currency with which it tends to
move in tandem.
In addition, when the Investment Manager anticipates purchasing
securities at some time in the future, and wishes to lock in the current
exchange rate of the currency in which those securities are denominated against
the U.S. dollar or some other foreign currency, the Fund may enter into a
forward contract to purchase an amount of currency equal to some or all of the
value of the anticipated purchase, for a fixed amount of U.S. dollars or other
currency. The Fund may, however, close out the forward contract without
purchasing the security which was the subject of the "anticipatory" hedge.
In all of the above circumstances, if the currency in which the Fund's
securities holdings (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be
possible, since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures.
The Fund is not required to enter into such transactions with regard to its
foreign currency-denominated securities and will not do so unless deemed
appropriate by the Investment Manager. The Fund generally will not enter into a
forward contract with a term of greater than one year, although it may enter
into forward contracts for periods of up to five years. The Fund may be limited
in its ability to enter into hedging transactions involving forward contracts
by the Internal Revenue Code requirements related to qualification as a
regulated investment company (see "Dividends, Distributions, and Taxes").
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a view
to achieving the Fund's investment objective. The Fund's portfolio is managed
within MSDW Advisors' Growth Group which manages 28 equity funds and fund
portfolios with approximately $10.5 billion in assets as of June 30, 1998.
George Paoletti, Vice President of MSDW Advisors, has been the Fund's primary
portfolio manager since July, 1998. Before managing the Fund Mr. Paoletti was a
Senior Equity Research Analyst with MSDW Advisors since May, 1997 and prior
thereto was an Equity Research Analyst with Fred Alger
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Management (November, 1995-May, 1997) and a consultant with Off Wall Street
Consulting (July, 1992-November, 1995).
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Investment Manager will rely on information from various
sources, including research, analysis and appraisals of brokers and dealers,
including Dean Witter Reynolds Inc., Morgan Stanley & Co. Incorporated and
other broker-dealers that are affiliates of the Investment Manager, and the
Investment Manager's own analysis of factors it deems relevant.
Orders for transactions in portfolio securities and commodities are
placed for the Fund with a number of brokers and dealers, including Dean Witter
Reynolds Inc. and other brokers and dealers that are affiliates of the
Investment Manager. The Fund may incur brokerage commissions on transactions
conducted through such affiliates. It is not anticipated that the portfolio
trading will result in the Fund's portfolio turnover rate exceeding 300% in any
one year. A portfolio turnover rate in excess of 100% may be considered high
and the Fund will incur correspondingly higher transaction costs. In addition,
high portfolio turnover may result in more capital gains which would be taxable
to the shareholders of the Fund. (See "Dividends, Distributions and Taxes.")
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and thus may be
changed without shareholder approval.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which have
been adopted by the Fund as fundamental policies. (See the Statement of
Additional Information for a list of the Fund's other investment restrictions.)
Under the Act, a fundamental policy may not be changed without the vote of a
majority of the outstanding voting securities of the Fund, as defined in the
Act. For purposes of the following limitations: (i) all percentage limitations
apply immediately after a purchase or initial investment, and (ii) any
subsequent change in any applicable percentage resulting from market
fluctuations or other changes in total or net assets does not require
elimination of any security from the portfolio.
The Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of one issuer (other than obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities).
2. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry except that the Fund will invest at least 25% of
its total assets in the securities of issuers in the communications and
information industry. This restriction does not apply to securities of the
communications and information industry as defined herein, or to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities.
3. 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 does not apply to obligations issued
or guaranteed by the United States Government, its agencies or
instrumentalities.
4. The Fund may not, as to 75% of its total assets, purchase more than
10% of the voting securities of any issuer.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares for sale to the public on a continuous
basis. Pursuant to a Distribution Agreement between the Fund and Morgan Stanley
Dean Witter Distributors Inc. ("MSDW Distributors" or the "Distributor"), an
affiliate of the Investment Manager, shares of the Fund are distributed by the
Distributor and offered by Dean Witter Reynolds Inc. ("DWR"), a selected dealer
and subsidiary of Morgan Stanley Dean Witter & Co., and other dealers who have
entered into selected broker-dealer agreements with the Distributor ("Selected
Broker-Dealers"). It is anticipated that DWR will undergo a change of corporate
name which is expected to incorporate the brand name of "Morgan Stanley Dean
Witter," pending approval of various regulatory authorities. The principal
executive office of the Distributor is located at Two World Trade Center, New
York, New York 10048.
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The Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales charge
are subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for certain specific circumstances. Class B
shares are sold without an initial sales charge but are subject to a CDSC
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years
after purchase. (Class B shares purchased by certain qualified plans are
subject to a CDSC scaled down from 2.0% to 1.0% if redeemed within three years
after purchase.) Class C shares are sold without an initial sales charge but
are subject to a CDSC of 1.0% on most redemptions made within one year after
purchase. Class D shares are sold without an initial sales charge or CDSC and
are available only to investors meeting an initial investment minimum of $5
million ($25 million for certain qualified plans), and to certain other limited
categories of investors. At the discretion of the Board of Trustees of the
Fund, Class A shares may be sold to categories of investors in addition to
those set forth in this prospectus at net asset value without a front-end sales
charge, and Class D shares may be sold to certain other categories of
investors, in each case as may be described in the then current prospectus of
the Fund. See "Alternative Purchase Arrangements--Selecting a Particular Class"
for a discussion of factors to consider in selecting which Class of shares to
purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25 million
for certain qualified plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5 million (or $25 million)
initial investment for Class D shares, and subject to the $1,000 minimum
initial investment for each Class of the Fund, an investor's existing holdings
of Class A shares of the Fund and other Morgan Stanley Dean Witter Funds that
are multiple class funds ("Morgan Stanley Dean Witter Multi-Class Funds") and
shares of Morgan Stanley Dean Witter Funds sold with a front-end sales charge
("FSC Funds") and concurrent investments in Class D shares of the Fund and
other Morgan Stanley Dean Witter Multi-Class Funds will be aggregated.
Subsequent purchases of $100 or more may be made by sending a check, payable to
Morgan Stanley Dean Witter Information Fund, directly to Morgan Stanley Dean
Witter Trust FSB (the "Transfer Agent" or "MSDW Trust") at P.O. Box 1040,
Jersey City, NJ 07303, or by contacting a Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative. When purchasing shares
of the Fund, investors must specify whether the purchase is for Class A, Class
B, Class C or Class D shares. If no Class is specified, the Transfer Agent will
not process the transaction until the proper Class is identified. The minimum
initial purchase in the case of investments through EasyInvest(SM), an automatic
purchase plan (see "Shareholder Services"), is $100, provided that the schedule
of automatic investments will result in investments totalling at lease $1,000
within the first twelve months. The minimum initial purchase in the case of an
"Education IRA" is $500, if the Distributor has reason to believe that
additional investments will increase the investment in the account to $1,000
within three years. In the case of investments pursuant to (i) Systematic
Payroll Deduction Plans (including Individual Retirement Plans), (ii) the MSDW
Advisors mutual fund asset allocation program and (iii) fee-based programs
approved by the Distributor, pursuant to which participants pay an asset based
fee for services in the nature of investment advisory, administrative and/or
brokerage services, the Fund, in its discretion, may accept investments without
regard to any minimum amounts which would otherwise be required, provided, in
the case of Systematic Payroll Deduction Plans, that the Distributor has reason
to believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares purchased
will not be issued unless a request is made by the shareholder in writing to
the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since DWR
and other Selected Broker-Dealers forward investors' funds on settlement date,
they will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions. Sales personnel of a Selected Broker-Dealer are compensated for
selling shares of the Fund by the Distributor or any of its affiliates and/or
the Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive non-cash compensation in the form of trips to
educational seminars and merchandise as special sales incentives. The Fund and
the Distributor reserve the right to reject any purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide them
with the flexibility of selecting an investment best suited to their needs. The
general public is offered three Classes of shares: Class A shares,
16
<PAGE>
Class B shares and Class C shares, which differ principally in terms of sales
charges and rate of expenses to which they are subject. A fourth Class of
shares, Class D shares, is offered only to limited categories of investors (see
"No Load Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs
resulting from the CDSC applicable to shares of those Classes. The ongoing
distribution fees that are imposed on Class A, Class B and Class C shares will
be imposed directly against those Classes and not against all assets of the
Fund and, accordingly, such charges against one Class will not affect the net
asset value of any other Class or have any impact on investors choosing another
sales charge option. See "Plan of Distribution" and "Redemptions and
Repurchases."
Set forth below is a summary of the differences between the Classes and
the factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
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 certain
purchases. Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charges at the
time of purchase but are subject to a CDSC of 1.0% on redemptions made within
one year after purchase, except for certain specific circumstances. Class A
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net
assets of the Class. See "Initial Sales Charge Alternative--Class A Shares."
CLASS B SHARES. Class B shares are offered at net asset value with no initial
sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%) if
redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed
within three years after purchase.) This CDSC may be waived for certain
redemptions. Class B shares are also subject to an annual 12b-1 fee of 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 reinvestments 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 CDSC has been imposed or waived, or (b) the average daily net
assets of Class B. The Class B shares' distribution fee will cause that Class
to have higher expenses and pay lower dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time. See
"Contingent Deferred Sales Charge Alternative--Class B Shares."
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 redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They are
subject to an annual 12b-1 fee of up to 1.0% of the average daily net assets of
the Class C shares. 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.
See "Level Load Alternative--Class C Shares."
CLASS D SHARES. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares are
sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
SELECTING A PARTICULAR CLASS. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an
investor depends on the amount and intended length of his or her investment.
Investors who prefer an initial sales charge alternative may elect to purchase
Class A shares. Investors qualifying for significantly reduced or, in the case
of purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.
17
<PAGE>
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly
lower CDSC upon redemptions, they do not, unlike Class B shares, convert into
Class A shares after approximately ten years, and, therefore, are subject to an
ongoing 12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A
shares) for an indefinite period of time. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Other investors, however, may elect to purchase Class C shares if,
for example, they determine that they do not wish to be subject to a front-end
sales charge and they are uncertain as to the length of time they intend to
hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all Morgan
Stanley Dean Witter Multi-Class Funds, shares of FSC Funds and shares of Morgan
Stanley Dean Witter Funds for which such shares have been exchanged will be
included together with the current investment amount.
Sales personnel may receive different compensation for selling each Class
of shares. Investors should understand that the purpose of a CDSC is the same
as that of the initial sales charge in that the sales charges applicable to
each Class provide for the financing of the distribution of shares of that
Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
- -----------------------------------------------------------------------------
CONVERSION
CLASS SALES CHARGE 12b-1 FEE FEATURE
- -----------------------------------------------------------------------------
A Maximum 5.25% 0.25% No
initial sales charge
reduced for
purchases of
$25,000 and over;
shares sold without
an initial sales
charge generally
subject to a 1.0%
CDSC during first
year.
- -----------------------------------------------------------------------------
B Maximum 5.0% 1.0% B shares convert
CDSC during the first to A shares
year decreasing automatically after
to 0 after six years approximately
ten years
- -----------------------------------------------------------------------------
C 1.0% CDSC during 1.0% No
first year
- -----------------------------------------------------------------------------
D None None No
- -----------------------------------------------------------------------------
See "Purchase of Fund Shares" and "The Fund and its Management" for a complete
description of the sales charges and service and distribution fees for each
Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--
CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased), except for certain specific circumstances. The CDSC will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The CDSC will not be imposed (i) in the
circumstances set forth below in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case of
Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets
of the Class.
The offering price of Class A shares will be the net asset value per
share next determined following receipt of an order (see "Determination of Net
Asset Value" below), plus a sales charge (expressed as a percentage of the
offering price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
Sales Charge
------------
Percentage of Approximate
Amount of Single Public Offering Percentage of
Transaction Price 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>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up to
the full applicable sales charge as
18
<PAGE>
shown in the above schedule 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 of 1933.
The above schedule of sales charges is applicable to purchases in a
single transaction by, among others: (a) an individual; (b) an individual, his
or her spouse and their children under the age of 21 purchasing shares for his,
her or their own accounts; (c) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified under
Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue Code
of a single employer or of employers who are "affiliated persons" of each other
within the meaning of Section 2(a)(3)(c) of the Act; and for investments in
Individual Retirement Accounts of employees of a single employer through
Systematic Payroll Deduction plans; or (g) any other organized group of
persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount.
COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced sales
charges in accordance with the above schedule by combining purchases of Class A
shares of the Fund in single transactions with the purchase of Class A shares
of other Morgan Stanley Dean Witter Multi-Class Funds and shares of FSC Funds.
The sales charge payable on the purchase of the Class A shares of the Fund, the
Class A shares of the other Morgan Stanley Dean Witter Multi-Class Funds and
the shares of the FSC Funds will be at their respective rates applicable to the
total amount of the combined concurrent purchases of such shares.
RIGHT OF ACCUMULATION. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other Morgan Stanley Dean Witter Funds
previously purchased at a price including a front-end sales charge (including
shares of the Fund and other Morgan Stanley Dean Witter Funds acquired in
exchange for those shares, and including in each case shares acquired through
reinvestment of dividends and distributions), which are held at the time of
such transaction, amounts to $25,000 or more. If such investor has a cumulative
net asset value of shares of FSC Funds and Class A and Class D shares that,
together with the current investment amount equal to at least $5 million ($25
million for certain qualified plans), such investor is eligible to purchase
Class D shares subject to the $1,000 minimum initial investment requirement of
that Class of the Fund. See "No Load Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or
the shareholder 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 by the dealer or shareholder when such an
order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Selected Broker-Dealer or the Transfer Agent fails to
confirm the investor's represented holdings.
LETTER OF INTENT. The foregoing schedule of reduced sales charges will also be
available to investors who enter into a written Letter of Intent providing for
the purchase, within a thirteen-month period, of Class A shares of the Fund
from DWR or other Selected Broker-Dealers. The cost of Class A shares of the
Fund or shares of other Morgan Stanley Dean Witter Funds which were previously
purchased at a price including a front-end sales charge during the 90-day
period prior to the date of receipt by the Distributor of the Letter of Intent,
or of Class A shares of the Fund or shares of other Morgan Stanley Dean Witter
Funds acquired in exchange for shares of such funds purchased during such
period at a price including a front-end sales charge, which are still owned by
the shareholder, may also be included in determining the applicable reduction.
ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of $1
million or more, Class A shares also may be purchased at net asset value by the
following:
(1) trusts for which MSDW Trust (which is an affiliate of the Investment
Manager) provides discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for services
in the nature of investment advisory, administrative and/or brokerage services
(such investments are subject to all of the terms and conditions of such
programs, which may include termination fees, mandatory redemption upon
termination and such other circumstances as specified in the programs'
agreements, and restrictions on transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section
401(a) of the Internal Revenue
19
<PAGE>
Code ("Qualified Retirement Plans") with at least 200 eligible employees and
for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement;
(4) Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible employees.
(5) investors who are clients of a Morgan Stanley Dean Witter Financial
Advisor who joined Morgan Stanley Dean Witter from another investment firm
within six months prior to the date of purchase of Fund shares by such
investors, if the shares are being purchased with the proceeds from a
redemption of shares of an open-end proprietary mutual fund of the Financial
Advisor's previous firm which imposed either a front-end or deferred sales
charge, provided such purchase was made within sixty days after the redemption
and the proceeds of the redemption had been maintained in the interim in cash
or a money market fund; and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares,
contact DWR or another Se-lected Broker-Dealer or consult the Statement of
Additional Information.
CONTINGENT DEFERRED SALES CHARGE
ALTERNATIVE--CLASS B SHARES
Class B shares are sold at net asset value next determined without an initial
sales charge so that the full amount of an investor's purchase payment may be
immediately invested in the Fund. A CDSC, however, will be imposed on most
Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain Qualified Retirement
Plans, three years) preceding the redemption. In addition, Class B shares are
subject to an annual 12b-1 fee of 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 reinvestments 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 CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any CDSC upon
redemption. Shares redeemed earlier than six years after purchase may, however,
be subject to a CDSC which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the following table:
<TABLE>
<CAPTION>
Year Since
Purchase CDSC as a Percentage
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>
In the case of Class B shares of the Fund purchased on or after July 28, 1997
by Qualified Retirement Plans for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, shares held for three years or more after
purchase (calculated as described in the paragraph above) will not be subject
to any CDSC upon redemption. However, shares redeemed earlier than three years
after purchase may be subject to a CDSC (calculated as described in the
paragraph above), the percentage of which will depend on how long the shares
have been held, as set forth in the following table:
<TABLE>
<CAPTION>
Year Since
Purchase CDSC as a Percentage
Payment Made of Amount Redeemed
------------ ------------------
<S> <C>
First ......................... 2.0%
Second ........................ 2.0%
Third ......................... 1.0%
Fourth and thereafter ......... None
</TABLE>
CDSC WAIVERS. A CDSC will not be imposed on: (i) any amount which represents an
increase in value of shares purchased within the six years (or, in the case of
shares held by certain Qualified Retirement Plans, three years) preceding the
redemption; (ii) the current net asset value of shares purchased more than six
years (or, in the case of shares held by certain Qualified Retirement Plans,
three years) prior to the redemption; and (iii) the current net asset value of
shares purchased through reinvestment of
20
<PAGE>
dividends or distributions and/or shares acquired in exchange for shares of FSC
Funds, or of other Morgan Stanley Dean Witter Funds acquired in exchange for
such shares. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order) are
redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the
case of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination
of disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) 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);
(B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan which offers investment companies managed by the
Investment Manager or its subsidiary, MSDW Services, as self-directed
investment alternatives and for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement ("Eligible Plan"), provided that either: (A)
the plan continues to be an Eligible Plan after the redemption; or (B) the
redemption is in connection with the complete termination of the plan involving
the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to engage
in gainful employment. With reference to (2) above, the term "distribution"
does not encompass a direct transfer of IRA, 403(b) Custodial Account or
retirement plan assets to a successor custodian or trustee. All waivers will be
granted only following receipt by the Distributor of confirmation of the
shareholder's entitlement.
CONVERSION TO CLASS A SHARES. All shares of the Fund held prior to July 28,
1997 have been designated Class B shares. Shares held before May 1, 1997 will
convert to Class A shares in May, 2007. In all other instances Class B shares
will convert automatically to Class A shares, based on the relative net asset
values of the shares of the two Classes on the conversion date, which will be
approximately ten (10) years after the date of the original purchase. The ten
year period is calculated 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
or a series of exchanges, from the last day of the month in which the original
Class B shares were purchased, provided that shares originally purchased before
May 1, 1997 will convert to Class A shares in May, 2007. The conversion of
shares purchased on or after May 1, 1997 will take place in the month following
the tenth anniversary of the purchase. There will also be converted at that
time such proportion of Class B shares acquired through automatic reinvestment
of dividends and distributions owned by the shareholder as the total number of
his or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a Qualified Retirement Plan for which MSDW Trust
serves as Trustee or DWR's Retirement Plan Services serves as recordkeeper
pursuant to a written Recordkeeping Services Agreement, 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 first shares of a Morgan Stanley Dean Witter Multi-Class
Fund purchased by that plan. In the case of Class B shares previously exchanged
for shares of an "Exchange Fund" (see "Shareholder Services--Exchange
Privilege"), the period of time the shares were held in the Exchange Fund
(calculated from the last day of the month in which the Exchange Fund shares
were acquired) is excluded from the holding period for conversion. If those
shares are subsequently re-exchanged for Class B shares of a Morgan Stanley
Dean Witter Multi-Class Fund, the holding period resumes on the last day of the
month in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date for conversion. Class B shares evidenced by share certificates that
are not received by the Transfer Agent at least one week prior to any
conversion date will be converted into Class A shares on the next scheduled
conversion date after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the
21
<PAGE>
conversion of shares does not constitute a taxable event under the Internal
Revenue Code, (ii) Class A shares received on conversion will have a basis
equal to the shareholder's basis in the converted Class B shares immediately
prior to the conversion, and (iii) Class A shares received on conversion will
have a holding period that includes the holding period of the converted Class B
shares. The conversion feature may be suspended if the ruling or opinion is no
longer available. In such event, Class B shares would continue to be subject to
Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an initial
sales charge but are subject to a CDSC of 1.0% on most redemptions made within
one year after purchase (calculated from the last day of the month in which the
shares were purchased). The CDSC will be assessed on an amount equal to the
lesser of the current market value or the cost of the shares being redeemed.
The CDSC will not be imposed in the circumstances set forth above in the
section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of
that section shall mean one year in the case of Class C shares. Class C shares
are subject to an annual 12b-1 fee of up to 1.0% of the average daily net
assets of the Class. Unlike Class B shares, Class C shares have no conversion
feature and, accordingly, an investor that purchases Class C shares will be
subject to 12b-1 fees applicable to Class C shares for an indefinite period
subject to annual approval by the Fund's Board of Trustees and regulatory
limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or redemption
and without any 12b-1 fee. Class D shares are offered only to investors meeting
an initial investment minimum of $5 million ($25 million for Qualified
Retirement Plans for which MSDW Trust serves as Trustee or DWR's Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement) and the following categories of investors: (i) investors
participating in the MSDW Advisors mutual fund asset allocation program
pursuant to which such persons pay an asset based fee; (ii) persons
participating in a fee-based program approved by the Distributor, pursuant to
which such persons pay an asset based fee for services in the nature of
investment advisory administrative and/or brokerage services (subject to all of
the terms and conditions of such programs, referred to in (i) and (ii) above,
which may include termination fees, mandatory redemption upon termination and
such other circumstances as specified in the programs' agreements, and
restrictions on transferability of Fund shares); (iii) 401(k) plans established
by DWR and SPS Transaction Services, Inc. (an affiliate of DWR) for their
employees; (iv) certain Unit Investment Trusts sponsored by DWR; (v) certain
other open-end investment companies whose shares are distributed by the
Distributor; and (vi) other categories of investors, at the discretion of the
Board, as disclosed in the then current prospectus of the Fund Investors who
require a $5 million (or $25 million) minimum initial investment to qualify to
purchase Class D shares may satisfy that requirement by investing that amount
in a single transaction in Class D shares of the Fund and other Morgan Stanley
Dean Witter Multi-Class Funds, subject to the $1,000 minimum initial investment
required for that Class of the Fund. In addition, for the purpose of meeting
the $5 million (or $25 million) minimum investment amount, holdings of Class A
shares in all Morgan Stanley Dean Witter Multi-Class Funds, shares of FSC Funds
and shares of Morgan Stanley Dean Witter Funds for which such shares have been
exchanged will be included together with the current investment amount. If a
shareholder redeems Class A shares and purchases Class D shares, such
redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act with respect to the distribution of Class A, Class B and Class C shares of
the Fund. In the case of Class A and Class C shares, the Plan provides that the
Fund will reimburse the Distributor and others for the expenses of certain
activities and services incurred by them specifically on behalf of those
shares. Reimbursements for these expenses will be made in monthly payments by
the Fund to the Distributor, which will in no event exceed amounts equal to
payments at the annual rates of 0.25% and 1.0% of the average daily net assets
of Class A and Class C, respectively. In the case of Class B shares, the Plan
provides that the Fund will pay the Distributor a fee, which is accrued daily
and paid monthly, at the annual rate of 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 reinvestments 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 CDSC has been
imposed or waived, or (b) the average daily net assets of Class B. The fee is
treated by the Fund as an expense in the year it is accrued. In the case of
Class A shares, the entire amount of the fee currently represents a service fee
within the meaning of
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the NASD guidelines. In the case of Class B and Class C shares, a portion of
the fee payable pursuant to the Plan, equal to 0.25% of the average daily net
assets of each of these Classes, is currently characterized as a service fee. A
service fee is a payment made for personal service and/or the maintenance of
shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of Morgan Stanley Dean
Witter Financial Advisors and others who engage in or support distribution of
shares or who service shareholder accounts, including overhead and telephone
expenses; printing and distribution of prospectuses and reports used in
connection with the offering of the Fund's shares to other than current
shareholders; and 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 DWR 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.
For the fiscal year ended March 31, 1998, Class B shares of the Fund
accrued payments under the Plan amounting to $2,387,929, which amount is equal
to 1.0% of the Fund's average daily net assets of Class B for the fiscal year.
The payments accrued under the Plan were calculated pursuant to clause (b) of
the compensation formula under the Plan. All shares held prior to July 28, 1997
have been designated Class B shares. For the fiscal period July 28, 1997
through March 31, 1998, Class A and Class C shares of the Fund accrued payments
under the Plan amounting to $193 and $554, respectively, which amounts on an
annualized basis are equal to 0.23% and 1.00% of the average daily net assets
of Class A and Class C, respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i)
the payments made by the Fund pursuant to the Plan, and (ii) the proceeds of
CDSCs paid by investors upon the redemption of Class B 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 such excess amounts, including the carrying charge described above,
totalled $11,792,699 at March 31, 1998, which was equal to 4.41% 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 or any
requirement that the Plan be continued from year to year, such 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 or other Selected Broker-Dealer 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 Selected
Broker-Dealer representatives at the time of sale totalled $567 in the case of
Class C at December 31, 1997, which was equal to 0.66% of the net assets of
Class C on such date, and that there were no such expenses which 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.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York 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) by taking the net assets of the Fund, dividing by the number of
shares outstanding and adjusting to the nearest cent. The assets belonging to
the Class A, Class B, Class C and Class D shares will be invested together in a
single portfolio. The net asset value of each Class, however, will be
determined separately by subtracting each Class's accrued expenses and
liabilities. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by
the New York Stock Exchange.
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<PAGE>
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
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time assets are valued; if there were no sales that day,
the security is valued at the latest bid price (in cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market pursuant to procedures adopted by the
Trustees); and (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest bid price.
When market quotations are not readily available, including circumstances under
which it is determined by the Investment Manager that sale or bid prices are
not reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by
and under the general supervision of the Board of 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 as of the close of
the New York Stock Exchange. Dividends receivable are accrued as of the
ex-dividend date or as of the time that the relevant ex-dividend date and
amounts become known.
Short-term debt securities with remaining maturities of 60 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. Other short-term debt securities will be valued on a mark-to-market
basis until such time as they reach a remaining maturity of 60 days, whereupon
they will be valued at amortized cost using their value on the 61st day unless
the Trustees determine such does not reflect the securities' market value, in
which case these securities will be valued at their fair value as determined by
the Trustees. All other securities and other assets are valued at their fair
value as determined in good faith under procedures established by and under the
supervision of the 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.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends and
capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the
shareholder, in shares of any other open-end Morgan Stanley Dean Witter Fund),
unless the shareholder requests that they be paid in cash. Shares so acquired
are acquired at net asset value and are not subject to the imposition of a
front-end sales charge or a CDSC (see "Redemptions and Repurchases").
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution in shares of the applicable Class at
the net asset value next determined after receipt by the Transfer Agent, by
returning the check or the proceeds to the Transfer Agent within thirty days
after the payment date. Shares so acquired are acquired at net asset value and
are not subject to the imposition of a front-end sales charge or a CDSC (see
"Redemptions and Repurchases").
EASYINVEST.(SM) Shareholders may subscribe to EasyInvest, an automatic purchase
plan which provides for any amount from $100 to $5,000 to be transferred
automatically from a checking or savings account or following redemption of
shares of a Morgan Stanley Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund (see "Purchase of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemption").
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable CDSC
will be imposed on shares redeemed under the Withdrawal Plan (See "Purchase of
Fund Shares"). Therefore, any shareholder participating in the Withdrawal Plan
will have sufficient shares redeemed from his or her account so that the
proceeds (net of any applicable CDSC) to the shareholder will be the designated
monthly or quarterly amount.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan
24
<PAGE>
payments continuously exceed net investment income and net capital gains, the
shareholder's original investment will be correspondingly reduced and
ultimately exhausted. Each withdrawal constitutes a redemption of shares and
any gain or loss realized must be recognized for federal income tax purposes.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
Shareholders should contact their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative or the Transfer Agent
for further information about any of the above services.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any other
Morgan Stanley Dean Witter Multi-Class Fund without the imposition of any
exchange fee. Shares may also be exchanged for shares of the following funds:
Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust, Morgan Stanley Dean
Witter Limited Term Municipal Trust, Morgan Stanley Dean Witter Short-Term Bond
Fund and five Morgan Stanley Dean Witter Funds which are money market funds
(the "Exchange Funds"). Class A shares may also be exchanged for shares of
Morgan Stanley Dean Witter Multi-State Municipal Series Trust and Morgan
Stanley Dean Witter Hawaii Municipal Trust, which are Morgan Stanley Dean
Witter Funds sold with a front-end sales charge ("FSC Funds"). Class B shares
may also be exchanged for shares of Morgan Stanley Dean Witter Global
Short-Term Income Fund Inc. ("Global Short-Term"), which is a Morgan Stanley
Dean Witter Fund offered with a CDSC. Exchanges may be made after the shares of
the Fund acquired by purchase (not by exchange or dividend reinvestment) have
been held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment.
An exchange to another Morgan Stanley Dean Witter Multi-Class Fund, any
FSC Fund, Global Short-Term or any Exchange Fund that is not a money market
fund is on the basis of the next calculated net asset value per share of each
fund after the exchange order is received. When exchanging into a money market
fund from the Fund, shares of the Fund are redeemed out of the Fund at their
next calculated net asset value and the proceeds of the redemption are used to
purchase shares of the money market fund at their net asset value determined
the following business day. Subsequent exchanges between any of the money
market funds and any of the Morgan Stanley Dean Witter Multi-Class Funds, FSC
Funds, Global Short-Term or any Exchange Fund that is not a money market fund
can be effected on the same basis. No CDSC is imposed at the time of any
exchange of shares, although any applicable CDSC will be imposed upon ultimate
redemption. During the period of time the shareholder remains in an Exchange
Fund (calculated from the last day of the month in which the shares were
acquired) the holding period (for the purpose of determining the rate of the
contingent deferred sales charge) is frozen. If those shares are subsequently
reexchanged for shares of a Morgan Stanley Dean Witter Multi-Class Fund or
shares of Global Short-Term, the holding period previously frozen when the
first exchange was made resumes on the last day of the month in which shares of
a Morgan Stanley Dean Witter Multi-Class Fund or shares of Global Short-Term
are reacquired. Thus, the CDSC is based upon the time (calculated as described
above) the shareholder was invested in shares of a Morgan Stanley Dean Witter
Multi-Class Fund or in shares of Global Short-Term (see "Purchase of Fund
Shares"). In the case of exchanges of Class A shares which are subject to a
CDSC, the holding period also includes the time (calculated as described above)
the shareholder was invested in shares of a FSC Fund. However, in the case of
shares exchanged for shares of an Exchange Fund on or after April 23, 1990,
upon a redemption of shares which results in a CDSC being imposed, a credit
(not to exceed the amount of the CDSC) will be given in an amount equal to the
Exchange Fund 12b-1 distribution fees, if any, incurred on or after that date
which are attributable to those shares. (Exchange Fund 12b-1 distribution fees
are described in the prospectuses for those funds.) Class B shares of the Fund
acquired in exchange for shares of Global Short-Term or Class B shares of
another Morgan Stanley Dean Witter Multi-Class Fund having a different CDSC
schedule than that of this Fund will be subject to the higher CDSC schedule,
even if such shares are subsequently re-exchanged for shares of the fund with
the lower CDSC schedule.
ADDITIONAL INFORMATION REGARDING EXCHANGES. Purchases and exchanges should be
made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Investment Manager to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Investment Manager's
discretion, may be limited by the Fund's refusal to accept additional purchases
and/or exchanges from the investor. Although the Fund does not have any
specific definition of what constitutes a pattern of frequent exchanges, and
will consider all relevant factors in determining whether a particular
situation is abusive and contrary to the best interests of the Fund and its
other shareholders, investors should be aware that the Fund
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<PAGE>
and each of the other Morgan Stanley Dean Witter Funds may in their discretion
limit or otherwise restrict the number of times this Exchange Privilege may be
exercised by any investor. Any such restriction will be made by the Fund on a
prospective basis only, upon notice to the shareholder not later than ten days
following such shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Morgan Stanley Dean Witter Funds for which shares of
the Fund have been exchanged, upon such notice as may be required by applicable
regulatory agencies (presently sixty days' prior written notice for termination
or material revision), provided that six months' prior written notice of
termination will be given to shareholders who hold shares of an Exchange Fund
pursuant to the Exchange Privilege, and provided further that the Exchange
Privilege may be terminated or materially revised without notice under certain
unusual circumstances. Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative regarding
restrictions on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment
objective(s) and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement of each Class of shares and any other conditions imposed by each
fund. In the case of any shareholder holding a share certificate or
certificates, no exchanges may be made until all applicable share certificates
have been received by the Transfer Agent and deposited in the Shareholder's
account. In the case of a shareholder holding a share certificate or
certificates, no exchanges may be made until all applicable share certificates
have been received by the Transfer Agent and deposited in the shareholder's
account. An exchange will be treated for federal income tax purposes the same
as a repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Morgan
Stanley Dean Witter Funds (for which the Exchange Privilege is available)
pursuant to this Exchange Privilege by contacting their Morgan Stanley Dean
Witter Financial Advisor or other Selected Broker-Dealer representative (no
Exchange Privilege Authorization Form is required). Other shareholders (and
those shareholders who are clients of DWR or another Selected Broker-Dealer but
who wish to make exchanges directly by telephoning the Transfer Agent) must
complete and forward to the Transfer Agent an Exchange Privilege Authorization
Form, copies of which may be obtained from the Transfer Agent, to initiate an
exchange. If the Authorization Form is used, exchanges may be made in writing
or by contacting the Transfer Agent at (800) 869-NEWS (toll-free). The Fund
will employ reasonable procedures to confirm that exchange instructions
communicated over the telephone are genuine. Such procedures may include
requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for
any losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her Morgan Stanley
Dean Witter Financial Advisor or other Selected Broker-Dealer representative,
if appropriate, or make a written exchange request. Shareholders are advised
that 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 Morgan Stanley Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their Morgan Stanley Dean Witter Financial Advisor or other
Selected Broker-Dealer representative or the Transfer Agent.
REDEMPTIONS AND REPURCHASES
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REDEMPTION. Shares of each Class of the Fund can be redeemed for cash at any
time at the net asset value per share next determined less the amount of any
applicable CDSC in the case of Class A, Class B or Class C shares (see
"Purchase of Fund Shares"). If shares are held in a shareholder's account
without a share certificate, a written request for redemption sent to the
Fund's Transfer Agent at P.O. Box 983, Jersey City, NJ 07303 is required.
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<PAGE>
If certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption, along with
any additional documentation required by the Transfer Agent.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to repurchase
shares represented by a share certificate which is delivered to any of their
offices. Shares held in a shareholder's account without a share certificate may
also be repurchased by DWR and other Selected Broker-Dealers upon the
telephonic or telegraphic request of the shareholder. The repurchase price is
the net asset value per share next determined (see "Purchase of Fund Shares")
after such purchase order is received by DWR or other Selected Broker-Dealer,
reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund or the
Distributor. The offer by DWR and other Selected Broker-Dealers to repurchase
shares may be suspended without notice by them at any time. In that event,
shareholders may redeem their shares through the Fund's Transfer Agent as set
forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after receipt
by the Transfer Agent of the certificate and/or written request in good order.
Such payment may be postponed or the right of redemption suspended under
unusual circumstances, e.g. when normal trading is not taking place on the New
York Stock Exchange. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum
time needed to verify that the check used for investment has been honored (not
more than fifteen days from the time of receipt of the check by the Transfer
Agent). Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative regarding restrictions
on redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within 35 days after the date of the redemption or repurchase, reinstate
any portion or all of the proceeds of such redemption or repurchase in shares
of the Fund in the same Class from which such shares were redeemed or
repurchased at the net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent and
receive a pro rata credit for any CDSC paid in connection with such redemption
or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right on sixty days' notice, to
redeem and at net asset value, the shares of any shareholder (other than shares
held in an Individual Retirement or Custodial Account under Section 403(b)(7)
of the Internal Revenue Code) whose shares, due to redemptions by the
shareholder, have a value of less than $100 as a result of redemptions or
repurchases, or such lesser amount as may be fixed by the Board of Trustees or,
in the case of an account opened through EasyInvest(SM), if after twelve months
the shareholder has invested less than $1,000 in the account. However, before
the Fund redeems such shares and sends the proceeds to the shareholder, it will
notify the shareholder that the value of the shares is less than the applicable
amount and allow the shareholder sixty days to make an additional investment in
an amount which will increase the value of the account to at least the
applicable amount before the redemption is processed. No CDSC will be imposed
on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends separately for each
Class of shares and intends to distribute substantially all of the Fund's net
investment income and net realized capital gains, if any, at least once each
year. The Fund may, however, determine to retain all or part of any net
long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional shares of the same Class and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends and/or distributions be paid
in cash. Shares acquired by dividend and distribution reinvestments will not be
subject to any front-end sales charge or CDSC. Class B shares acquired through
dividend and distribution reinvestments will become eligible for conversion to
Class A shares on a pro rata basis. Distributions paid on Class A and Class D
shares will be higher than for Class B and Class C shares because distribution
fees paid by Class B and Class C shares are higher. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions.")
TAXES. Because the Fund intends to distribute all of its net investment income
and capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
it is not expected that the Fund will be required to pay any federal income
tax. Shareholders who
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<PAGE>
are required to pay taxes on their income will normally have to pay federal
income taxes, and any state income taxes, on the dividends and 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. Any
dividends declared with a record date in the last quarter of any calendar year
which are paid in the following year prior to February 1 will be deemed, for
tax purposes, to have been received by the shareholder in the prior year.
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. Capital gains distributions are not
eligible for the dividends received deduction.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments will not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes. Shareholders will also be notified of their proportionate share of
long-term capital gains distributions that are eligible for a reduced rate of
tax under the Taxpayer Relief Act of 1997. To avoid being subject to a 31%
federal backup withholding tax on taxable dividends, capital gains
distributions and the proceeds of redemptions and repurchases, shareholders'
taxpayer identification numbers must be furnished and certified as to their
accuracy.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and makes the appropriate election with the Internal Revenue Service, the Fund
will report annually to its shareholders the amount per share of such taxes to
enable shareholders to claim United States foreign tax credits or deductions
with respect to such taxes. In the absence of such an election, the Fund would
deduct foreign tax in computing the amount of its distributable income.
Shareholders should consult their tax advisors as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
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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 total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or decrease) in the value of an initial
investment in a Class of the Fund of $1,000 over one, five and ten years, or
the life of the Fund, if less than any of the foregoing. Average annual total
return reflects all income earned by the Fund, any appreciation or depreciation
of the Fund's assets, all expenses incurred by the applicable Class and all
sales charges which would be incurred by shareholders, for the stated periods.
It also assumes reinvestment of all dividends and distributions paid by the
Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average, and
year-by-year or other types of total return figures. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. 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. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc.).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. 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 share-
28
<PAGE>
holders. Also, as discussed herein, Class A, Class B and Class C bear the
expenses related to the distribution of their respective shares.
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 Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for 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 Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses 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 limitation 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.
CODE OF ETHICS. Directors, officers and employees of MSDW Advisors, MSDW
Services and MSDW Distributors are subject to a strict Code of Ethics adopted
by those companies. The Code of Ethics is intended to ensure that the interests
of shareholders and other clients are placed ahead of any personal interest,
that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by
employees of the companies be subject to an advance clearance process to
monitor that no Morgan Stanley Dean Witter Fund is engaged at the same time in
a purchase or sale of the same security. The Code of Ethics bans the purchase
of securities in an initial public offering, and also prohibits engaging in
futures and options transactions and profiting on short-term trading (that is,
a purchase within 60 days of a sale or a sale within 60 days of a purchase) of
a security. In addition, investment personnel may not purchase or sell a
security for their personal account within 30 days before or after any
transaction in any Morgan Stanley Dean Witter Fund managed by them. Any
violations of the Code of Ethics are subject to sanctions, including reprimand,
demotion or suspension or termination of employment. The Code of Ethics
comports with regulatory requirements and the recommendations in the 1994
report by the Investment Company Institute Advisory Group on Personal
Investing.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve its
investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objective and policies and substantially the same investment restrictions as
those applicable to the Fund.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
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MORGAN STANLEY DEAN WITTER
INFORMATION FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and
General Counsel
George Paoletti
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank
Chase Plaza
New York, New York 10005
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
