AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1994
REGISTRATION NOS.: 2-66268
811-2979
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 (X)
PRE-EFFECTIVE AMENDMENT NO.___ ( )
Post-EFFECTIVE AMENDMENT NO. 16 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 (X)
AMENDMENT NO. 17 (X)
---------------
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
---------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
_____ immediately upon filing pursuant to paragraph (b)
__X__ on February 25, 1994 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
_____ on (date) pursuant to paragraph (a) of rule 485.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT HAS FILED ITS RULE 24F-2 NOTICE,
FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1993, WITH THE SECURITIES AND EXCHANGE
COMMISSION ON JANUARY 31, 1994.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
===============================================================================
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
Cross-Reference Sheet
<TABLE>
<CAPTION>
FORM N-1A
ITEM CAPTION
- ---- -------
PART A PROSPECTUS
- ------ ----------
<S> <C>
1. ............ Cover Page
2. ............ Prospectus Summary; Summary of Fund Expenses
3. ............ Financial Highlights; Performance Information
4. ............ Investment Objective and Policies; The Fund and its
Management; Cover Page; Investment Restrictions;
Prospectus Summary
5. ............ The Fund and Its Management; Back Cover;
Investment Objective and Policies
6. ............ Dividends, Distributions and Taxes; Additional
Information
7. ............ Purchase of Fund Shares; Shareholder Services
8. ............ Redemptions and Repurchases; Shareholder Services
9. ............ Not Applicable
<CAPTION>
PART B STATEMENT OF ADDITIONAL INFORMATION
- ------ --------------------------------
<S> <C>
10. ............ Cover Page
11. ............ Table of Contents
12. ............ The Fund and Its Management
13. ............ Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and Brokerage
14. ............ The Fund and Its Management; Trustees and
Officers
15. ............ Trustees and Officers
16. ............ The Fund and Its Management; The Distributor;
Shareholder Services; Custodian and
Transfer Agent; Independent Accountants
17. ............ Portfolio Transactions and Brokerage
18. ............ Shares of the Fund
19. ............ The Distributor; Redemptions and
Repurchases; Financial Statements;
Shareholder Services
20. ............ Dividends, Distributions and Taxes;
Performance Information
21. ............ Purchase of Fund Shares
22. ............ Not applicable
23. ............ Experts; Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
FEBRUARY 25, 1994
Dean Witter Tax-Exempt Securities Trust (the "Fund") is an open-end
diversified management investment company whose investment objective is to
provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund invests principally in
tax-exempt fixed-income securities which are rated in the three highest
categories by Moody's Investors Service, Inc. or Standard & Poor's Corporation.
(See "Investment Objective and Policies.")
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 February 25, 1994, 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 below. The
Statement of Additional Information is incorporated herein by reference.
Dean Witter
Tax-Exempt Securities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 526-3143
TABLE OF CONTENTS
Prospectus Summary/ 2
Summary of Fund Expenses/ 3
Financial Highlights/ 4
The Fund and its Management/ 4
Investment Objective and Policies/ 5
Investment Restrictions/ 9
Purchase of Fund Shares/ 10
Shareholder Services/ 12
Redemptions and Repurchases/ 14
Dividends, Distributions and Taxes/ 15
Performance Information/ 17
Additional Information/ 17
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
FederalDeposit Insurance Corporation, the Federal ReserveBoard, or any other
agency.
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.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
===============================================================================
The
Fund The Fund is organized as a Trust, commonly known as a
Massachusetts business trust, and is an open-end diversified
management investment company investing principally in
investment grade, tax-exempt fixed-income securities (see
page 4).
- -------------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $0.01 par value (see page
17).
- -------------------------------------------------------------------------------
Offering Price The price of the shares offered by this prospectus varies
with the changes in the value of the Fund's investments. The
offering price, determined once daily as of 4:00 p.m., New
York time, on each day that the New York Stock Exchange is
open, is equal to the net asset value plus a sales charge of
4.0% of the offering price, scaled down on purchases of
$25,000 or over (see pages 10-12).
- -------------------------------------------------------------------------------
Minimum
Purchase Minimum initial purchase is $1,000; minimum subsequent
purchase is $100 (see page 10).
- -------------------------------------------------------------------------------
Investment
Objective The investment objective of the Fund is to provide a high
level of current income exempt from federal income tax,
consistent with the preservation of capital (see page 5).
- -------------------------------------------------------------------------------
Investment
Manager Dean Witter InterCapital Inc. ("InterCapital"), the
Investment Manager of the Fund, and its wholly-owned
subsidiary, Dean Witter Services Company Inc., serve in
various investment management, advisory, management and
administrative capacities to eighty-one investment companies
and other portfolios with assets of approximately $71.2
billion at December 31, 1993 (see page 4).
- -------------------------------------------------------------------------------
Management Fee The monthly fee is at an annual rate of 1/2 of 1% of average
daily net assets, scaled down on assets over $500 million
(see page 5).
- -------------------------------------------------------------------------------
Dividends and
Capital Gains
Distributions Income dividends are declared daily and paid monthly; capital
gains, if any, may be distributed annually or retained for
reinvestment by the Fund. Dividends and distributions are
automatically reinvested in additional shares at net asset
value (without sales charge), unless the shareholder elects
to receive cash (see page 15).
- -------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (see page 10).
- -------------------------------------------------------------------------------
Sales Charge 4.0% of offering price (4.17% of amount invested); reduced
charges on purchases of $25,000 or more (see page 10).
- -------------------------------------------------------------------------------
Redemption Shares redeemable by the shareholder at net asset value. An
account may be involuntarily redeemed if shares owned have a
net asset value of less than $100 (see page 14).
- -------------------------------------------------------------------------------
Risks The value of the Fund's portfolio securities, and therefore
the Fund's net asset value per share, may increase or
decrease due to various factors, principally changes in
prevailing interest rates and the ability of the issuers of
the Fund's portfolio securities to pay interest and principal
on such obligations. The Fund may purchase when-issued and
delayed delivery securities (see page 7). The Fund may also
invest in futures and options, which may be considered
speculative in nature and which may involve greater risks
than those customarily assumed by certain other investment
companies which do not invest in such instruments (see pages
7-9).
- -------------------------------------------------------------------------------
The above is qualified in its entirety by the detailed information appearing
elsewhere in the Prospectus and in the Statement of Additional Information.
2
<PAGE>
SUMMARY OF FUND EXPENSES
===============================================================================
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended December 31, 1993.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses
- --------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases....................... 4.0 %
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends............ None
Deferred Sales.................................................. None
Redemption Fees................................................. None
Exchange Fee.................................................... None
<CAPTION>
Annual Fund Operating Expenses
(as a Percentage of Average Net Assets)
- -------------------------------------------------------------
<S> <C>
Management Fee.................................................. 0.41%
Other Expenses.................................................. 0.06%
Total Fund Operating Expenses................................... 0.47%
<CAPTION>
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption
at the end of each time period:....... $45 $54 $65 $97
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND 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" and "Purchase of Fund Shares." There are reduced
sales charges on purchases of $25,000 or more (see "Purchase of Fund Shares").
3
<PAGE>
FINANCIAL HIGHLIGHTS
===============================================================================
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, the notes thereto and the unqualified report of
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 year ended December 31,
----------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $11.88 $11.65 $11.09 $11.28 $10.96 $10.45 $11.50 $10.79 $ 9.80 $ 9.85
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Investment income--net...... 0.77 0.79 0.80 0.80 0.81 0.81 0.80 0.85 0.92 1.06
Realized and unrealized gain
(loss) on investments--net.. 0.54 0.23 0.56 (0.18) 0.32 0.51 (0.97) 1.21 1.07 (0.19)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................... 1.31 1.02 1.36 0.62 1.13 1.32 (0.17) 2.06 1.99 0.87
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less dividends and
distributions:
Dividends from net
investment income........... (0.77) (0.79) (0.80) (0.81) (0.81) (0.81) (0.83) (0.87) (1.00) (0.92)
Distributions from net
realized gain on
investments................. (0.01) -0- -0- -0- -0- -0- (0.05) (0.48) -0- -0-
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions................ (0.78) (0.79) (0.80) (0.81) (0.81) (0.81) (0.88) (1.35) (1.00) (0.92)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period................ $12.41 $11.88 $11.65 $11.09 $11.28 $10.96 $10.45 $11.50 $10.79 $ 9.80
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT
RETURN+....................... 11.23% 9.09% 12.71% 5.86% 10.61% 13.02% (1.44%) 20.17% 21.35% 9.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)...............$1,581,986$1,323,469$1,144,716$1,010,355$1,033,250$907,822 $896,419 $965,834 $489,367 $173,147
Ratio of expenses to average
net assets................... 0.47% 0.49% 0.51% 0.51% 0.51% 0.54% 0.52% 0.56% 0.61% 0.68%
Ratio of net investment income
to average net assets........ 6.23% 6.74% 7.05% 7.25% 7.31% 7.51% 7.42% 7.51% 8.90% 11.71%
Portfolio turnover rate....... 13% 4% 10% 19% 13% 17% 37% 42% 116% 102%
<FN>
- ------------
+ Does not reflect the deduction of sales load.
See Notes to Financial Statements
</TABLE>
THE FUND AND ITS MANAGEMENT
===============================================================================
Dean Witter Tax-Exempt Securities Trust (the "Fund") is an open-end
diversified management investment company incorporated in Maryland on December
13, 1979. The Fund reorganized as a trust of the type commonly known as a
"Massachusetts business trust" on April 30, 1987.
Dean Witter InterCapital Inc. ("InterCapital" 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, which was incorporated in
July, 1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co.
("DWDC"), a balanced financial services organization providing a broad range of
nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to a total of eighty-one investment companies,
twenty-nine of which are listed on the New York Stock Exchange, with combined
total net assets of approximately $69.2 billion as of December 31, 1993. The
Investment Manager also manages portfolios of pension plans, other institutions
and individuals which aggregated approximately $2.0 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
4
<PAGE>
and sale of portfolio securities. InterCapital has retained Dean Witter
Services Company Inc. to perform the aforementioned administrative services for
the Fund.
The Fund's Trustees review the various services provided by or under the
direction of 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 at an annual rate
of 0.50% of the daily net assets of the Fund up to $500 million, scaled down at
various asset levels to 0.325% on assets over $1.25 billion. For the fiscal
year ended December 31, 1993, the Fund accrued total compensation to the
Investment Manager amounting to 0.41% of the Fund's average daily net assets
and the Fund's total expenses amounted to 0.47% of the Fund's average daily net
assets.
INVESTMENT OBJECTIVE AND POLICIES
- -------------------------------------------------------------------------------
The investment objective of the Fund is to provide a high level of current
income which is exempt from federal income tax, consistent with the
preservation of capital. There is no assurance that this objective will be
achieved. This objective is fundamental and may not be changed without
shareholder approval. The Fund seeks to achieve its investment objective by
investing its assets in accordance with the following policies:
1. At least 80% of the Fund's total assets will be invested in tax-
exempt securities, except as stated in paragraph (5) below. Tax-exempt
securities consist of Municipal Bonds and Municipal Notes ("Municipal
Obligations") and Municipal Commercial Paper.
2. At least 75% of the Fund's total assets will be invested in: (a)
Municipal Bonds which are rated at the time of purchase within the three
highest grades by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P"); (b) Municipal Notes which at the time of purchase
are rated in the two highest grades by Moody's or S&P, or, if not rated, have
outstanding one or more issues of Municipal Bonds rated as set forth in clause
(a) of this paragraph; and (c) Municipal Commercial Paper which at the time of
purchase are rated P-1 by Moody's and A-1 by S&P.
3. Up to 25% of the Fund's total assets may be invested in tax-exempt
securities which are not rated by Moody's or S&P or, if rated, are not within
the rating categories of Moody's or S&P stated in paragraph (2) above.
4. In accordance with the current position of the staff of the
Securities and Exchange Commission, tax-exempt securities which are subject to
the federal alternative minimum tax for individual shareholders will not be
included in the 80% total described in paragraph 1 above. (See "Dividends,
Distributions and Taxes," below.) As such, the remaining 20% of the Fund's
total assets may be invested in tax-exempt securities subject to the
alternative minimum tax.
5. Inclusive of paragraph 4 above, up to 20% of the Fund's total
assets may be invested in taxable money market instruments under any one or
more of the following circumstances: (a) pending investment of proceeds of sale
of Fund shares or of portfolio securities; (b) pending settlement of purchases
of portfolio securities; and (c) to maintain liquidity for the purpose of
meeting anticipated redemptions. In addition, the Fund may temporarily invest
more than 20% of its total assets in taxable securities, or in tax-exempt
securities subject to the federal alternative minimum tax for individual
shareholders, to maintain a "defensive" posture when, in the opinion of the
Investment Manager, it is advisable to do so because of market conditions. The
types of taxable securities in which the Fund may temporarily invest are
limited to the following short-term fixed-income securities
5
<PAGE>
(maturing in one year or less from the time of purchase): (i) obligations of
the United States Government, its agencies, instrumentalities or authorities;
(ii) commercial paper rated P-1 by Moody's or A-1 by S&P; (iii) certificates of
deposit of domestic banks with assets of $1 billion or more; and (iv)
repurchase agreements with respect to any of the foregoing portfolio
securities.
Municipal Obligations are debt obligations of states, cities,
municipalities and municipal agencies which generally have maturities, at the
time of their issuance, of either one year or more (Bonds) or from six months
to three years (Notes). Municipal Commercial Paper refers to short-term
obligations of municipalities. Any Municipal Obligation which depends directly
or indirectly on the credit of the Federal Government shall be considered to
have a rating of Aaa/AAA.
While the Fund may invest up to 25% of its total assets in Municipal
Obligations which are unrated or, if rated, are not within the three highest
Bond rating categories of Moody's or S&P or the two highest Note rating
categories of Moody's or S&P, the Fund does not intend to invest in Municipal
Bonds which are rated below either Baa by Moody's or BBB by S&P (the lowest
ratings considered investment grade) or, if not rated, are deemed by the
Investment Manager to be below investment grade, in amounts exceeding 5% of its
total assets. Investments in Municipal Bonds rated either Baa by Moody's or BBB
by S&P may 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. Municipal Bonds rated below investment
grade may not currently be paying any interest and may have extremely poor
prospects of ever attaining any real investment standing.
The two principal classifications of Municipal Obligations and
Commercial Paper are "general obligation" and "revenue" obligations or
commercial paper. General obligation bonds, notes or commercial paper are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Issuers of general obligation bonds, notes
or commercial paper include a state, its counties, cities, towns and other
government units. Revenue bonds, notes or commercial paper are payable from the
revenues derived from a particular facility or class of facilities or, in some
cases, from specific revenue sources. Revenue bonds, notes or commercial paper
are issued for a wide variety of purposes, including the financing of electric,
gas, water and sewer systems and other public utilities; industrial development
and pollution control facilities; single and multi-family housing units; public
buildings and facilities; air and marine ports; transportation facilities such
as toll roads, bridges and tunnels; and health and educational facilities such
as hospitals and dormitories. They rely primarily on user fees to pay debt
service, although the principal revenue source is often supplemented by
additional security features which are intended to enhance the creditworthiness
of the issuer's obligations. In some cases, particularly revenue bonds issued
to finance housing and public buildings, a direct or implied "moral obligation"
of a governmental unit may be pledged to the payment of debt service. In other
cases, a special tax or other charge may augment user fees.
Included within the revenue category are participations in lease
obligations or installment purchase contracts (hereinafter collectively called
"lease obligations") of municipalities. State and local governments issue lease
obligations to acquire equipment and facilities.
Lease obligations may have risks not normally associated with general
obligation or other revenue bonds. Leases and installment purchase or
conditional sale contracts (which may provide for title to the leased asset to
pass eventually to the issuer) have developed as a means for governmental
issuers to acquire property and equipment without the necessity of complying
with the constitutional and statutory requirements generally applicable for the
issuance of debt. Certain lease obligations contain "non-appropriation" clauses
that provide that the governmental issuer has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on an annual or other periodic
basis. Consequently, continued lease payments
6
<PAGE>
on those lease obligations containing "non-appropriation" clauses are dependent
on future legislative actions. If such legislative actions do not occur, the
holders of the lease obligation may experience difficulty in exercising their
rights, including disposition of the property.
Lease obligations represent a relatively new type of financing that has
not yet developed the depth of marketability associated with more conventional
municipal obligations, and, as a result, certain of such lease obligations, may
be considered illiquid securities. To determine whether or not the Fund will
consider such securities to be illiquid (the Fund may not invest more than ten
percent of its net assets in illiquid securities), the Trustees of the Fund
have established guidelines to be utilized by the Fund in determining the
liquidity of a lease obligation. The factors to be considered in making the
determination include: 1) the frequency of trades and quoted prices for the
obligation; 2) the number of dealers willing to purchase or sell the security
and the number of other potential purchasers; 3) the willingness of dealers to
undertake to make a market in the security; and 4) the nature of the
marketplace trades, including, the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer.
The value of the Fund's portfolio securities and, therefore, the Fund's
net asset value per share, may increase or decrease due to various factors,
principally changes in prevailing interest rates and the ability of the issuers
of the Fund's portfolio securities to pay interest and principal on such
obligations on a timely basis. Generally, a rise in interest rates will result
in a decrease in the Fund's net asset value per share, while a drop in interest
rates will result in an increase in the Fund's net asset value per share.
The foregoing percentage and rating policies apply at the time of
acquisition of a security based on the last previous determination of the
Fund's net asset value. Any subsequent change in any rating by a rating service
or change in percentages resulting from market fluctuations or other changes in
the Fund's total assets will not require elimination of any security from the
Fund's portfolio until such time as the Investment Manager determines that it
is practicable to sell the security without undue market or tax consequences to
the Fund.
The ratings assigned by Moody's and S&P represent their opinions as to
the quality of the securities which they undertake to rate (see the Appendix to
the Statement of Additional Information). It should be emphasized, however,
that the ratings are general and not absolute standards of quality.
PORTFOLIO CHARACTERISTICS
Variable Rate Obligations. The interest rates payable on certain
Municipal Bonds and Municipal Notes are not fixed and may fluctuate based upon
changes in market rates. Municipal obligations of this type are called
"variable rate" obligations. The interest rate payable on a variable rate
obligation is adjusted either at predesignated periodic intervals or whenever
there is a change in the market rate of interest on which the interest rate
payable is based.
When-Issued and Delayed Delivery Securities. The Fund may purchase
tax-exempt securities on a when-issued or delayed delivery basis; i.e.,
delivery and payment can take place a month or more after the date of the
transaction. These securities are subject to market fluctuation and no interest
accrues to the purchaser prior to settlement. At the time the Fund makes the
commitment to purchase such securities, it will record the transaction and
thereafter reflect the value, each day, of such securities in determining its
net asset value. An increase in the percentage of the Fund's assets committed
to the purchase of securities on a when-issued or delayed delivery basis may
increase the volatility of the Fund's net asset value.
HEDGING ACTIVITIES
The Fund may enter into financial futures contracts ("futures
contracts"), options on such futures and municipal bond index futures contracts
for hedging purposes.
Futures Contracts and Options on Futures. The Fund may invest in
futures contracts and related options thereon. The Fund may sell a futures
contract or a call option thereon or purchase a put option on such futures
contract, if the Investment Manager anticipates interest rates to rise, as a
hedge against a decrease in
7
<PAGE>
the value of the Fund's portfolio securities. If the Investment Manager
anticipates that interest rates will decline, the Fund may purchase a futures
contract or a call option thereon or sell a put option on such futures
contract, to protect against an increase in the price of the securities the
Fund intends to purchase. These futures contracts and related options thereon
will be used only as a hedge against anticipated interest rate changes. A
futures contract sale creates an obligation by the Fund, as seller, to deliver
the specific type of instrument called for in the contract at a specified
future time for a specified price. A futures contract purchase creates an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specified future time at a specified price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until or near that date. The determination would be in
accordance with the rules of the eange on which the futures contract sale or
purchase was effected.
Although the terms of futures contracts specify actual delivery or
receipt of securities, in most instances the contracts are closed out before
the settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is effected by entering into an offsetting
purchase or sale transaction.
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date, an option on a futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract (a long
position in the case of a call option and a short position in the case of a put
option). If the holder decides not to enter into the contract, the premium paid
for the option on the contract is lost. Since the value of the option is fixed
at the point of sale, there are not daily payments of cash to reflect the
change in the value of the underlying contract as there are by a purchaser or
seller of a futures contract. The value of the option does change and is
reflected in the net asset value of the Fund.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may correlate imperfectly with the behavior of the cash
prices of the Fund's portfolio securities. The risk of imperfect correlation
may be increased by the fact that the Fund will invest in futures contracts on
taxable securities and there is no guarantee that the prices of taxable
securities will move in a similar manner to the prices of tax-exempt
securities. The correlation may be distorted by the fact that the futures
market is dominated by short-term traders seeking to profit from the difference
between a contract or security price objective and their cost of borrowed
funds. Such distortions are generally minor and would diminish as the contract
approached maturity.
Another risk is that the Fund's manager could be incorrect in its
expectations as to the direction or extent of various interest rate 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.
In addition to the risks that apply to all options transactions (see
the Statement of Additional Information for a description of the
characteristics of, and the risks of investing in, options on debt securities),
there are several special risks relating to options on futures; in particular,
the ability to establish and close out positions on options on futures will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or be maintained.
Municipal Bond Index Futures. The Fund may utilize municipal bond
index futures contracts and options thereon for hedging purposes. The Fund's
strategies in employing such contracts will be similar to that discussed above
with respect to financial futures and options thereon. A municipal bond index
is a method of reflecting in a single number the market value of many different
municipal bonds and is designed to be representative of the municipal bond
market generally. The index fluctuates in response to changes in the market
values of the bonds included within the index. Unlike futures contracts on
particular financial instruments, transactions in futures on a municipal bond
index will be settled in cash, if held until the close of trading in the
contract. However, like any other futures contract, a position in the contract
may be closed out by purchase
8
<PAGE>
or sale of an offsetting contract for the same delivery month prior to
expiration of the contract.
The Fund may not enter into futures contracts or purchase related
options thereon if immediately thereafter the amount committed to margin plus
the amount paid for premiums for unexpired options on futures contracts exceeds
5% of the value of the Fund's total assets. The Fund may not purchase or sell
futures contracts or related options thereon if, immediately thereafter, more
than one-third of its net assets would be hedged.
PORTFOLIO MANAGEMENT
The Fund is actively managed by the Investment Manager with a view to
achieving the Fund's investment objective. 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. ("DWR"),
a broker-dealer affiliate of InterCapital, the views of Trustees of the Fund
and others regarding economic developments and interest rate trends, and the
Investment Manager's own analysis of factors it deems relevant. The Fund is
managed within InterCapital's Municipal Fixed Income Group, which manages 36
tax-exempt municipal funds and fund portfolios, with approximately $12 billion
in assets as of December 31, 1993. James F. Willison, Senior Vice President of
InterCapital and Manager of InterCapital's Municipal Fixed Income Group, has
been the primary portfolio manager of the Fund since its inception and has been
a portfolio manager at InterCapital for over five years.
Securities are purchased and sold principally in response to the
Investment Manager's current evaluation of an issuer's ability to meet its debt
obligations in the future, and the Investment Manager's current assessment of
future changes in the levels of interest rates on tax-exempt securities of
varying maturities. Securities purchased by the Fund are, generally, sold by
dealers acting as principal for their own accounts. Pursuant to an order of the
Securities and Exchange Commission, the Fund may effect principal transactions
in certain money market instruments with DWR. In addition, the Fund may incur
brokerage commissions on transactions conducted through DWR.
The portfolio trading engaged in by the Fund may result in its
portfolio turnover rate exceeding 100%. The Fund will incur underwriting
discount costs (on underwritten securities) commensurate with its portfolio
turnover rate. Additionally, see "Dividends, Distributions and Taxes" for a
discussion of the tax policy of the Fund. A more extensive discussion of the
Fund's portfolio brokerage policies is set forth in the Statement of Additional
Information.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as
such, 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. Under the
Investment Company Act of 1940, as amended (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 restrictions: (a) an "issuer" of a
security is the entity whose assets and revenues are committed to the payment
of interest and principal on that particular security, provided that the
guarantee of a security will be considered a separate security, and provided
further that a guarantee of a security shall not be deemed to be a security
issued by the guarantor if the value of all securities issued or guaranteed by
the guarantor and owned by the Fund does not exceed 10% of the value of the
total assets of the Fund; (b) a "taxable security" is any security the interest
on which is subject to federal income tax; and (c) all percentage limitations
apply immediately after a purchase or initial investment, and any subsequent
change in any applicable percentage resulting from market fluctuations or other
changes in the Fund's total assets does not require elimination of any security
from the portfolio.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities of
any one issuer (other than obligations issued or guaranteed by the United
States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding taxable debt securities or any
one issuer (other than
9
<PAGE>
obligations issued, or guaranteed as to principal and interest, by the United
States Government, its agencies or instrumentalities).
3. Invest more than 25% of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities or to cash equivalents (industrial development and pollution
control bonds are grouped into industries based upon the business in which the
issuers of such obligations are engaged).
4. Invest more than 5% of the value of its total assets in taxable
securities of issuers having a record, together with predecessors, of less than
three years of continuous operation. This restriction shall not apply to any
obligation of the United States Government, its agencies or instrumentalities.
PURCHASE OF FUND SHARES
- -------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous
basis. Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers who have entered into agreements with the Distributor ("Selected
Broker-Dealers"). The principal executive office of the Distributor is located
at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter Tax-Exempt
Securities Trust, directly to Dean Witter Trust Company (the "Transfer Agent")
at P.O. Box 1040, Jersey City, N.J. 07303 or by contacting a DWR or other
Selected Broker-Dealer account executive.
In the case of purchases made pursuant to systematic payroll deduction
plans (including individual retirement plans), the Fund, in its discretion, may
accept such purchases without regard to any minimum amounts which would
otherwise be required if the Fund has reason to believe that additional
purchases will increase the amount of the purchase of shares 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. The offering price 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 APPROXIMATE
OF PERCENTAGE OF
AMOUNT OF PUBLIC AMOUNT
SINGLE TRANSACTION OFFERING PRICE INVESTED
------------------ -------------- -------------
<S> <C> <C>
Less than $25,000............................ 4.00% 4.17%
$25,000 but less than $50,000................ 3.50 3.65
$50,000 but less than $100,000............... 3.25 3.33
$100,000 but less than $250,000.............. 2.75 2.81
$250,000 but less than $500,000.............. 2.50 2.56
$500,000 but less than $1,000,000............ 1.75 1.78
$1,000,000 and over.......................... 0.50 0.50
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow
up to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when substantially the entire
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, as amended.
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 or her
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 qualifiedor 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; or (g) any other organized group of persons,
whether
10
<PAGE>
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.
Shares of the Fund are sold through the Distributor on a normal five business
day settlement basis; that is, payment generally is due on or before the fifth
business day (settlement date) after the order is placed with the Distributor.
Shares of the Fund purchased through the Distributor are entitled to dividends
beginning on the next business day following settlement date. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds where payment is made prior
thereto. Shares purchased through the Transfer Agent are entitled to dividends
beginning on the next business day following receipt of an order. As noted
above, orders placed directly with the Transfer Agent must be accompanied by
payment. Investors will be entitled to receive capital gains distributions if
their order is received by the close of business on the day prior to the record
date for such distributions. The Fund and/or the Distributor reserve the right
to reject any purchase order.
REDUCED SALES CHARGES
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
shares of the Fund in single transactions with the purchase of shares of Dean
Witter High Yield Securities Inc. and of Dean Witter Funds which are sold with
a contingent deferred sales charge ("CDSC funds"). The sales charge payable on
the purchase of shares of the Fund and Dean Witter High Yield Securities Inc.
will be at their respective rates applicable to the total amount of the
combined concurrent purchases of the Fund, Dean Witter High Yield Securities
Inc. and CDSC funds.
Right of Accumulation. The above persons and entities may also benefit from
a reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of shares purchased in a single transaction,
together with shares previously purchased (including shares of Dean Witter High
Yield Securities Inc. and CDSC funds, and of certain Dean Witter funds acquired
in exchange for shares of such funds) which are held at the time of such
transaction, amounts to $25,000 or more.
The Distributor must be notified by DWR or other 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 shares of the Fund from
DWR or another Selected Broker-Dealer. The cost of shares of the Fund or shares
of Dean Witter High Yield Securities Inc. 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 shares of
other Dean Witter Funds acquired in exchange for shares of such funds acquired
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.
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 by
taking the value of all assets of the Fund, subtracting its liabilities,
dividing by the number of shares outstanding and adjusting to the nearest cent.
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.
Portfolio securities (other than short-term taxable debt securities, futures
and options) are valued for the Fund by an outside independent pricing service
approved by the Fund's Trustees. The service utilizes a computerized grid
matrix of tax-exempt securities and
11
<PAGE>
evaluations by its staff in determining what it believes is the fair value of
the Fund's portfolio securities. The Board believes that timely and reliable
market quotations are generally not readily available to the Fund for purposes
of valuing tax-exempt securities and that the valuations supplied by the
pricing services are more likely to approximate the fair value of such
securities.
Short-term taxable debt securities with remaining maturities of 60 days or
less at time of purchase are valued at amortized cost, unless the Board
determines such does not reflect the securities' fair value, in which case
these securities will be valued at their market value as determined by the
Board of Trustees. Other taxable short-term debt securities with maturities of
more than 60 days will be valued on a mark to market basis until such time as
they reach a 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' fair value, in which case these securities will be
valued at their fair market value as determined by the Board of Trustees.
Listed options on debt securities are valued at the latest sale price on the
exchange on which they are listed unless no sales of such options have taken
place that day, in which case, they will be valued at the mean between their
closing bid and asked prices. Unlisted options on debt securities are valued at
the mean between their latest bid and asked price. Futures are valued at the
latest sale price on the commodities exchange on which they trade unless the
Board of Trustees determines that such price does not reflect their fair value,
in which case they will be valued at their fair market value as determined by
the Board of 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 Board of Trustees.
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 Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the shareholder
requests that they be paid in cash. Each purchase of shares of the Fund is made
upon the condition that the Transfer Agent is thereby automatically appointed
as agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and distributions
will be paid in shares of the Fund (or in cash if the shareholder so requests)
at the net asset value per share (without sales charge) on the monthly payment
date, which will be no later than the last business day of the month for which
the dividend or distribution is payable. Processing of dividend checks begins
immediately following the monthly payment date. Shareholders who have requested
to receive dividends in cash will normally receive their monthly dividend
checks during the first ten days of the following month.
EasyInvestSM. 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, on a semi-
monthly, monthly or quarterly basis, to the Transfer Agent for investment in
shares of the Fund.
Systematic Withdrawal Plan. A 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 plan provides for monthly or
quarterly (March, June, September, December) checks in any dollar amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis.
Withdrawal plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately eausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
12
<PAGE>
shareholder may make additional investments of $2,500 or more under the
Systematic Withdrawal Plan, withdrawals made concurrently with purchases of
additional shares are inadvisable because of the sales charges applicable to
the purchase of additional shares.
Shareholders should contact their DWR or other Selected Broker-Dealer account
executive or the Transfer Agent for further information about any of the above
services.
Exchange Privilege. The Fund makes available to its shareholders an
"Exchange Privilege" allowing the exchange of shares of the Fund for shares of
other Dean Witter Funds sold with a front-end (at time of purchase) sales
charge ("FESC" funds), Dean Witter Funds sold with a contingent deferred sales
charge ("CDSC funds"), five Dean Witter Funds which are money market funds and
Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Short-Term Bond Fund
and Dean Witter Limited Term Municipal Trust (the foregoing eight non-CDSC or
FESC funds are hereinafter collectively referred to in this section as the
"Exchange Funds"). 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 holding period for exchanges of shares acquired by
exchange or dividend reinvestment. However, shares of CDSC funds, including
shares acquired in exchange for shares of FESC funds, may not be exchanged for
shares of FESC funds. Thus, shareholders who exchange their Fund shares for
shares of CDSC funds may subsequently exchange those shares for shares of other
CDSC funds or money market funds but may not reacquire FESC fund shares by
exchange.
An exchange to another FESC fund, to a CDSC fund, or to 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 Exchange Funds, FESC funds and CDSC funds can be
effected on the same basis (except that CDSC fund shares may not be exchanged
for shares of FESC funds). Shares of a CDSC fund acquired in exchange for
shares of an FESC fund (or in exchange for shares of other Dean Witter Funds
for which shares of an FESC fund have been exchanged) are not subject to any
contingent deferred sales charge upon their redemption.
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 shoud be aware that
the Fund and each of the other 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 Dean Witter Funds for which shares of the Fund may be
exchanged, upon such notice as may be required by applicable regulatory
agencies. Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
exchange of shares of the Fund pledged in their margin account.
The current prospectus for each fund describes its investment objectives and
policies, and shareholders should obtain one and read it carefully before
invest- ing. Exchanges are subject to the minimum investment requirement and
other conditions imposed by each fund. In the case of any shareholder holding a
share
13
<PAGE>
certificate or certificates, no exchanges may be made until the share
certificate(s) have been received by the Transfer Agent and deposited in the
shareholder's account. An exchange will be treated for federal income tax
purposes as a redemption or repurchase of shares, on which the shareholder may
realize a capital gain or loss. However, the ability to deduct capital losses
on an exchange is limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. There are also limits on the
deduction of losses after the payment of exempt-interest dividends for shares
held for less than six months (see "Dividends, Distributions and Taxes"). 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 Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their DWR or other Selected Broker-Dealer account
executive (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 writing or 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 by contacting the Transfer Agent at (800) 526-3143 (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 DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request (see "Redemptions and Repurchases"). 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 Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders should
contact their DWR or other Selected Broker-Dealer account executive or the
Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -------------------------------------------------------------------------------
Redemption. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined (without any redemption or other
charge). If shares are held in a shareholder's account without a share
certificate, a written request for redemption is required. If certificates are
held by the shareholder(s), the shares may be redeemed by surrendering the
certificate(s) with a written request for redemption, along with any additional
information 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 request of the shareholder. The repurchase price is the net
asset value next determined (see "Purchase of Fund Shares--Determination of Net
Asset Value") after such repurchase order is received by DWR or other Selected
Broker-Dealer. Payment for
14
<PAGE>
shares repurchased may be made by the Fund to the Distributor for the account
of the shareholder. The offers by DWR and other Selected Broker-Dealers to
repurchase shares from shareholders may be suspended 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 at times
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 investment of the check by the Transfer Agent). Shareholders
maintaining margin accounts with DWR or another Selected Broker-Dealer are
referred to their account executive regarding restrictions on redemption of
shares of the Fund pledged in the margin account.
Reinstatement Privilege. A shareholder who has had his or her share redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within 30 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 at their net asset value (without a sales charge)next determined
after a reinstatement request, together with the proceeds, is received by the
Transfer Agent.
Involuntary Redemption. The Fund reserves the right, on sixty days notice, to
redeem at their net asset value, the shares of any shareholder whose shares
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. 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 $100 and
allow the shareholder to make an additional investment in an amount which will
increase the value of the account to $100 or more before the redemption is
processed. No charge will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends from net investment
income on each day the New York Stock Exchange is open for business (see
"Purchase of Fund Shares"). Such dividends are paid monthly. The Fund intends
to distribute all of the Fund's net investment income on an annual basis.
The Fund will distribute at least once each year all net realized short-term
capital gains in excess of any realized net long-term capital losses, if any.
The Fund intends to distribute all of its realized net long-term capital gains,
if any, in excess of any realized net short-term capital losses and any
available net capital loss carryovers, at least once per fiscal year, although
it may elect to retain all or part of such gains for reinvestment. Taxable
capital gains may be generated by the sale of portfolio securities and by
transactions in options and futures contracts engaged in by the Fund. All
dividends and capital gains distributions will be paid in additional Fund
shares (without sales charge) and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder requests
in writing that all dividends be paid in cash and such request is received by
the close of business on the day prior to the record date for such
distributions (see "Shareholder Services--Automatic Investment of Dividends and
Distributions"). Any dividends declared in the last quarter of any year which
are paid in the following year prior to February 1 will be deemed received by
the shareholder in the prior year.
Taxes. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and intends to 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.
15
<PAGE>
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by maintaining, as of the close of each quarter of its taxable
year, at least 50% of the value of its total assets in tax-exempt securities.
If the Fund satisfies such requirement, distributions from net investment
income to shareholders, whether taken in cash or reinvested in additional
shares, will be excludable from gross income for federal income tax purposes to
the extent net investment income is represented by interest on tax-exempt
securities. Exempt-interest dividends are included, however, in determining
what portion, if any, of a person's Social Security benefits are subject to
federal income tax. The Internal Revenue Code may subject interest received on
certain otherwise tax-exempt securities to an alternative minimum tax. This
alternative minimum tax may be incurred due to interest received on certain
"private activity bonds" (in general, bonds that benefit non-government
entities) issued after August 7, 1986 which, although tax-exempt, are used for
purposes other than those generally performed by government units (e.g., bonds
used for commercial or housing purposes). Income received on such bonds is
classified as a "tax preference item," under the alternative minimum tax, for
both individual and corporate investors. The Fund anticipates that a portion of
its investments will be made in such "private activity bonds," with the result
that a portion of the exempt-interest dividends paid by the Fund will be an
item of tax preference to shareholders subject to the alternative minimum tax.
In addition, certain corporations which are subject to the alternative minimum
tax may also have to include exempt-interest dividends in calculating their
alternative minimum taxable income in situations where the "adjusted current
earnings" of the corporation exceeds its alternative minimum taxable income.
Under the Revenue Reconciliation Act of 1993, all or a portion of the Fund's
gain from the sale or redemption of tax-exempt obligations purchased at a
market discount after April 30, 1993 will be treated as ordinary income rather
than capital gain. This rule may increase the amount of ordinary income
dividends received by shareholders.
Within sixty days after the end of its fiscal year, the Fund will mail to its
shareholders a statement indicating the percentage of the dividend
distributions for such fiscal year which constitutes exempt-interest dividends
and the percentage, if any, that is taxable, and the percentage, if any, of the
exempt-interest dividends which constitutes an item of tax preference.
Shareholders will normally be subject to federal income tax on dividends paid
from interest income derived from taxable securities and on distributions of
net short-term capital gains, if any. Distributions of long-term capital gains,
if any, are taxable as long-term capital gains, regardless of how long the
shareholder has held the Fund shares and regardless of whether the distribution
is received in additional shares or in cash. To avoid being subject to a 31%
federal backup withholding tax on taxable dividends, capital gains
distributions and proceeds of redemptions or repurchases, shareholders'
taxpayer identification numbers must be furnished and certified as to accuracy.
Any loss on the sale or exchange of shares of the Fund which are held for six
months or less is disallowed to the extent of the amount of any exempt-interest
dividend paid with respect to such shares. Treasury Regulations may provide for
a reduction in such required holding periods. If a shareholder receives a
distribution that is taxed as a long-term capital gain on shares held for six
months or less and sells those shares at a loss, the loss will be treated as a
long-term capital loss.
Interest on indebtedness incurred by shareholders to purchase or carry shares
of an investment company paying exempt-interest dividends, such as the Fund,
will not be deductible by the investor for federal income tax purposes.
The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any state
or local taxing authority. Thus, shareholders of the Fund may be subject to
state and local taxes on exempt-interest dividends.
Shareholders should consult their tax advisers as to the applicability of the
above to their own tax situation.
16
<PAGE>
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return" in
advertisements and sales literature. Both the yield and the total return of the
Fund are based on historical earnings and are not intended to indicate future
performance. The yield of the Fund is computed by dividing the Fund's net
investment income over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the maximum offering price
per share at the end of the period), all in accordance with applicable
regulatory requirements. Such amount is compounded for six months and then
annualized for a twelve-month period to derive the Fund's yield. The Fund may
also quote tax-equivalent yield, which is calculated by determining the pre-tax
yield which, after being taxed at a stated rate, would be equivalent to the
yield determined as described above.
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 of $1,000 over periods of one, five and ten years. 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 Fund and all
sales charges 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 over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations may or may not reflect the
imposition of the front-end 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 or $100,000 in shares of the Fund by adding 1
to the Fund's aggregate total return to date and multiplying by $9,600, $48,375
or $97,250 ($10,000, $50,000 or $100,000 adjusted for 4.00%, 3.25% and 2.75%
sales charges, respectively). 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 $.01
par value and are equal as to earnings, assets and voting privileges.
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 the obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that 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 limitations on shareholder personal liability and
the nature of the Fund's assets and operations the possibility of the Fund's
being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
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.
17
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
Dean Witter Liquid Asset Fund Inc.
Dean Witter Tax-Free Daily Income Trust
Dean Witter U.S. Government Money Market Trust
Dean Witter California Tax-Free Daily Income Trust
Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Natural Resource Development Securities Inc.
Dean Witter Dividend Growth Securities Inc.
Dean Witter Developing Growth Securities Trust
Dean Witter World Wide Investment Trust
Dean Witter Equity Income Trust
Dean Witter Value-Added Market Series
Dean Witter Utilities Fund
Dean Witter Capital Growth Securities
Dean Witter European Growth Fund Inc.
Dean Witter Precious Metals and Minerals Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth Securities
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
DEAN WITTER RETIREMENT SERIES
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Valued-Added Market Series
Global Equity Series
ASSET ALLOCATION FUNDS
Dean Witter Managed Assets Trust
Dean Witter Strategist Fund
ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
<PAGE>
Dean Witter
Tax-Exempt Securities Trust
Two World Trade Center
New York, New York 10048
BOARD OF TRUSTEES
Jack F. Bennett
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
110 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
DEAN WITTER
TAX-EXEMPT
SECURITIES
TRUST
PROSPECTUS
FEBRUARY 25, 1994
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DEAN WITTER
TAX-EXEMPT
FEBRUARY 25, 1994 SECURITIES (LOGO)
TRUST
===============================================================================
Dean Witter Tax-Exempt Securities Trust (the "Fund") is an open-end
diversified management investment company whose investment objective is to
provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund invests principally in
tax-exempt fixed-income securities which are rated in the three highest
categories by Moody's Investors Service, Inc. or Standard & Poor's Corporation.
(See "Investment Practices and Policies.")
A Prospectus for the Fund dated February 25, 1994, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at its address or telephone number listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and
more detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Dean Witter
Tax-Exempt Securities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
===============================================================================
<S> <C>
The Fund and its Management.......................... 3
Trustees and Officers................................ 6
Investment Practices and Policies.................... 8
Investment Restrictions.............................. 14
Portfolio Transactions and Brokerage................. 16
Purchase of Fund Shares.............................. 17
Shareholder Services................................. 19
Redemptions and Repurchases.......................... 22
Dividends, Distributions and Taxes................... 23
Performance Information.............................. 25
Shares of the Fund................................... 26
Custodian and Transfer Agent......................... 27
Independent Accountants.............................. 27
Reports to Shareholders.............................. 27
Legal Counsel........................................ 27
Experts.............................................. 27
Registration Statement............................... 27
Report of Independent Accountants.................... 28
Financial Statements--December 31, 1993.............. 29
Appendix............................................. 37
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
===============================================================================
THE FUND
The Fund was incorporated in the State of Maryland on December 31, 1979 under
the name InterCapital Tax-Exempt Securities Inc. On March 17, 1983, the Fund's
shareholders approved a change in the Fund's name, effective March 21, 1983, to
Dean Witter Tax-Exempt Securities Inc. On April 30, 1987 the Fund reorganized
as a Massachusetts business trust, with the name Dean Witter Tax-Exempt
Securities Trust.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
whose address is Two World Trade Center, New York, New York 10048, is the
Fund's Investment Manager. InterCapital is a wholly-owned subsidiary of Dean
Witter, Discover & Co. ("DWDC"), a Delaware corporation. In an internal
reorganization which took place in January, 1993, InterCapital assumed the
investment advisory, administrative and management activities previously
performed by the InterCapital Division of Dean Witter Reynolds Inc. ("DWR"), a
broker-dealer affiliate of InterCapital. (As hereinafter used in this Statement
of Additional Information, the terms "InterCapital" and "Investment Manager"
refer to DWR's InterCapital Division prior to the internal reorganization and
to Dean Witter InterCapital Inc. thereafter.) The daily management of the Fund
and research relating to the Fund's portfolio is conducted by or under the
direction of officers of the Fund and of the Investment Manager, subject to
periodic review by the Fund's Board of Trustees. In addition, Trustees of the
Fund provide guidance on economic factors and interest rate trends. Information
as to these trustees and officers is contained under the caption "Trustees and
Officers."
InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., Dean Witter High Yield Securities Inc.,
Dean Witter Tax-Free Daily Income Trust, Dean Witter Developing Growth
Securities Trust, Dean Witter American Value Fund, Dean Witter Dividend Growth
Securities Inc., Dean Witter Natural Resource Development Securities Inc., Dean
Witter U.S. Government Money Market Trust, Dean Witter California Tax-Free
Income Fund, Dean Witter Variable Investment Series, Dean Witter World Wide
Investment Trust, Dean Witter Select Municipal Reinvestment Fund, Dean Witter
U.S. Government Securities Trust, Dean Witter Equity Income Trust, Dean Witter
New York Tax-Free Income Fund, Dean Witter Convertible Securities Trust, Dean
Witter Federal Securities Trust, Dean Witter Value-Added Market Series, High
Income Advantage Trust, High Income Advantage Trust II, High Income Advantage
Trust III, Dean Witter Government Income Trust, Dean Witter California Tax-Free
Daily Income Trust, Dean Witter Utilities Fund, Dean Witter Managed Assets
Trust, Dean Witter Strategist Fund, Dean Witter World Wide Income Trust, Dean
Witter Intermediate Income Securities, Dean Witter Capital Growth Securities,
Dean Witter European Growth Fund Inc., Dean Witter Pacific Growth Fund Inc.,
Dean Witter Precious Metals and Minerals Trust, Dean Witter Global Short-Term
Income Fund Inc., Dean Witter Multi-State Municipal Series Trust, Dean Witter
New York Municipal Money Market Trust, InterCapital Quality Municipal
Investment Trust, Dean Witter Premier Income Trust, Dean Witter Short-Term U.S.
Treasury Trust, InterCapital Insured Municipal Bond Trust, InterCapital Insured
Municipal Trust, InterCapital Quality Municipal Income Trust, Dean Witter
Diversified Income Trust, Dean Witter Health Sciences Trust, Dean Witter
Retirement Series, InterCapital Quality Municipal Securities, InterCapital
California Quality Municipal Securities, InterCapital New York Quality
Municipal Securities, Dean Witter Global Dividend Growth Securities, Dean
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund,
InterCapital Insured Municipal Securities, InterCapital Insured California
Municipal Securities, InterCapital Insured Municipal Income Trust, InterCapital
California Insured Municipal Income Trust, Active Assets Money Trust, Active
Assets California Tax-Free Trust, Active Assets Tax-Free Trust, Active Assets
Government Securities Trust, Municipal Income Trust, Municipal Income Trust II,
Municipal Income Trust III, Municipal Income Opportunities Trust, Municipal
Income Opportunities Trust II, Municipal Income Opportunities Trust III,
Municipal Premium Income Trust and Prime Income Trust. The foregoing investment
companies, together with the Fund, are collectively referred to as the Dean
Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following companies for
which TCW Funds Management, Inc. is
3
<PAGE>
the investment adviser: TCW/DW Core Equity Trust, TCW/DW North American
Government Income Trust, TCW/DW Latin American Growth Fund, TCW/DW Income and
Growth Fund, TCW/DW Small Cap Growth Fund, TCW/DW Balanced Fund, TCW/DW Term
Trust 2000, TCW/DW Term Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW
Funds"). InterCapital also serves as: (i) sub-adviser to Templeton Global
Opportunities Trust, an open-end investment company; (ii) administrator of The
BlackRock Strategic Term Trust Inc., a closed-end investment company; and (iii)
sub-administrator of MassMutual Participation Investors and Templeton Global
Governments Income Trust, closed-end investment companies.
The Investment Manager also serves as an investment adviser for Dean Witter
World Wide Investment Fund, an investment company organized under the laws of
Luxembourg, shares of which are not available for purchase in the United States
or by American citizens outside of the United States.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective and policies.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, bookkeeping and legal services as the Fund may
reasonably require in the conduct of its business, including the preparation of
prospectuses, proxy statements and reports required to be filed with federal
and state securities commissions (except insofar as the participation or
assistance of independent accountants and attorneys is, in the opinion of the
Investment Manager, necessary or desirable). In addition, the Investment
Manager pays the salaries of all personnel, including officers of the Fund, who
are employees of the Investment Manager. The Investment Manager also bears the
cost of telephone service, heat, light, power and other utilities provided to
the Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. The foregoing
internal reorganization did not result in any change in the nature or scope of
the administrative services being provided to the Fund or any of the fees being
paid by the Fund for the overall services being performed under the terms of
the existing Management Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Dean Witter Distributors Inc.
("Distributors" or the "Distributor") (see "Purchase of Fund Shares"), will be
paid by the Fund. The expenses borne by the Fund include, but are not limited
to: charges and expenses of any registrar, custodian, stock transfer and
dividend disbursing agent; brokerage commissions; taxes; engraving and printing
share certificates; registration costs of the Fund and its shares under federal
and state securities laws; the cost and expense of printing, including
typesetting, and distributing Prospectuses and Statements of Additional
Information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and Trustees' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of Trustees or members of any advisory board or committee who are not
employees of the Investment Manager or any corporate affiliate of the
Investment Manager; all expenses incident to any dividend, withdrawal or
redemption options; charges and expenses of any outside service used for
pricing of the Fund's shares; fees and expenses of legal counsel, including
counsel to the Trustees who are not interested persons of the Funds or of the
Investment Manager (not including compensation or expenses of attorneys who are
employees of the Investment Manager) and independent accountants; membership
dues of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation. As full
compensation for the
4
<PAGE>
services and facilities furnished to the Fund and expenses of the Fund assumed
by the Investment Manager, the Fund pays the Investment Manager monthly
compensation calculated daily by applying the following annual rates to the net
assets of the Fund determined as of the close of each business day: 0.50% of
the portion of the daily net assets not exceeding $500 million; 0.425% of the
portion of the daily net assets exceeding $500 million but not exceeding $750
million; 0.375% of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.35% of the portion of the daily net assets
exceeding $1 billion but not exceeding $1.25 billion; and 0.325% of the portion
of daily net assets exceeding $1.25 billion. For the fiscal years ended
December 31, 1991, 1992 and 1993, the Fund accrued to the Investment Manager
total compensation of $4,737,459, $5,274,650 and $6,085,516, respectively.
Pursuant to the Agreement, total operating expenses of the Fund are subject
to applicable limitations under rules and regulations of states where the Fund
is authorized to sell its shares. Therefore, operating expenses are effectively
subject to the most restrictive of such limitations as the same may be amended
from time to time. Presently, the most restrictive limitations are as follows:
if, in any fiscal year, the Fund's total operating expenses, including the
investment management fee but exclusive of taxes, interest, brokerage fees and
extraordinary expenses (to the extent permitted by applicable state securities
laws and regulations), exceed 2 1/2% of the first $30,000,000 of the average
daily net assets, 2% of the next $70,000,000 of average daily net assets and 1
1/2% of any excess over $100,000,000, the Investment Manager will reimburse the
Fund for the amount of such excess. Such amount, if any, will be calculated
daily and credited on a monthly basis. During the fiscal years ended December
31, 1991, 1992 and 1993, the Fund's expenses did not exceed the expense
limitation.
The Agreement provides that in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations thereunder, the
Investment Manager is not liable to the Fund or any of its investors for any
act or omission by the Investment Manager or for any losses sustained by the
Fund or its investors. The Agreement in no way restricts the Investment Manager
from acting as investment manager or adviser to others.
The Agreement was initially approved by the Trustees on October 30, 1992 and
by the shareholders on January 12, 1993. The Agreement is substantially
identical to a prior investment management agreement which was initially
approved by the Fund's Trustees on April 15, 1987 and subsequently by the
Fund's shareholders on April 21, 1987. The Agreement took effect on June 30,
1993, upon the spin-off by Sears, Roebuck and Co. of its remaining shares of
DWDC. The Agreement may be terminated at any time, without penalty, on thirty
days' notice, by the Board of Trustees of the Fund, by the holders of a
majority, as defined in the Investment Company Act of 1940, as amended (the
"Act"), of the outstanding shares of the Fund, or by the Investment Manager.
The Agreement will automatically terminate in the event of its assignment (as
defined in the Act).
Under its terms, the Agreement continues in effect until April 30, 1994, and
will continue from year to year thereafter, provided continuance of the
Agreement is approved at least annually by the vote of the holders of a
majority (as defined in the Act) of the outstanding shares of the Fund, or by
the Board of Trustees of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Independent
Trustees, which vote must be cast in person at a meeting called for the purpose
of voting on such approval.
The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent company may use or, at any
time, permit others to use, the name "Dean Witter". The Fund has also agreed
that in the event the investment management contract between the Investment
Manager and the Fund is terminated, or if the affiliation between InterCapital
and its parent company is terminated, the Fund will eliminate the name "Dean
Witter" from its name if DWR or its parent shall so request.
5
<PAGE>
TRUSTEES AND OFFICERS
===============================================================================
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the Dean Witter Funds and the TCW/DW Funds, are shown
below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING
NAME, POSITION WITH FUND AND ADDRESS LAST FIVE YEARS
- ------------------------------------ ----------------------------
<S> <C>
Jack F. Bennett
Trustee
141 Taconic Road
Greenwich, Connecticut Retired; Director or Trustee of
the Dean Witter Funds; formerly
Senior Vice President and Director
of Exxon Corporation; (1975-
January, 1989) and Under Secretary
of the U.S. Treasury for Monetary
Affairs (1974-1975); Director of
Philips Electronics N.V., Tandem
Computers Inc. and Massachusetts
Mutual Insurance Company; director
or trustee of various not-for-
profit and business organizations.
Charles A. Fiumefreddo*
Trustee, Chairman, President and Chief
Executive Officer
Two World Trade Center
New York, New York Chairman, Chief Executive Officer
and Director of InterCapital,
Distributors and DWSC; Executive
Vice President and Director of
DWR; Chairman, Director or
Trustee, President and Chief
Executive Officer of the Dean
Witter Funds; Chairman, Chief
Executive Officer and Trustee of
the TCW/DW Funds; Chairman and
Director of Dean Witter Trust
Company; Director and/or officer
of various DWDC subsidiaries;
formerly Executive Vice President
and Director of DWDC (until
February, 1993).
Edwin J. Garn
Trustee
2000 Eagle Gate Tower
Salt Lake City, Utah Director or Trustee of the Dean
Witter Funds; formerly United
States Senator (R-Utah) (1974-
1992) and Chairman, Senate Banking
Committee (1980-1986); formerly
Mayor of Salt Lake City, Utah
(1971-1974); formerly Astronaut,
Space Shuttle Discovery (April 12-
19, 1985); Vice Chairman, Huntsman
Chemical Corporation (since
January, 1993); Member of the
board of various civic and
charitable organizations.
<PAGE>
John R. Haire
Trustee
439 East 51st Street
New York, New York Chairman of the Audit Committee
and Chairman of the Committee of
Independent Directors or Trus-tees
and Director or Trustee of the
Dean Witter Funds; Trustee of the
TCW/DW Funds; formerly President,
Council for Aid to Education
(1978-October, 1989) and Chairman
and Chief Executive Officer of
Anchor Corporation, an Investment
Adviser (1964-1978); Director of
Washington National Corporation
(insurance) and Bowne & Co. Inc.
(printing).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING
NAME, POSITION WITH FUND AND ADDRESS LAST FIVE YEARS
- ------------------------------------ ----------------------------
<S> <C>
Dr. John E. Jeuck
Trustee
70 East Cedar Street
Chicago, Illinois Retired; Director or Trustee of
the Dean Witter Funds; formerly
Robert Law Professor of Business
Administration, Graduate School of
Business, University of Chicago
(until July, 1989); Business
Consultant.
Dr. Manuel H. Johnson
Trustee
7521 Old Dominion Drive
MacLean, Virginia Senior Partner, Johnson Smick
International, Inc., a consulting
firm; Koch Professor of
International Economics and
Director of the Center for Global
Market Studies at George Mason
University (since September,
1990); Co-Chairman and a founder
of the Group of Seven Council
(G7C), an international economic
commission (since September,
1990); Director or Trustee of the
Dean Witter Funds; Trustee of the
TCW/DW Funds; Director of
Greenwich Capital Markets Inc.
(broker-dealer); formerly Vice
Chairman of the Board of Governors
of the Federal Reserve System
(February, 1986-August, 1990) and
Assistant Secretary of the U.S.
Treasury (1982-1986).
Paul Kolton
Trustee
9 Hunting Ridge Road
Stamford, Connecticut Director or Trustee of the Dean
Witter Funds; Chairman of the
Audit Committee and Chairman of
the Committee of the Independent
Trustees and Trustee of the TCW/DW
Funds; formerly Chairman of the
Financial Accounting Standards
Advisory Council and Chairman and
Chief Executive Officer of the
American Stock Exchange; Director
of UCC Investors Holding Inc.
(Uniroyal Chemical Company, Inc.);
director or trustee of various
not-for-profit organizations.
Michael E. Nugent
Trustee
237 Park Avenue
New York, New York General Partner, Triumph Capital,
L.P., a private investment
partnership (since 1988); Director
or Trustee of the Dean Witter
Funds; Trustee of the TCW/DW
Funds; formerly Vice President,
Bankers Trust Company and BT
Capital Corporation (1984-1988);
Director of various business
organizations.
<PAGE>
Edward R. Telling*
Trustee
Sears Tower
Chicago, Illinois Retired; Director or Trustee of
the Dean Witter Funds; formerly
Chairman of the Board of Directors
and Chief Executive Officer (until
December 31, 1985) and President
(from January, 1981-March, 1982
and from February, 1984-August,
1984) of Sears, Roebuck and Co.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING
NAME, POSITION WITH FUND AND ADDRESS LAST FIVE YEARS
- ------------------------------------ ----------------------------
<S> <C>
Sheldon Curtis
Vice President, Secretary
and General Counsel
Two World Trade Center
New York, New York Senior Vice President, Secretary
and General Counsel of
InterCapital and DWSC; Senior Vice
President and Secretary of Dean
Witter Trust Company; Senior Vice
President, Assistant Secretary and
Assistant General Counsel of
Distributors; Assistant Secretary
of DWDC and DWR; Vice President,
Secretary and General Counsel of
the Dean Witter Funds and the
TCW/DW Funds.
James F. Willison
Vice President
Two World Trade Center
New York, New York Senior Vice President of
InterCapital; Vice President of
various Dean Witter Funds.
Thomas F. Caloia
Treasurer
Two World Trade Center
New York, New York First Vice President (since May,
1991) and Assistant Treasurer
(since January, 1993) of
InterCapital; First Vice President
and Assistant Treasurer of DWSC
and Treasurer of the Dean Witter
Funds and the TCW/DW Funds;
previously Vice President of
InterCapital.
</TABLE>
- ----------
* Denotes Trustees who are "interested persons" of the Fund, as defined in the
Act.
In addition, Robert M. Scanlan, President of InterCapital, David A. Hughey
and Edmund C. Puckhaber, Executive Vice Presidents of InterCapital, and Peter
M. Avelar and Jonathan R. Page, Senior Vice Presidents of InterCapital, are
Vice Presidents of the Fund, and Barry Fink, First Vice President and Assistant
General Counsel of InterCapital, and Marilyn K. Cranney, Lawrence S. Lafer, Lou
Anne D. McInnis and Ruth Rossi, Vice Presidents and Assistant General Counsels
of InterCapital, are Assistant Secretaries of the Fund.
The Fund pays each Trustee who is not an employee or retired employee of the
Investment Manager or an affiliated company an annual fee of $1,200 plus $50
for each meeting of the Board of Trustees, the Audit Committee or the Committee
of Independent Trustees attended by the Trustee in person (the Fund pays the
Chairman of the Audit Committee an additional annual fee of $1,000, and pays
the Chairman of the Committee of Independent Trustees an additional annual fee
of $2,400, in each case inclusive of the Committee meeting fees). The Fund also
reimburses Trustees for travel and other out-of-pocket expenses incurred by
them in connection with attending such meetings. Trustees and officers of the
Fund who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund. The
Fund has adopted a retirement program under which an Independent Trustee who
retires after a minimum required period of service would be entitled to
retirement payments upon reaching the eligible retirement age (normally, after
attaining age 72) based upon length of service and computed as a percentage of
one-fifth of the total compensation earned by such Trustee for service to the
Fund in the five-year period prior to the date of the Trustee's retirement. No
Independent Trustee has retired since the adoption of the program and no
payments by the Fund have been made under it. For the fiscal year ended
December 31, 1993, the Fund accrued a total of $35,671 for the Trustees' fees,
expenses and benefits under the above described retirement program. As of the
date of this Statement of Additional Information, the aggregate amount of
shares of the Fund owned by the Fund's officers and trustees as a group was
less than 1 percent of the Fund's shares outstanding.
INVESTMENT PRACTICES AND POLICIES
===============================================================================
PORTFOLIO SECURITIES
The payment of principal and interest by issuers of certain Municipal Bonds
and Notes ("Municipal Obligations") purchased by the Fund may be guaranteed by
letters of credit or other credit facilities offered by banks or other
financial institutions. Such guarantees will be considered in determining
whether
8
<PAGE>
a Municipal Obligation meets the Fund's investment quality requirements. In
addition, some issues may contain provisions which permit the Fund to demand
from the issuer repayment of principal at some specified period(s) prior to
maturity.
Municipal Bonds. Municipal Bonds, as referred to in the Prospectus,
are debt obligations of a state, its cities, municipalities and municipal
agencies (all of which are generally referred to as "municipalities") which
generally have a maturity at the time of issuance of one year or more, and the
interest from which is, in the opinion of bond counsel, exempt from federal
income tax. They are issued to raise funds for various public purposes, such as
construction of a wide range of public facilities, to refund outstanding
obligations and to obtain funds for general operating expenses or to loan to
other public institutions and facilities. In addition, certain types of
industrial development bonds and pollution control bonds are issued by or on
behalf of public authorities to provide funding for various privately operated
facilities.
Municipal Notes. Municipal Notes are short-term obligations of
municipalities, generally with a maturity at the time of issuance ranging from
six months to three years, the interest from which is, in the opinion of bond
counsel, exempt from federal income tax. The principal types of Municipal Notes
include tax anticipation notes, bond anticipation notes, revenue anticipation
notes and project notes, although there are other types of Municipal Notes in
which the Fund may invest. Notes sold in anticipation of collection of taxes, a
bond sale or receipt of other revenues are usually general obligations of the
issuing municipality or agency. Project Notes are issued by local agencies and
are guaranteed by the United States Department of Housing and Urban
Development. Such notes are secured by the full faith and credit of the United
States Government. Project Notes are not currently being issued.
Municipal Commercial Paper. Municipal Commercial Paper refers to
short-term obligations of municipalities the interest from which is, in the
opinion of bond counsel, exempt from federal income tax, and which may be
issued at a discount and is sometimes referred to as Short-Term Discount Notes.
Municipal Commercial Paper is likely to be used to meet seasonal working
capital needs of a municipality or interim construction financing and to be
paid from general revenues of the municipality or refinanced with long-term
debt. In most cases, Municipal Commercial Paper is backed by letters of credit,
lending agreements, note repurchase agreements or other credit facility
agreements offered by banks or other institutions.
Obligations of issuers of Municipal Bonds, Municipal Notes and
Municipal Commercial Paper are subject to provisions of bankruptcy, insolvency
and other laws affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Act, and laws, if any, which may be enacted by Congress or
any state extending the time for payment of principal or interest, or both, or
imposing other constraints upon enforcement of such obligations or upon
municipalities to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of any one or more
issuers to pay, when due, principal of and interest on its, or their, Municipal
Bonds, Municipal Notes and Municipal Commercial Paper may be materially
affected.
Special Investment Considerations. The percentage and rating policies
in the Prospectus apply at the time of acquisition of a security based upon the
last previous determination of the Fund's net asset value; any subsequent
change in any ratings by a rating service or change in percentages resulting
from market fluctuations or other changes in the amount of total assets will
not require elimination of any security from the Fund's portfolio until such
time as the Investment Manager determines that it is practicable to sell the
security without undue market or tax consequences to the Fund. Therefore, the
Fund may hold securities which have been downgraded to ratings of Ba or BB or
lower by Moody's or S&P. Such securities are considered to be speculative
investments.
Furthermore, the Fund does not have any minimum quality rating standard
for its downgraded or lower-rated investments. As such, the Fund may invest in
securities rated as low as Caa, Ca or C by Moody's or CCC, CC, C or CI by S&P.
Bonds rated Caa or Ca by Moody's may already be in default on payment of
interest or principal, while bonds rated C by Moody's, their lowest bond
rating, can be regarded as having extremely poor prospects of ever attaining
any real investment standing. Bonds rated CI by S&P, their lowest bond rating,
are no longer making interest payments.
9
<PAGE>
Because of the special nature of securities which are rated below
investment grade by national credit rating agencies ("lower-rated securities"),
the Investment Manager must take account of certain special considerations in
assessing the risks associated with such investments. For example, as the lower
rated securities market is relatively new, its growth has paralleled a long
economic expansion and it has not weathered a recession in its present size and
form. Therefore, an economic downturn or increase in interest rates is likely
to have a negative effect on this market and on the value of the lower rated
securities held by the Fund, as well as on the ability of the securities'
issuers to repay principal and interest on their borrowings.
The prices of lower rated securities have been found to be less
sensitive to changes in prevailing interest rates than higher rated
investments, but are likely to be more sensitive to adverse economic changes or
individual corporate developments. During an economic downturn or substantial
period of rising interest rates, highly leveraged issuers may experience
financial stress which would adversely affect their ability to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. If the issuer of a fixed-income
security owned by the Fund defaults, the Fund may incur additional expenses to
seek recovery. In addition, periods of economic uncertainty and change can be
expected to result in an increased volatility of market prices of lower rated
securities and a concomitant volatility in the net asset value of a share of
the Fund. Moreover, the market prices of certain of the Fund's portfolio
securities which are structured as zero coupon securities are affected to a
greater extent by interest rate changes and thereby tend to be more volatile
than securities which pay interest periodically and in cash (see "Dividends,
Distributions and Taxes" for a discussion of the tax ramifications of
investments in such securities).
The secondary market for lower rated securities may be less liquid than
the markets for higher quality securities and, as such, may have an adverse
effect on the market prices of certain securities. The limited liquidity of the
market may also adversely affect the ability of the Fund's Trustees to arrive
at a fair value for certain lower rated securities at certain times and should
make it difficult for the Fund to sell certain securities.
New laws and proposed new laws may have a potentially negative impact
on the market for lower rated securities. For example, recent legislation
requires federally-insured savings and loan associations to divest their
investments in lower rated securities. This legislation and other proposed
legislation may have an adverse effect upon the value of lower rated securities
and a concomitant negative impact upon the net asset value of a share of the
Fund.
PORTFOLIO CHARACTERISTICS
Variable Rate Obligations. As stated in the Prospectus, the Fund may invest
in obligations of the type called "variable rate obligations".
The interest rate payable on a variable rate obligation is adjusted
either at predesignated periodic intervals or whenever there is a change in the
market rate of interest on which the interest rate payable is based. Other
features may include the right whereby the Fund may demand prepayment of the
principal amount of the obligation prior to its stated maturity (a "demand
feature") and the right of the issuer to prepay the principal amount prior to
maturity. The principal benefit of a variable rate obligation is that the
interest rate adjustment minimizes changes in the market value of the
obligation. The principal benefit to the Fund of purchasing obligations with a
demand feature is that liquidity, and the ability of the Fund to obtain
repayment of the full principal amount of the obligation prior to maturity, is
enhanced.
When-Issued and Delayed Delivery Securities. As stated in the
Prospectus, the Fund may purchase tax-exempt securities on a when-issued or
delayed delivery 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. While the Fund will only
purchase securities on a when-issued or delayed delivery basis with the
intention of acquiring the securities, the Fund may sell the securities before
the settlement date, if it is deemed advisable. The securities so purchased or
sold are subject to market fluctuation and no interest accrues to the purchaser
during this period. At the time the Fund makes the commitment to purchase a
Municipal Obligation on a when-issued or delayed delivery
10
<PAGE>
basis, it will record the transaction and thereafter reflect the value, each
day, of the Municipal Obligation in determining its net asset value. The Fund
will also establish a segregated account with its custodian bank in which it
will maintain cash, cash equivalents or other high quality Municipal
Obligations equal in value to commitments for such when-issued or delayed
delivery securities. The Fund does not believe that its net asset value or
income will be adversely affected by its purchase of Municipal Obligations on a
when-issued or delayed delivery basis. The Fund may sell securities on a when-
issued or delayed delivery basis provided that the Fund owns the security at
the time of the sale.
Repurchase Agreements. When cash may be available for only a few
days, it may be invested by the Fund in repurchase agreements until such time
as it may otherwise be invested or used for payments of obligations of the
Fund. These agreements, which may be viewed as a type of secured lending by the
Fund, typically involve the acquisition by the Fund of debt securities from a
selling financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
("collateral"), which is held by the Fund's Custodian, at a specified price and
at a fixed time in the future, usually not more than seven days from the date
of purchase. The Fund will receive interest from the institution until the time
when the repurchase is to occur. Although such date is deemed by the Fund to be
the maturity date of a repurchase agreement, the maturities of securities
subject to repurchase agreements are not subject to any limits and may exceed
one year. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions,
whose financial condition will be continually monitored by the Investment
Manager. In addition, the value of the collateral underlying the repurchase
agreement will always be a least equal to the repurchase price, including any
accrued interest earned on the repurchase agreement. In the event of a default
or bankruptcy by a selling financial institution, the Fund will seek to
liquidate such collateral. However, the exercising of the Fund's right to
liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss.
It is the current policy of the Fund not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with any
other illiquid assets held by the Fund, amounts to more than 10% of its total
assets. The Fund's investments in repurchase agreements may at times be
substantial when, in the view of the Investment Manager, liquidity or other
considerations warrant. However, the Fund did not enter into any repurchase
agreements during its fiscal year ended December 31, 1993 and it has no
intention of entering into any such agreements in the foreseeable future.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
As discussed in the Prospectus, the Fund may invest in financial
futures contracts ("futures contracts") and related options thereon. These
futures contracts and related options thereon will be used only as a hedge
against anticipated interest rate changes. A futures contract sale creates an
obligation by the Fund, as seller, to deliver the specific type of instrument
called for in the contract at a specified future time for a specified price. A
futures contract purchase would create an obligation by the Fund, as purchaser,
to take delivery of the specific type of financial instrument at a specified
future time at a specified price. The specific securities delivered or taken,
respectively, at settlement date, would not be determined until on or near that
date. The determination would be in accordance with the rules of the exchange
on which the futures contract sale or purchase was effected.
Although the terms of futures contracts specify actual delivery or
receipt of securities, in most instances the contracts are closed out before
the settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is usually effected by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale
is effected by the Fund entering into a futures contract purchase for the same
aggregate amount of the specific type of financial instrument at the same
delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund is immediately paid the difference and thus realizes a gain.
If the offsetting purchase price exceeds the sale price, the
11
<PAGE>
Fund pays the difference and realizes a loss. Similarly, the closing out of a
futures contract purchase is effected by the Fund entering into a futures
contract sale. If the offsetting sale price exceeds the purchase price the Fund
realizes a gain, and if the offsetting sale price is less than the purchase
price the Fund realizes a loss.
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date, an option on a futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract (a long
position in the case of a call option and a short position in the case of a put
option). If the holder decides not to enter into the contract, the premium paid
for the contract is lost. Since the value of the option is fixed at the point
of sale, there are no daily payments of cash to reflect the change in the value
of the underlying contract, as discussed below for futures contracts. The value
of the option changes is reflected in the net asset value of the Fund.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects futures contracts and options thereon. The initial
margin requirements vary according to the type of the underlying security. In
addition, due to current industry practice, daily variations in gains and
losses on open contracts are required to be reflected in cash in the form of
variation margin payments. The Fund may be required to make additional margin
payments during the term of the contract.
Currently, futures contracts can be purchased on debt securities such
as U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6
1/2 and 10 years, Certificates of the Government National Mortgage Association,
Bank Certificates of Deposit and on a municipal bond index (see below). The
Fund may invest in interest rate futures contracts covering these types of
financial instruments as well as in new types of contracts that become
available in the future.
Financial futures contracts are traded in an auction environment on the
floors of several Exchanges--principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. Each Exchange
guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the Exchange membership which
is also responsible for handling daily accounting of deposits or withdrawals of
margin.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may correlate imperfectly with the behavior of the cash
prices of the Fund's portfolio securities. The correlation may be distorted by
the fact that the futures market is dominated by short-term traders seeking to
profit from the difference between a contract or security price objective and
their cost of borrowed funds. This would reduce the value of futures contracts
for hedging purposes over a short time period. The correlation may be further
distorted since the futures contracts that are being used to hedge are not
based on municipal obligations.
Another risk is that the Fund's Investment Manager could be incorrect
in its expectations as to the direction or extent of various interest rate
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.
Put and call options on financial futures have characteristics similar
to Exchange traded options. For a further description of options, see below and
the Prospectus.
In addition to the risks associated in investing in options on
securities, there are particular risks associated with investing in options on
futures. In particular, the ability to establish and close out positions on
such options will be subject to the development and maintenance of a liquid
secondary market. It is not certain that such a market will develop.
In order to assure that the Fund is entering into transactions in
futures contracts for hedging purposes as such is defined by the Commodity
Futures Trading Commission either: 1) a substantial majority (i.e.,
approximately 75%) of all anticipatory hedge transactions (transactions in
which the Fund does not own at the time of the transaction, but expects to
acquire, the securities underlying the relevant futures contract) involving the
purchase of futures contracts will be completed by the purchase of securities
which are the subject of the hedge or 2) the underlying value of all long
positions in futures contracts will
12
<PAGE>
not exceed the total value of a) all short-term debt obligations held by the
Fund; b) cash held by the Fund; c) cash proceeds due to the Fund on investments
within thirty days; d) the margin deposited on the contracts; and e) any
unrealized appreciation in the value of the contracts.
The Fund may not enter into futures contracts or related options theron
if, immediately thereafter, the amount committed to margin plus the amount paid
for option premiums exceeds 5% of the value of the Fund's total assets. In
instances involving the purchase of futures contracts by the Fund, an amount
equal to the market value of the futures contract will be deposited in a
segregated account of cash and cash equivalents to collateralize the position
and thereby ensure that the use of such futures is unleveraged. The Fund may
not purchase or sell futures contracts or related options if, immediately
thereafter, more than one-third of its net assets would be hedged.
Municipal Bond Index Futures --The Fund may utilize municipal bond
index futures contracts and options thereon for hedging purposes. The Fund's
strategies in employing such contracts will be similar to that discussed above
with respect to financial futures and options thereon. A municipal bond index
is a method of reflecting in a single number the market value of many different
municipal bonds and is designed to be representative of the municipal bond
market generally. The index fluctuates in response to changes in the market
values of the bonds included within the index. Unlike futures contracts on
particular financial instruments, futures contracts on a municipal bond index
will be settled in cash if held until the close of trading in the contract.
However, as in any other futures contract, a position in the contract may be
closed out by purchase or sale of an offsetting contract for the same delivery
month prior to expiration of the contract.
Options --The Fund may purchase or sell (write) options on debt
securities as a means of achieving additional return or hedging the value of
the Fund's portfolio. The Fund will only buy options listed on national
securities exchanges. The Fund will not purchase options if, as a result, the
aggregate cost of all outstanding options exceeds 10% of the Fund's total
assets.
Presently there are no options on tax-exempt securities traded on
national securities exchanges and until such time as they become available, the
Fund will not invest in options on debt securities.
A call option is a contract that gives the holder of the option the
right to buy from the writer of the call option, in return for a premium, the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option has the obligation, upon
exercise of the option, to deliver the underlying security upon payment of the
exercise price during the option period. A put option is a contract that gives
the holder of the option the right to sell to the writer, in return for a
premium, the underlying security at a specified price during the term of the
option. The writer of the put has the obligation to buy the underlying security
upon exercise, at the exercise price during the option period.
The Fund will only write covered call or covered put options listed on
national exchanges. The Fund may not write covered options in an amount
exceeding 20% of the value of its total assets. A call option is "covered" if
the Fund owns the underlying security covered by the call or has an absolute
and immediate right to acquire that security or futures contract without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Fund
holds a call on the same security or futures contract as the call written,
where the exercise price of the call held is (i) equal to or less than the
exercise price of the call written or (ii) greater than the exercise price of
the call written if the difference is maintained by the Fund in cash, Treasury
bills or other high grade short-term obligations in a segregated account with
its custodian. A put option is "covered" if the Fund maintains cash, Treasury
bills or other high grade short-term obligations with a value equal to the
exercise price in a segregated account with its custodian, or else holds a put
on the same security or futures contract as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written.
If the Fund has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction. Similarly, if the Fund is the holder of an
option, it may liquidate its position by effecting a closing sale transaction.
This is accomplished by selling an option of the same series as
13
<PAGE>
the option previously purchased. There can be no assurance that either a
closing purchase or sale transaction can be effected when the Fund so desires.
The Fund will realize a profit from a closing transaction if the price
of the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; the Fund will realize a
loss from a closing transaction if the price of the transaction is more than
the premium received from writing the option or is less than the premium paid
to purchase the option. Since call option prices generally reflect increases in
the price of the underlying security, any loss resulting from the purchase of a
call option may also be wholly or partially offset by unrealized appreciation
of the underlying security. If a put option written by the Fund is exercised,
the Fund may incur a loss equal to the difference between the exercise price of
the option and the sum of the sale price of the underlying security plus the
premiums received from the sale of the option. Other principal factors
affecting the market value of a put or a call option include supply and demand,
interest rates, the current market price and price volatility of the underlying
security and the time remaining until the expiration date.
An option position may be closed out only on an exchange which provides
a secondary market for an option of the same series. Although the Fund will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market
on an exchange will exist for any particular option. In such event, it might
not be possible to effect closing transactions in particular options, so that
the Fund would have to exercise its options in order to realize any profit and
would incur brokerage commissions upon the exercise of call options and upon
the subsequent disposition of underlying securities for the exercise of put
options. If the Fund as a covered call option writer is unable to effect a
closing purchase transaction in a secondary market, it will not be able to sell
the underlying security until the option expires or it delivers the underlying
security upon exercise.
PORTFOLIO MANAGEMENT
The Fund may engage in short-term trading consistent with its
investment objective. Securities may be sold in anticipation of a market
decline (a rise in interest rates) or purchased in anticipation of a market
rise (a decline in interest rates). In addition, a security may be sold and
another security of comparable equality purchased at approximately the same
time to take advantage of what the Investment Manager believes to be a
temporary disparity in the normal yield relationship between the two
securities. These yield disparities may occur for reasons not directly related
to the investment quality of particular issues or the general movement of
interest rates, such as changes in the overall demand for, or supply of,
various types of tax-exempt securities.
In general, purchases and sales may also be made to restructure the
portfolio in terms of average maturity, quality, coupon yield, or
diversification for any one or more of the following purposes: (a) to increase
income, (b) to improve portfolio quality, (c) to minimize capital depreciation,
(d) to realize gains or losses, or for such other reasons as the Investment
Manager deems relevant in light of economic and market conditions.
The Fund may invest in obligations customarily sold to institutional
investors in private transactions with the issuers thereof and up to 5% of its
total assets in securities for which a bona fide market does not exist at the
time of purchase. With respect to any securities as to which a bona fide market
does not exist, the Fund may be unable to dispose of such securities promptly
at reasonable prices.
The Fund does not generally intend to invest more than 25% of its total
assets in securities of any one governmental unit or in the securities of
governmental units located in any one state, territory or possession of the
United States. Subject to investment restriction number 3 disclosed in the
Prospectus under the Section "Investment Restrictions," the Fund may invest
more than 25% of its total assets in industrial development and pollution
control bonds (two kinds of tax-exempt Municipal Bonds).
INVESTMENT RESTRICTIONS
===============================================================================
In addition to the investment restrictions enumerated in the Prospectus, the
investment restrictions listed below have been adopted by the Fund as
fundamental policies, which may not be changed without
14
<PAGE>
the vote of a majority of the outstanding voting securities of the Fund, as
defined in the Act. Such a majority is defined as the lesser of (a) 67% of the
shares present at a meeting of shareholders, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or (b)
more than 50% of the outstanding shares of the Fund. For purposes of the
following restrictions: (a) an "issuer" of a security is the entity whose
assets and revenues are committed to the payment of interest and principal on
that particular security, provided that the guarantee of a security will be
considered a separate security, and provided further that a guarantee of a
security shall not be deemed to be a security issued by the guarantor if the
value of all securities issued or guaranteed by the guarantor and owned by the
Fund does not exceed 10% of the value of the total assets of the Fund; (b) a
"taxable security" is any security the interest on which is subject to federal
income tax; and (c) all percentage limitations apply immediately after a
purchase or initial investment, and any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in the amount of
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest in common stock.
2. Invest in securities of any issuer if, to the knowledge
of the Fund, any officer or trustee/director of the Fund or of the Investment
Manager owns more than 1/2 of 1% of the outstanding securities of such issuer,
and such officers and trustees/directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuer.
3. Purchase or sell real estate or interests therein,
although it may purchase securities secured by real estate or interests
therein.
4. Purchase or sell commodities except that the Fund may
purchase or sell financial futures contracts and related options thereon.
5. Purchase oil, gas or other mineral leases, rights or
royalty contracts, or exploration or development programs.
6. Write, purchase or sell puts, calls, or combinations
thereof, except for options on futures contracts or options on debt securities.
7. Purchase securities of other investment companies, except
in connection with a merger, consolidation, reorganization or acquisition of
assets.
8. Borrow money, except that the Fund may borrow from a bank
for temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of the value of its total assets (not including
the amount borrowed).
9. Pledge its assets or assign or otherwise encumber them
except to secure borrowing effected within the limitations set forth in
Restriction 8. However, for the purpose of this restriction, collateral
arrangements with respect to the writing of options and collateral arrangements
with respect to initial margin for futures are not deemed to be pledges of
assets.
10. Issue senior securities as defined in the Act, except
insofar as the Fund may be deemed to have issued a senior security by reason
of: (a) entering into any repurchase agreement; (b) purchasing any securities
on a when-issued or delayed delivery basis; (c) purchasing or selling any
financial futures contracts; (d) borrowing money in accordance with
restrictions described above; or (e) lending portfolio securities.
11. Make loans of money or securities, except: (a) by the
purchase of debt obligations in which the Fund may invest consistent with its
investment objective and policies; and (b) by investment in repurchase
agreements.
12. Make short sales of securities.
13. Purchase securities on margin, except for such short-term
loans as are necessary for the clearance of purchases of portfolio securities.
14. Engage in the underwriting of securities, except insofar
as the Fund may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
15. Invest for the purpose of exercising control or
management of any other issuer.
15
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
===============================================================================
Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities and
futures contracts for the Fund, the selection of brokers and dealers to effect
the transactions, and the negotiation of brokerage commissions, if any. The
Fund expects that the primary market for the securities in which it intends to
invest will generally be the over-the-counter market. Securities are generally
traded in the over-the-counter market on an "net" basis with dealers acting as
principal for their own account without charging a stated commission, although
the price of the security usually includes a profit to the dealer. Options and
futures transactions will usually be effected through a broker and a commission
will be charged. The Fund also expects that securities will be purchased at
times in underwritten offerings, where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or
discount. On occasion, the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or discounts
are paid. During the fiscal years ended December 31, 1991, 1992 and 1993, the
Fund paid no brokerage commissions.
The Investment Manager currently serves as investment manager to a
number of clients, including other investment companies, and may in the future
act as investment manager or adviser to others. It is the practice of the
Investment Manager to cause purchase and sale transactions to be allocated
among the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client accounts,
the main factors considered are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts.
The policy of the Fund regarding purchases and sales of securities and
futures contracts for its portfolio is that primary consideration will be given
to obtaining the most favorable prices and efficient execution of transactions.
Consistent with this policy, when securities transactions are effected on a
stock exchange, the Fund's policy is to pay commissions which are considered
fair and reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a requirement
always to seek the lowest commission cost could impede effective portfolio
management and preclude the Fund and the Investment Manager from obtaining a
high quality of brokerage and research services. In seeking to determine the
reasonableness of brokerage commissions paid in any transaction, the Investment
Manager relies upon its experience and knowledge regarding commissions
generally charged by various brokers and on its judgment in evaluating the
brokerage and research services received from the broker effecting the
transaction. Such determinations are necessarily subjective and imprecise, as
in most cases an exact dollar value for those services is not ascertainable.
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment Manager
believes provide the most favorable prices and who are capable of providing
efficient executions. If the Investment Manager believes such price and
execution are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and dealers
who also furnish research and other services to the Fund or the Investment
Manager. Such services may include, but are not limited to, any one or more of
the following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investment;
wire services; and appraisals or evaluations of portfolio securities.
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of research
or services otherwise performed by the Investment Manager and thus reduce its
expenses, it is of indeterminable value and the management fee paid to the
Investment Manager is not reduced by any amount that may be attributable to the
value of such services.
16
<PAGE>
Pursuant to an order of the Securities and Exchange Commission, the
Fund may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments ( i.e., Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper (not including Tax-
Exempt Municipal Paper). Such transactions will be effected with DWR only when
the price available from DWR is better than that available from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect portfolio transactions for
the Fund, the commissions, fees or other remuneration received by DWR must be
reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow DWR to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker
in a commensurate arm's-length transaction. Furthermore, the Trustees of the
Fund, including a majority of the Trustees who are not "interested" Trustees,
have adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to DWR are consistent with the
foregoing standard. The Fund did not effect any securities transactions with or
through DWR or any other selected broker-dealer affiliated with the Fund or its
Investment Manager during its fiscal years ended December 31, 1991, 1992 and
1993.
PURCHASE OF FUND SHARES
===============================================================================
As discussed in the Prospectus, the Fund offers its shares for sale to
the public on a continuous basis at an offering price equal to the net asset
value per share next determined following receipt of an effective order, plus a
sales charge based upon the aggregate amount of the investment (see the
Prospectus--"Purchase of Fund Shares"). The "Statement of Assets and
Liabilities" set forth in the Financial Statements contained within this
Statement of Additional Information illustrates the computation of the offering
price for a share of the Fund on December 31, 1993 and is incorporated herein
by reference.
As discussed in the Prospectus, shares of the Fund are distributed by
Dean Witter Distributors Inc. (the "Distributor"). The Distributor has entered
into a selected dealer agreement with DWR, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into selected dealer agreements with other selected broker-dealers. The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of DWDC. The
Board of Trustees of the Fund, including a majority of the Trustees who are
not, and were not at the time of their vote "interested persons" (as defined in
the Act) of either party to the Distribution Agreement (the "Independent
Trustees"), approved, at its meeting held on October 30, 1992, the current
Distribution Agreement appointing the Distributor exclusive distributor of the
Fund's shares and providing for the Distributor to bear distribution expenses
not borne by the Fund. The Distribution Agreement took effect on June 30, 1993
upon the spin-off by Sears, Roebuck and Co. of its remaining shares of DWDC. By
its terms, the Distribution Agreement has an initial term ending April 30,
1994, and provides that it will remain in effect from year to year thereafter
if approved by the Board.
The Distributor has agreed to pay certain expenses of the offering of
the Fund's shares, including the cost of printing and distributing prospectuses
and supplements thereto used in connection with the offering and sale of the
Fund's shares. The Fund will bear the costs of initial typesetting, printing
and distribution of prospectuses, statements of additional information, proxies
and annual and interim reports to shareholders. The Fund and the Distributor
have agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Distributor has informed the Fund that it and/or DWR received sales
charges on sales of the Fund's shares in the approximate amounts of $6,966,000,
$6,522,000 and $7,812,000, for the fiscal years ended December 31, 1991, 1992
and 1993, respectively.
17
<PAGE>
REDUCED SALES CHARGES
Right of Accumulation. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds shares
of the Fund having a current value of $5,000, and purchases $20,000 of
additional shares of the Fund, the sales charge applicable to the $20,000
purchase would be 3.5% of the offering price.
For the purposes of this Right of Accumulation, the cumulative current
net asset value of any shares of Dean Witter Liquid Asset Fund Inc., Dean
Witter Tax-Free Daily Income Trust, Dean Witter California Tax-Free Daily
Income Trust, Dean Witter New York Municipal Money Market Trust, Dean Witter
U.S. Government Money Market Trust, Dean Witter Short-Term U.S. Treasury Trust,
Dean Witter Short-Term Bond Fund or Dean Witter Limited Term Municipal Trust
originally purchased with the proceeds of shares of the Fund or Dean Witter
High Yield Securities Inc. or with the proceeds of shares of a Dean Witter Fund
sold with a contingent deferred sales charge ("CDSC fund") and held in an
Exchange Privilege Account of that fund in the name of a shareholder of the
Fund (see "Shareholder Services--Exchange Privilege") and shares of Dean Witter
High Yield Securities Inc. or a CDSC fund held by the shareholder will be added
to the value of shares of the Fund owned by the shareholder in determining the
sales charge applicable to any new purchases of Fund shares.
The Distributor must be notified by the 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 selected broker-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 Distributor or Dean Witter Trust Company (the
"Transfer Agent") fails to confirm the investor's represented holdings.
Letter of Intent. As discussed in the prospectus under the caption
"Reduced Sales Charges," reduced sales charges are available to investors who
enter into a written Letter of Intent providing for the purchase, within a
thirteen-month period, of shares of the Fund from the Distributor or from a
single selected broker-dealer which has entered into a Selected Dealers
Agreement with the Distributor.
A Letter of Intent permits an investor to establish a total investment
goal to be achieved by any number of purchases over a thirteen-month period.
Each purchase made during the period will receive the reduced sales commission
applicable to the amount represented by the goal, as if it were a single
purchase. A number of shares equal in value to 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Transfer Agent, in the name of
the shareholder. The initial purchase under a Letter of Intent must be equal to
at least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, nor
the Fund to sell, the indicated amount. In the event the Letter of Intent goal
is not achieved within the thirteen-month period, the investor is required to
pay the difference between the sales charge otherwise applicable to the
purchases made during this period and sales charges actually paid. Such payment
may be made directly to the Distributor or, if not paid, the Distributor is
authorized by the shareholder to liquidate a sufficient number of his or her
escrowed shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level,
the sales charge on the entire amount of the purchase that results in passing
that level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under Right of Accumulation, but
there will be no retroactive reduction of sales charges on previous purchases.
For the purpose of determining whether the investor is entitled to a further
reduced sales charge applicable to purchases at or above a sales charge level
which exceeds the stated goal of a Letter of Intent, the cumulative current net
asset value of any shares owned by the investor in an Exchange Privilege
Account with Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily
Income Trust, Dean Witter California Tax-Free Daily Income Trust, Dean Witter
New York Municipal Money Market Trust, Dean Witter
18
<PAGE>
U.S. Government Money Market Trust, Dean Witter Short-Term U.S. Treasury Trust,
Dean Witter Short-Term Bond Fund or Dean Witter Limited Term Municipal Trust,
if such shares were originally purchased with the proceeds of shares of the
Fund, Dean Witter High Yield Securities Inc. or CDSC fund held by the
shareholder will be added to the cost or net asset value of shares of the Fund
owned by the investor. (See "Shareholder Services--Exchange Privilege.")
However, shares of Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free
Daily Income Trust, Dean Witter California Tax-Free Daily Income Trust, Dean
Witter New York Municipal Money Market Trust, Dean Witter U.S. Government Money
Market Trust, Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Short-
Term Bond Fund or Dean Witter Limited Term Municipal Trust held in an Exchange
Privilege Account and the purchase of shares of any other Dean Witter Funds
will not be included in determining whether the stated goal of a Letter of
Intent has been reached.
At any time while a Letter of Intent is in effect, a shareholder may,
by written notice to the Distributor, increase the amount of the stated goal.
In that event, only shares purchased during the previous 90-day period and
still owned by the shareholder will be included in the new sales charge
reduction. The 5% escrow and minimum purchase requirements will be applicable
to the new stated goal. Investors electing to purchase shares of the Fund
pursuant to a Letter of Intent should carefully read such Letter of Intent.
Acquisition of Certain Investment Companies. The public offering
price of a share of the Fund may be reduced to the net asset value per share in
connection with the acquisition of the assets of, or merger or consolidation
with, a personal holding company or public or private investment company. The
value of the assets or company acquired in a tax-free transaction may, in
appropriate cases, be adjusted to reduce possible adverse tax consequences to
the Fund which might result from an acquisition of assets having net unrealized
appreciation which is disproportionately higher at the time of acquisition than
the realized or unrealized appreciation of the Fund.
DETERMINATION OF NET ASSET VALUE
As discussed in the Prospectus, the net asset value of a 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. The New York Stock Exchange currently observes
the following holidays: New Year's Day; Presidents' Day; Good Friday; Memorial
Day; Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.
Portfolio securities (other than short-term debt securities and futures
and options) are valued for the Fund by an outside independent pricing service
approved by the Board of Trustees. The pricing service has informed the Fund
that in valuing the Fund's portfolio securities it uses both a computerized
grid matrix of tax-exempt securities and evaluations by its staff, in each case
based on information concerning market transactions and quotations from dealers
which reflect the bid side of the market each day. The Fund's portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. The Board of Trustees
believes that timely and reliable market quotations are generally not readily
available to the Fund for purposes of valuing tax-exempt securities and that
the valuations supplied by the pricing service, using the procedures outlined
above and subject to periodic review, are more likely to approximate the fair
value of such securities. The Investment Manager will periodically review and
evaluate the procedures, methods and quality of services provided by the
pricing service then being used by the Fund and may, from time to time,
recommend to the Board of Trustees the use of other pricing services or
discontinuance of the use of any pricing service in whole or part. The Board
may determine to approve such recommendation or take other provisions for
pricing of the Fund's portfolio securities.
SHAREHOLDER SERVICES
===============================================================================
Upon the purchase of shares of the Fund, a Shareholder Investment
Account is opened for the investor on the books of the Fund, maintained by the
Transfer Agent. This is an open account in which shares owned by the investor
are credited by the Transfer Agent in lieu of issuance of a share certificate.
If a share certificate is desired, it must be requested in writing for each
transaction. Certificates are
19
<PAGE>
issued only for full shares and may be redeposited in the account at any time.
There is no charge to the investor for issuance of a certificate. Whenever a
shareholder instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction from
the Fund or DWR or other selected broker-dealer.
Targeted Dividends.SM In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of an open-end Dean Witter Fund other than
Dean Witter Tax-Exempt Securities Trust. Such investment will be made as
described above for automatic investment in shares of the Fund, at the net
asset value per share (without sales charge) of the selected Dean Witter Fund
as of the close of business on the monthly payment date and will begin to earn
dividends, if any, in the selected Dean Witter Fund the next business day. To
participate in the Targeted Dividends program, shareholders should contact
their DWR or other selected broker-dealer account executive or the Transfer
Agent. Shareholders of the Fund must be shareholders of the Dean Witter Fund
targeted to receive investments from dividends at the time they enter the
Targeted Dividends program. Investors should review the prospectus of the
targeted Dean Witter Fund before entering the program.
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, on a semi-
monthly, monthly or quarterly basis, to the Transfer Agent for investment in
shares of the Fund. Shares purchased through EasyInvest will be added to the
shareholder's existing account at the net asset value calculated the same
business day the transfer of funds is effected. For further information or to
subscribe to EasyInvest, shareholders should contact their DWR or other
selected broker-dealer account executive or the Transfer Agent.
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 at the net asset
value (without sales charge) next determined by returning the check or the
proceeds to the Transfer Agent within 30 days after the payment date. If the
shareholder returns the proceeds of a dividend or distribution, such funds must
be accompanied by a signed statement indicating that the proceeds constitute a
dividend or distribution to be invested. Such investment will be made at the
net asset value per share (without sales charge) next determined after receipt
of the proceeds by the Transfer Agent.
Direct Investments through Transfer Agent. A shareholder may make
additional investments in Fund shares at any time through the Shareholder
Investment Account by sending a check in any amount, not less than $100,
payable to Dean Witter Tax-Exempt Securities Trust, directly to the Fund's
Transfer Agent. After deduction of the applicable sales charge, the balance
will be applied to the purchase of Fund shares at the net asset value per share
next determined after receipt of the check or purchase payment by the Transfer
Agent. The shares so purchased will be credited to the investment account.
Systematic Withdrawal Plan. As discussed in the Prospectus, a
withdrawal plan is available for shareholders who own or purchase shares of the
Fund having a minimum value of $10,000 based upon their current net asset
value. The plan provides for monthly or quarterly (March, June, September and
December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis.
Dividends and capital gains distributions on shares held under the
Systematic Withdrawal Plan will be invested in additional full and fractional
shares at net asset value (without a sales charge). Shares will be credited to
an open account for the investor by the Transfer Agent; no share certificates
will be issued. A shareholder is entitled to a share certificate upon written
request to the Transfer Agent, although in that event the shareholder's
Systematic Withdrawal Plan will be terminated.
The Transfer Agent acts as agent for the shareholder in tendering to
the Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated in the application. The
shares will be redeemed at their net asset value determined on the tenth or
twenty-fifth day (or next following business day) of the relevant month or
quarter and normally a check for the proceeds will be mailed by the Transfer
Agent within five days after the date of redemption. The Systematic Withdrawal
Plan may be terminated at any time by the Transfer Agent.
20
<PAGE>
Any shareholder who wishes to have payments under the Withdrawal Plan
made to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to enroll
in the Withdrawal Plan. The shareholder's signature on such instructions must
be guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments and the
address to which checks are mailed by written notification to the Transfer
Agent. In addition, the party and/or the address to which checks are mailed may
be changed by written notification to the Transfer Agent, with signature
guarantees required in the manner described above. The shareholder may also
terminate the Systematic Withdrawal Plan at any time by written notice to the
Transfer Agent. In the event of such termination, the account will be continued
as a Shareholder Investment Account. The shareholder may also redeem all or
part of the shares held in the Systematic Withdrawal Plan Account (see
"Redemptions and Repurchases") at any time.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of the Fund may
exchange their shares for shares of other Dean Witter Funds sold with a front-
end (at the time of purchase) sales charge ("FESC funds"), for shares of Dean
Witter Funds sold with a contingent deferred sales charge ("CDSC funds"), for
shares of five Dean Witter Funds which are money market funds, and for shares
of Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund
and Dean Witter Short-Term U.S. Treasury Trust (the foregoing eight non-FESC or
CDSC funds are hereinafter referred to for purposes of this section as the
"Exchange Funds"). Exchanges may be made after the shares of the CDSC fund or
FESC fund acquired by purchase (not by exchange or dividend reinvestment) have
been held for thirty days. There is no holding period for exchanges of shares
acquired by exchange or dividend reinvestment. However, shares of CDSC funds,
including shares acquired in exchange for shares of FESC funds, may not be
exchanged for shares of FESC funds. Thus, shareholders who exchange their Fund
shares for shares of CDSC funds may subsequently exchange those shares for
shares of other CDSC funds or for shares of Exchange Funds, but may not
reacquire FESC fund shares by exchange. 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.
Any new account established through the Exchange Privilege will have
the same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed).
The Transfer Agent acts as agent for shareholders of the Fund in
effecting redemptions of Fund shares and in applying the proceeds to the
purchase of other fund shares. In the absence of negligence on its part,
neither the Transfer Agent nor the Fund shall be liable for any redemption of
Fund shares caused by unauthorized telephone instructions. Accordingly, in such
event the investor shall bear the risk of loss. The staff of the Securities and
Exchange Commission is currently considering the propriety of such a policy.
With respect to the repurchase of shares of the Fund, the application
of proceeds to the purchase of new shares in the Fund or any other of the funds
and the general administration of the Exchange Privilege, the Transfer Agent
acts as agent for the Distributor and for the shareholder's selected broker-
dealer, if any, in the performance of such functions.
With respect to exchanges, redemptions or repurchases, the Transfer
Agent shall be liable for its own negligence and not for the default or
negligence of its correspondents or for losses in transit. The Fund shall not
be liable for any default or negligence of the Transfer Agent, the Distributor
or any selected broker-dealer.
21
<PAGE>
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any
other conditions imposed by each fund. (The minimum initial investment is
$5,000 for Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily
Income Trust, Dean Witter New York Municipal Money Market Trust and Dean Witter
California Tax-Free Daily Income Trust although those funds may, at their
discretion, accept initial investments of as low as $1,000. The minimum initial
investment for Dean Witter Short-Term U.S. Treasury Trust is $10,000 although
that fund may, at its discretion, accept initial investments of as low as
$5,000. The minimum initial investment for all other Dean Witter Funds for
which the Exchange Privilege is available is $1,000.) Upon exchange into an
Exchange Fund, the shares of that fund will be held in a special Exchange
Privilege Account separately from accounts of those shareholders who haved
acquired their shares directly from that fund. As a result, certain services
normally available to shareholders of Exchange Funds, including the check
writing feature, will not be available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number
of times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the 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 the shareholders who hold shares of
Exchange Funds, pursuant to the Exchange Privilege and provided further that
the Exchange Privilege may be terminated or materially revised without notice
at times (a) when the New York Stock Exchange is closed for other than
customary weekends and holidays, (b) when trading on that Exchange is
restricted, (c) when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange Commission
by order so permits (provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist), or (e) if the Fund would be unable to invest
amounts effectively in accordance with its investment objective(s), policies
and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
===============================================================================
Redemption. As stated in the Prospectus, shares of the Fund can be
redeemed for cash at any time at the net asset value per share next determined.
If shares are held in a shareholder's account without a share certificate, a
written request for redemption to the Fund's Transfer Agent at P.O. Box 983,
Jersey City, NJ 07303 is required. If certificates are held by the shareholder,
the shares may be redeemed by surrendering the certificates with a written
request for redemption. The share certificate, or an accompanying stock power,
and the request for redemption, must be signed by the shareholder or
shareholders exactly as the shares are registered. Each request for redemption,
whether or not accompanied by a share certificate, must be sent to the Fund's
Transfer Agent, which will redeem the shares at their net asset value next
computed (see "Purchase of Fund Shares" in the Prospectus) after it receives
the request, and certificate, if any, in good order. Any redemption request
received after such computation will be redeemed at the next determined net
asset value. The term "good order" means that the share certificate, if any,
and request for redemption are properly signed, accompanied by any
documentation required by the Transfer Agent, and bear signature guarantees
when required by the Fund or the Transfer Agent. If redemption is requested by
a corporation, partnership, trust or fiduciary, the Transfer Agent may require
that written evidence of authority acceptable to the Transfer Agent be
submitted before such request is accepted.
22
<PAGE>
Whether certificates are held by the shareholder or shares are held in
a shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than the Distributor or a selected broker-dealer for the account of the
shareholder), partnership, trust or fiduciary, or sent to the shareholder at an
address other than the registered address, signatures must be guaranteed by an
eligible guarantor acceptable to the Transfer Agent (shareholders should
contact the Transfer Agent for a determination as to whether a particular
institution is such an eligible guarantor). A stock power may be obtained from
any dealer or commercial bank. The Fund may change the signature guarantee
requirements from time to time upon notice to shareholders, which may be by
means of a revised prospectus.
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, 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. The term good order means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent. Such
payment may be postponed or the right of redemption suspended at times (a) when
the New York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on that Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or (d) during any other
period when the Securities and Exchange Commission by order so permits;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist.
Reinstatement Privilege. As described in the Prospectus, a
shareholder who has had his or her shares redeemed or repurchased and has not
previously exercised this reinstatement privilege may, within 30 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 at the net
asset value (without sales charge) next determined after a reinstatement
request, together with such proceeds, is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal
income tax treatment of any gain or loss realized upon the redemption or
repurchase, except that if the redemption or repurchase resulted in a loss and
reinstatement is made in shares of the Fund, some or all of the loss, depending
on the amount reinstated, will not be allowed as a deduction for federal income
tax purposes but will be applied to adjust the cost basis of the shares
acquired upon reinstatement.
Involuntary Redemption. As described in the Prospectus, due to the
relatively high cost of handling small investments, the Fund reserves the right
to redeem, at net asset value, the shares of any shareholder whose shares have
a value of less than $100, or such lesser amount as may be fixed by the Board
of Trustees. 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 $100 and allow him or her 60 days to make an additional
investment in an amount which will increase the value of his or her account to
$100 or more before the redemption is processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
===============================================================================
Each shareholder will receive at least a quarterly summary of his or
her account, including information as to reinvested dividends and capital gains
distributions. Share certificates for dividends or distributions will not be
issued unless a shareholder requests in writing that a certificate be issued
for a specific number of shares.
In computing net investment income, the Fund will amortize any premiums
and original issue discounts on securities owned, if applicable. Capital gains
or losses realized upon sale or maturity of such securities will be based on
their amortized cost.
23
<PAGE>
Gains or losses on the sales of securities by the Fund will be long-
term capital gains or losses if the securities have been held by the Fund for
more than twelve months. Gains or losses on the sale of securities held for
twelve months or less will be short-term capital gains or losses.
The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code. If so
qualified, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, realized during any fiscal year to
the extent that it distributes such income and capital gains to its
shareholders.
With respect to the Fund's investments in zero coupon bonds, the Fund
accrues income prior to any actual cash payments by their issuers. In order to
continue to comply with Subchapter M of the Internal Revenue Code and remain
able to forego payment of federal income tax on its income and capital gains,
the Fund must distribute all of its net investment income, including income
accrued from zero coupon bonds. As such, the Fund may be required to dispose of
some of its portfolio securities under disadvantageous circumstances to
generate the cash required for distribution.
As discussed in the Prospectus, the Fund intends to qualify to pay
"exempt-interest dividends" to its shareholders by maintaining, as of the close
of each of its taxable years, at least 50% of the value of its assets in tax-
exempt securities. An exempt-interest dividend is that part of the dividend
distributions made by the Fund which consists of interest received by the Fund
on tax-exempt securities upon which the shareholder incurs no federal income
taxes. Exempt-interest dividends are included however, in determining what
portion, if any, of a person's Social Security benefits are subject to federal
income tax.
As also discussed in the Prospectus, the Fund intends to invest a
portion of its assets in certain "private activity bonds" issued after August
7, 1986. As a result, a portion of the exempt-interest dividends paid by the
Fund will be an item of tax preference to shareholders subject to the
alternative minimum tax. Certain corporations which are subject to the
alternative minimum tax may also have to include exempt-interest dividends in
calculating their alternative minimum taxable income in situations where the
"adjusted current earnings" of the corporation exceeds its alternative minimum
taxable income.
Within sixty days after the end of its fiscal year, the Fund will mail
to shareholders a statement indicating the percentage of the dividend
distributions for each fiscal year which constitutes exempt-interest dividends,
the percentage, if any, that is taxable, and the percentage, if any, of the
exempt-interest dividends which constitutes an item of tax preference, and to
what extent the taxable portion is long-term capital gain, short-term capital
gain or ordinary income. This percentage should be applied uniformly to all
monthly distributions made during the fiscal year to determine the proportion
of dividends that is tax-exempt. The percentage may differ from the percentage
of tax-exempt dividend distributions for any particular month.
Shareholders will be subject to federal income tax on dividends paid
from interest income derived from taxable securities and on distributions of
net short-term capital gains. Such dividends and distributions are taxable to
the shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional shares or in cash.
Distributions of long-term capital gains, if any, are taxable as long-term
capital gains, regardless of how long the shareholder has held the Fund shares
and regardless of whether the distribution is received in additional shares or
in cash. Since the Fund's income is expected to be derived entirely from
interest rather than dividends, it is anticipated that no portion of such
dividend distributions will be eligible for the federal dividends received
deduction available to corporations.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund is not deductible. Furthermore, entities or persons who are
"substantial users" (or related persons) of facilities financed by industrial
development bonds should consult their tax advisers before purchasing shares of
the Fund. "Substantial user" is defined generally by Income Tax Regulation
1.103-11(b) as including a "non-exempt person" who regularly uses in a trade or
business a part of a facility financed from the proceeds of industrial
development bonds.
24
<PAGE>
From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be affected. In that event, the
Fund would re-evaluate its investment objective and policies.
Any dividends or capital gains distributions received by a shareholder
from any investment company will have the effect of reducing the net asset
value of the shareholder's shares in that fund by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains
distributions are, and some portion of the dividends may be, subject to income
tax. If the net asset value of the shares should be reduced below a
shareholder's cost as a result of the payment of taxable dividends or the
distribution of capital gains, such payment or distribution would be in part a
return of capital but nonetheless taxable to the shareholder. Therefore, an
investor should consider the tax implications of purchasing Fund shares
immediately prior to a distribution record date.
Shareholders should consult their tax advisers regarding specific
questions as to state or local taxes.
PERFORMANCE INFORMATION
===============================================================================
As discussed in the Prospectus, from time to time the Fund may quote
its "yield" and/or its "total return" in advertisements and sales literature.
Yield is calculated for any 30-day period as follows: the amount of interest
income for each security in the Fund's portfolio is determined as described
below; the total for the entire portfolio constitutes the Fund's gross income
for the period. Expenses accrued during the period are subtracted to arrive at
"net investment income". The resulting amount is divided by the product of the
maximum offering price per share on the last day of the period (reduced by any
undeclared earned income per share that is expected to be declared shortly
after the end of the period) multiplied by the average number of Fund shares
outstanding during the period that were entitled to dividends. This amount is
added to 1 and raised to the sixth power. 1 is then subtracted from the result
and the difference is multiplied by 2 to arrive at the annualized yield.
To determine interest income from debt obligations, a yield-to-
maturity, expressed as a percentage, is determined for obligations held at the
beginning of the period, based on the current market value of the security plus
accrued interest, generally as of the end of the month preceding the 30-day
period, or, for obligations purchased during the period, based on the cost of
the security (including accrued interest). The yield-to-maturity is multiplied
by the market value (plus accrued interest) for each security and the result is
divided by 360 and multiplied by 30 days or the number of days the security was
held during the period, if less. Modifications are made for determining yield-
to-maturity on certain tax-exempt securities. For the 30-day period ended
December 31, 1993, the Fund's yield, calculated pursuant to the formula
described above, was 4.57%.
The Fund may also quote a "tax-equivalent yield" determined by dividing
the tax-exempt portion of quoted yield by 1 minus the stated income tax rate
and adding the result to the portion of the yield that is not tax-exempt. The
Fund's tax-equivalent yield, based upon a Federal personal income tax bracket
of 36.0%, for the 30-day period ended December 31, 1993 was 7.14% based upon
the yield quoted above.
The Fund's "average annual total return" represents an annualization of
the Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment, taking a root of the quotient (where the root is equivalent to the
number of years in the period) and subtracting 1 from the result.
The average annual total returns of the Fund for the year ended
December 31, 1993, for the five years ended December 31, 1993, and for the ten
years ended December 31, 1993, were 6.78%, 8.98% and 10.57%, respectively.
25
<PAGE>
In addition to the foregoing, the Fund may advertise its total return
over different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. Such calculation may or may not reflect
the imposition of the maximum front-end sales charge which, if reflected, would
reduce the performance quoted. For example, the average annual total return of
the Fund may be calculated in the manner described in the preceding paragraph,
but without the deduction for any applicable sales charge. Based on this
calculation, the Fund's average annual total return for the year ended December
31, 1993 was 11.23%, the average annual total return for the five years ended
December 31, 1993 was 9.87% and the average annual total return for the ten
years ended December 31, 1993 was 11.02%.
In addition, the Fund may compute its aggregate total return for
specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on the foregoing calculation, the
Fund's total return for the year ended December 31, 1993 was 11.23%, the total
return for five years ended December 31, 1993 was 60.13%, and the total return
for the ten years ended December 31, 1993 was 184.47%.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date and multiplying by $9,600, $48,375 or $97,250
($10,000, $50,000 or $100,000 adjusted for a 4.0%, 3.25% or 2.75% sales charge,
respectively). Investments of $10,000, $50,000 and $100,000, adjusted for the
aforementioned sales charges, in the Fund at inception (March 27, 1980) would
have grown to $39,279, $197,931 and $397,908, respectively, at December 31,
1993. The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
SHARES OF THE FUND
===============================================================================
The Shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. The Trustees themselves have the power
to alter the number and the terms of office of the Trustees (as provided for in
the Declaration of Trust), and they may at any time lengthen or shorten their
own terms or make their terms of unlimited duration and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Fund. Under certain circumstances the
Trustees may be removed by action of the Trustees. The shareholders also have
the right under certain circumstances to remove the Trustees. The voting rights
of shareholders are not cumulative, so that holders of more than 50 percent of
the shares voting can, if they choose, elect all Trustees being selected, while
the holders of the remaining shares would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation
of additional series of shares (the managed portfolios) and additional classes
of shares within any series (which would be used to distinguish among the
rights of different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). However, the Trustees have not
authorized any such additional series or classes of shares and the Fund has no
present intention to add additional classes or series of shares.
The Declaration of Trust further provides that no Trustee, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor is
any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise
from his/her or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of his duties. It also provides that all third persons shall
look solely to the Fund property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated above, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the affairs
of the Fund.
The Fund shall be of unlimited duration subject to the provisions in
the Declaration of Trust concerning termination by action of the shareholders
or the Trustees.
26
<PAGE>
CUSTODIAN AND TRANSFER AGENT
===============================================================================
The Bank of New York, 110 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. The Custodian has no part in deciding the
Fund's investment policies or which securities are to be purchased or sold for
the Fund's portfolio. Any of the Fund's cash balances with the Custodian in
excess of $100,000 are unprotected by Federal deposit insurance. Such balances
may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two,
Jersey City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust Company is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager, and Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts; disbursing cash dividends and reinvesting dividends; processing
account registration changes; handling purchase and redemption transactions;
mailing prospectuses and reports; mailing and tabulating proxies; processing
share certificate transactions; and maintaining shareholder records and lists.
For these services Dean Witter Trust Company receives a per shareholder account
fee from the Fund.
INDEPENDENT ACCOUNTANTS
===============================================================================
Price Waterhouse serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
===============================================================================
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report, containing
financial statements audited by independent accountants, will be sent to
shareholders each year.
The Fund's fiscal year is the calendar year. The financial statements
of the Fund must be audited at least once a year by independent accountants
whose selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
===============================================================================
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
===============================================================================
The annual financial statements of the Fund for the year ended December 31,
1993, which are included in this Statement of Additional Information and
incorporated by reference in the Prospectus, have been so included and
incorporated in reliance on the report of Price Waterhouse, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
REGISTRATION STATEMENT
===============================================================================
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
27
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
===============================================================================
To the Shareholders and Trustees of Dean Witter Tax-Exempt Securities Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Tax-Exempt Securities
Trust (the "Fund") at December 31, 1993, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities owned at December 31, 1993 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York 10036
February 10, 1994
===============================================================================
1993 FEDERAL TAX NOTICE (unaudited)
During the year ended December 31, 1993, the Fund paid to shareholders $0.766
per share from net investment income. All of the Fund's dividends from net
investment income were exempt interest dividends, excludable from gross income
for Federal income tax purposes. For the same period, the Fund paid to
shareholders $0.005523 per share from long-term capital gains.
===============================================================================
28
<PAGE>
<TABLE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS
<CAPTION>
===============================================================================
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1993
===============================================================================
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,402,027,418) (Note 1)............. $1,562,541,249
Cash................................................... 3,053,570
Receivable for:
Interest.............................................. 27,990,205
Shares of beneficial interest sold.................... 2,499,071
Prepaid expenses....................................... 22,699
-------------
TOTAL ASSETS...................................... 1,596,106,794
-------------
LIABILITIES:
Payable for:
Investments purchased................................. 8,967,287
Shares of beneficial interest repurchased............. 360,980
Investment management fee payable (Note 2)............. 544,937
Dividends and distributions to shareholders (Note 6)... 4,049,291
Accrued expenses (Note 3).............................. 198,253
-------------
TOTAL LIABILITIES................................. 14,120,748
-------------
NET ASSETS:
Paid-in-capital........................................ 1,418,230,317
Accumulated realized gain on investments--net.......... 3,241,898
Unrealized appreciation on investments--net............ 160,513,831
--------------
NET ASSETS........................................ $1,581,986,046
==============
NET ASSET VALUE PER SHARE, 127,473,938
shares outstanding (unlimited authorized
shares of $.01 par value)............................. $12.41
======
MAXIMUM OFFERING PRICE PER SHARE (net asset
value plus 4.17% of net asset value)*................. $12.93
======
*On sales of $25,000 or more the offering price is reduced.
<CAPTION>
===============================================================================
STATEMENT OF OPERATIONS
For the year ended December 31, 1993
===============================================================================
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME....................................... $ 98,381,785
------------
EXPENSES
Investment management fee (Note 2)................... 6,085,516
Transfer agent fees and expenses (Note 3)............ 462,531
Registration fees.................................... 123,269
Professional fees.................................... 54,007
Shareholder reports and notices...................... 51,968
Custodian fees....................................... 43,152
Trustees' fees and expenses (Note 3)................. 35,671
Other................................................ 51,010
----------
TOTAL EXPENSES.................................... 6,907,124
----------
INVESTMENT INCOME--NET............................. 91,474,661
----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS--NET (Note 1):
Realized gain on investments--net..................... 8,324,995
Change in unrealized appreciation on
investments--net..................................... 54,678,906
----------
NET GAIN ON INVESTMENTS........................... 63,003,901
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS......................... $154,478,562
============
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
===================================================================================================================================
<CAPTION>
For the year For the year
ended ended
December 31, 1993 December 31, 1992
----------------- --------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income--net........................................................ $ 91,474,661 $ 82,371,019
Realized gain on investments--net............................................. 8,324,995 4,179,591
Change in unrealized appreciation on investments--net......................... 54,678,906 19,231,201
-------------- --------------
Net increase in net assets resulting from operations........................... 154,478,562 105,781,811
------------- -------------
Dividends and distributions to shareholders from:
Investment income--net........................................................ (91,474,661) (82,370,979)
Realized gain on investments--net............................................. (701,643) -0-
------------- -------------
(92,176,304) (82,370,979)
------------- -------------
Transactions in shares of beneficial interest--net increase (Note 5)........... 196,214,972 155,342,190
------------- -------------
Total increase............................................................. 258,517,230 178,753,022
NET ASSETS:
Beginning of period............................................................ 1,323,468,816 1,144,715,794
-------------- --------------
END OF PERIOD.................................................................. $1,581,986,046 $1,323,468,816
-------------- --------------
-------------- --------------
See Notes to Financial Statements
</TABLE>
29
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. ORGANIZATION AND ACCOUNTING POLICIES--Dean Witter Tax-Exempt Securities
Trust (the "Fund") is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a diversified, open-end management investment company
and was originally incorporated in Maryland in 1979 and reorganized as a
Massachusetts business trust on April 30, 1987. The Fund commenced operations
on March 27, 1980.
The following is a summary of significant accounting policies:
A. Valuation of Investments--Portfolio securities are valued for the
Fund by an outside independent pricing service approved by the Fund's Trustees.
The pricing service has informed the Fund that in valuing the Fund's portfolio
securities, it uses both a computerized grid matrix of tax-exempt securities
and evaluations by its staff, in each case based on information concerning
market transactions and quotations from dealers which reflect the bid side of
the market each day. The Fund's portfolio securities are thus valued by
reference to a combination of transactions and quotations for the same or other
securities believed to be comparable in quality, coupon, maturity, type of
issue, call provisions, trading characteristics and other features deemed to be
relevant.
B. Accounting for Investments--Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined on the identified cost
method. Net investment income includes amortization of premiums and original
issue discounts. Additionally, with respect to market discount on bonds
purchased after April 30, 1993, a portion of any capital gain realized upon
disposition is recharacterized as taxable investment income. Interest income is
accrued daily except where collection is not expected.
C. Federal Income Tax Status--It is the Fund's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable and non-taxable
income to its shareholders. Accordingly, no federal income tax provision is
required.
D. Dividends and Distributions to Shareholders--The Fund records
dividends and distributions to its shareholders on the record date. The amount
of dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassifications. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. TRANSACTIONS WITH INVESTMENT MANAGER--Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc. (the "Investment
Manager"), the Fund pays its Investment Manager a management fee, accrued daily
and payable monthly, by applying the following annual rates to the daily net
assets of the Fund determined as of the close of each business day: 0.50% of
the portion of the daily net assets not exceeding $500 million; 0.425% of the
portion of the daily net assets exceeding $500 million but not exceeding $750
million; 0.375% of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.35% of the portion of the daily net assets
exceeding $1 billion but not exceeding $1.25 billion; and 0.325% of the portion
of the daily net assets exceeding $1.25 billion. Under the terms of
30
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
===============================================================================
the Agreement, in addition to managing the Fund's investments, the Investment
Manager maintains certain of the Fund's books and records and furnishes office
space and facilities, equipment, clerical, bookkeeping and certain legal
services, and pays the salaries of all personnel, including officers of the
Fund who are employees of the Investment Manager. The Investment Manager also
bears the cost of telephone services, heat, light, power and other utilities
provided to the Fund.
Shares of the Fund are distributed by Dean Witter Distributors Inc.,
(the Distributor), an affiliate of the Investment Manager. The Distributor has
informed the Fund that it received approximately $7,812,000 in commissions from
the sale of the Fund's shares of beneficial interest for the year ended
December 31, 1993. Such commissions are not an expense of the Fund; they are
deducted from the proceeds of the sales of the shares of beneficial interest.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of
purchases and the proceeds from sales of portfolio securities for the year
ended December 31, 1993, excluding short-term investments, aggregated
$321,605,788 and $186,553,030, respectively.
On April 1, 1991 the Fund established an unfunded noncontributory
defined benefit pension plan covering all independent Trustees of the Fund who
will have served as independent Trustees for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the year ended December 31, 1993, included in Trustees' fees and expenses in
the Statement of Operations, amounted to $12,232. At December 31, 1993 the Fund
had an accrued pension liability of $39,299 which is included in accrued
expenses in the Statement of Assets and Liabilities.
Dean Witter Trust Company ("DWTC"), an affiliate of the Investment
Manager, is the Fund's transfer agent. During the year ended December 31, 1993,
the Fund incurred transfer agent fees and expenses of $462,531 with DWTC, of
which $48,127 was payable at December 31, 1993.
4. FEDERAL INCOME TAX STATUS--During the year ended December 31, 1993, the Fund
utilized all of its net capital loss carryovers of approximately $4,331,000.
<TABLE>
5. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial interest were as follows:
<CAPTION>
For the year ended For the year ended
December 31, 1993 December 31, 1992
--------------------------- -------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold................................. 22,369,075 $273,876,016 19,288,589 $226,599,094
Reinvestment of dividends and
distributions....................... 4,269,905 52,363,197 3,992,396 46,822,621
--------- ----------- --------- -----------
26,638,980 326,239,213 23,280,985 273,421,715
Repurchased.......................... (10,610,367) (130,024,241) (10,078,275) (118,079,525)
--------- ----------- --------- -----------
Net increase......................... 16,028,613 $196,214,972 13,202,710 $155,342,190
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
6. DIVIDENDS AND DISTRIBUTIONS--On a daily basis the Fund declares dividends
from its net investment income. Such dividends are payable monthly.
31
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
<TABLE>
PORTFOLIO OF INVESTMENTS December 31, 1993
===================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ------ ------ -----
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (94.9%)
GENERAL OBLIGATION (8.1%)
$ 10,000 Birmingham, Alabama, Cap Impr & Refg Ser 1985
(Crossover Refunded)............................................ 9.80 % 10/ 1/10 $ 11,252,400
North Slope Borough, Alaska,
7,930 Refg 1985 Ser C................................................. 10.40 6/30/95 8,378,124
5,015 Refg 1984 Ser C................................................. 10.50 6/30/96 5,300,905
3,500 Refg 1990 Ser I (MBIA Insured).................................. 0.00 6/30/99 2,746,345
3,900 Ser 1992 A (MBIA Insured)....................................... 0.00 6/30/03 2,478,645
5,000 Ser 1992 A Conv (MBIA Insured).................................. 0.00 6/30/03 5,187,500
4,000 Connecticut, College Savings 1989 Ser A.......................... 0.00 7/ 1/08 1,881,440
10,000 Broward County, Florida, Refg Ser 1986 (Prerefunded)............. 7.875 1/ 1/12 11,229,600
Florida Board of Education, Cap Outlay
5,000 Ser 1989 A Refg................................................. 5.00 6/ 1/24 4,759,850
6,000 Ser 1989 A Refg................................................. 6.00 6/ 1/25 6,238,740
Massachusetts,
27,000 Fiscal Recovery 1990 Ser A...................................... 7.25 6/ 1/96 29,286,360
1,500 Refg 1992 Ser B................................................. 6.50 8/ 1/08 1,705,800
11,500 Refg 1993 Ser A................................................. 5.50 2/ 1/11 11,565,780
4,000 Clark County, Nevada, Transportation Ser 1992 A (AMBAC Insured).. 6.50 6/ 1/17 4,633,280
New York City, New York,
12,000 1990 Ser D...................................................... 6.00 8/ 1/07 12,118,200
10,000 1990 Ser D...................................................... 6.00 8/ 1/08 10,069,800
-------- -------------
126,345 128,832,769
-------- -------------
EDUCATIONAL FACILITIES REVENUE (6.2%)
10,000 Maryland Health & Higher Educational Facilities Authority,
The Johns Hopkins University Ser 1985 (Prerefunded)............. 9.25 7/ 1/15 11,087,100
3,000 University of Maryland, 1989 Refg Ser A.......................... 7.20 10/ 1/09 3,436,050
Massachusetts Health & Educational Facilities Authority,
5,000 Boston University Ser G (Prerefunded)........................... 8.875 7/ 1/15 5,489,950
3,500 Boston University Ser L RIBS (MBIA Insured)..................... 10.45 + 10/ 1/31 4,274,375
22,500 New Hampshire Higher Educational & Health Facilities Authority,
Dartmouth College Ser 1993...................................... 5.375 6/ 1/23 22,449,150
2,000 New Jersey Economic Development Authority, The Seeing Eye Inc 1991 7.30 4/ 1/11 2,185,480
11,000 New York State, City University--John Jay College COPs........... 7.25 8/15/07 11,992,530
New York State Dormitory Authority, State University
5,000 Ser 1989 B...................................................... 0.00 5/15/02 3,200,550
21,000 Ser 1990 B...................................................... 7.00 5/15/16 23,819,250
2,000 Pennsylvania Higher Educational Facilities Authority, University of
Pennsylvania Ser 1987........................................... 6.625 1/ 1/17 2,139,440
6,725 University of Texas, Permanent University Fund Refg Ser 1985
(Prerefunded)................................................... 9.00 7/ 1/05 7,300,055
-------- -------------
91,725 97,373,930
-------- -------------
ELECTRIC REVENUE (12.1%)
Municipal Electric Authority of Georgia,
13,500 Power Ser K (Prerefunded)....................................... 6.50 1/ 1/07 14,012,325
10,000 Fifth Crossover Ser............................................. 6.50 1/ 1/17 11,467,700
6,665 Massachusetts Municipal Wholesale Electric Company, Power
1987 Ser A (Prerefunded)........................................ 8.75 7/ 1/18 7,853,503
Nebraska Public Power District, Power
7,000 Ser 1993........................................................ 6.125 1/ 1/15 7,446,600
25,000 1993 Ser C...................................................... 5.00 1/ 1/17 23,913,500
15,000 New York State Power Authority, Gen Pur Ser CC................... 5.25 1/ 1/18 14,938,950
North Carolina Eastern Municipal Power Agency,
7,500 Refg Ser 1993 B................................................. 6.25 1/ 1/12 7,796,325
10,000 Refg Ser 1986 A (Prerefunded)................................... 7.75 1/ 1/15 11,120,900
</TABLE>
32
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
<TABLE>
PORTFOLIO OF INVESTMENTS December 31, 1993 (continued)
===================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ------ ------ -----
<C> <S> <C> <C> <C>
$ 5,000 North Carolina Municipal Power Agency #1, Catawba Ser 1988....... 6.00 % 1/ 1/15 $ 5,099,400
Puerto Rico Electric Power Authority, Power
6,000 Ser N........................................................... 5.00 7/ 1/12 5,803,080
20,000 Ser O........................................................... 0.00 7/ 1/17 5,211,400
6,000 Austin, Texas, Comb Utilities Refg Ser 1993 A.................... 5.75 11/15/13 6,074,400
Intermountain Power Agency, Utah,
25,000 Refg 1985 Ser H GAINS (Prerefunded)............................. 0.00 7/ 1/12 20,925,000
15,000 Refg 1985 Ser H................................................. 6.00 7/ 1/21 15,173,100
5,000 Refg 1985 Ser I................................................. 6.00 7/ 1/21 5,057,700
8,000 Refg 1993 Ser A................................................. 5.00 7/ 1/23 7,496,800
8,000 Lewis County Public Utility District #1, Washington, Cowlitz Falls
Hydro Refg Ser 1993............................................. 5.50 1/ 1/13 8,047,440
13,000 Snohomish County Public Utilities District #1, Washington,
1993 Ser (FGIC Insured)......................................... 6.00 1/ 1/18 13,607,490
-------- -------------
205,665 191,045,613
-------- -------------
HOSPITAL REVENUE (10.4%)
3,000 Baxter County, Arkansas, Baxter County Regional Hospital Inc
Impr & Refg Ser 1992............................................ 7.50 9/ 1/21 3,289,170
10,000 University of California, UCLA Medical Center Ser 1986........... 6.90 12/ 1/16 10,847,200
6,000 Connecticut Health & Educational Facilities Authority,
Yale--New Haven Hospital Ser F (MBIA Insured)................... 7.10 7/ 1/25 6,923,160
10,000 Alachua County Health Facilities Authority, Florida, Shands Hospital
at the University of Florida Ser 1985 (Prerefunded)............. 8.00 12/ 1/15 10,693,200
8,350 Altamonte Springs Health Facilities Authority, Florida,
Adventist Health/Sunbelt Inc Ser 1984 (MBIA Insured) (Prerefunded) 7.90 10/ 1/14 9,405,105
3,500 Maine Health & Higher Educational Facilities Authority, Maine Medical
Center Ser 1986 (Prerefunded)................................... 7.375 10/ 1/13 3,914,960
Massachusetts Health & Educational Facilities Authority,
8,000 Brigham & Women's Hospital Ser B (Prerefunded).................. 7.125 7/ 1/07 8,692,320
1,500 Malden Hospital--FHA Insured Mtge Ser A......................... 5.00 8/ 1/16 1,405,425
9,000 New England Medical Center Ser G (MBIA Insured) (a)............. 5.375 7/ 1/24 8,873,820
2,570 New Ulm, Minnesota, Health Central Refg 1985 Ser C............... 10.00 10/ 1/14 2,906,336
Rochester, Minnesota, Mayo Foundation/Mayo Medical Center
7,000 Ser 1992 I...................................................... 5.75 11/15/21 7,245,490
3,700 Ser 1992 F...................................................... 6.25 11/15/21 3,981,014
18,000 Missouri Health & Educational Facilities Authority,
Barnes-Jewish Inc/Christian Health Services Ser 1993 A.......... 5.25 5/15/14 17,537,220
12,000 Charlotte-Mecklenburg County Hospital Authority, North Carolina,
Ser 1992........................................................ 6.00 1/ 1/22 12,616,920
4,000 Cuyahoga County, Ohio, The Cleveland Clinic Foundation
Refg Ser 1988 A................................................. 8.00 12/ 1/15 4,544,680
6,250 Philadelphia Hospital & Higher Education Facilities Authority,
Pennsylvania, Temple University Hospital 1993 Ser A............. 6.625 11/15/23 6,693,062
8,680 North Central Texas Health Facilities Development Corporation,
University Medical Center Inc Ser 1987.......................... 7.75 4/ 1/17 9,206,442
5,000 Salt Lake City, Utah, IHC Hospital Inc Ser of 1983 (ETM)......... 5.00 6/ 1/15 4,877,750
Fairfax County Industrial Development Authority, Virginia,
14,000 Fairfax Hospital System Inc/Inova Health Ser 1991 C RITES
(Prerefunded)................................................... 10.527+ 8/29/23 18,480,000
7,500 Inova Health System Foundation Refg Ser 1993 A.................. 5.25 8/15/19 7,253,400
5,000 University of Virginia, Refg Ser E............................... 6.00 6/ 1/13 5,124,800
-------- -------------
153,050 164,511,474
-------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (10.5%)
3,000 Atlanta, Georgia, Delta Air Lines Inc Ser 1989 B (AMT)............. 6.25 12/ 1/19 2,928,390
15,000 Jefferson County, Kentucky, Louisville Gas & Electric Co 1993 Ser B 5.625 8/15/19 15,222,750
4,000 Maryland Industrial Development Financing Authority, Medical
Waste Assocs LP 1989 Ser (AMT).................................. 8.75 11/15/10 3,000,000
10,000 Bass Brook, Minnesota, Minnesota Power & Light Co Refg Ser 1992.. 6.00 7/ 1/22 10,330,200
</TABLE>
33
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
<TABLE>
PORTFOLIO OF INVESTMENTS December 31, 1993 (continued)
===================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ------ ------ -----
<C> <S> <C> <C> <C>
$ 7,500 Becker, Minnesota, Northern States Power Co Ser A 1989........... 6.80 % 4/ 1/07 $ 8,360,625
18,000 Claiborne County, Mississippi, Middle South Energy Inc Ser C..... 9.875 12/ 1/14 22,142,880
10,500 Clark County, Nevada, Nevada Power Co Ser 1992 A (AMT)
(FGIC Insured).................................................. 6.70 6/ 1/22 11,565,225
10,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987
(AMBAC Insured)................................................. 6.30 12/ 1/14 10,750,900
2,000 New Jersey Economic Development Authority, New Jersey Natural
Gas Co Ser 1991 B (AMT)......................................... 7.25 3/ 1/21 2,205,280
3,000 Pennsylvania Industrial Development Authority, Ser A 1991........ 7.00 1/ 1/11 3,329,100
18,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT)....... 7.50 12/ 1/29 19,534,680
6,000 Brazos River Authority, Texas, Texas Utilities Electric Co
Collateralized Ser 1988 A (AMT)................................. 9.25 3/ 1/18 7,057,800
12,000 Grapevine Industrial Development Corporation, Texas,
American Airlines Inc Ser 1985.................................. 9.25 12/ 1/12 13,156,920
Matagorda County Navigational District #1, Texas, Central
Power & Light Co
7,000 Collateralized Ser 1984 A....................................... 7.50 12/15/14 8,028,440
10,000 Ser 1986 (AMT).................................................. 7.875 12/ 1/16 11,216,700
5,000 Putnam County, West Virginia, Appalachian Power Co Ser C ........ 6.60 7/ 1/19 5,343,750
10,000 Weston, Wisconsin, Wisconsin Public Service Corp Refg Ser 1993 A. 6.90 2/ 1/13 11,395,700
-------- -------------
151,000 165,569,340
-------- -------------
MORTGAGE REVENUE--MULTI-FAMILY (1.8%)
Massachusetts Housing Finance Agency,
4,875 GNMA-Backed Ser 1985 A.......................................... 9.125 12/ 1/20 5,308,631
4,800 Hsg Dev 1986 Ser A (AMT)........................................ 7.75 12/ 1/19 5,104,800
7,000 Michigan Housing Development Authority, Rental Ser A
(Bifurcated FSA Insured)........................................ 6.50 4/ 1/23 7,438,900
New York City Housing Development Corporation, New York,
4,712 Ruppert Proj--FHA Insured Sec 223F.............................. 6.50 11/15/18 5,063,184
4,574 Stevenson Commons Proj--FHA Insured Sec 223F.................... 6.50 5/15/18 4,908,112
-------- -------------
25,961 27,823,627
-------- -------------
MORTGAGE REVENUE--SINGLE FAMILY (4.3%)
4,975 California Housing Finance Agency, Home Cap Apprec 1983 Ser B.... 0.00 8/ 1/15 523,121
6,575 Illinois Housing Development Authority, 1991 Ser C-2 RIBS (AMT).. 10.607+ 2/ 1/18 7,437,969
40,000 Maryland Community Development Administration, Cap Apprec 1983
Second Ser...................................................... 0.00 4/ 1/15 4,958,400
5,500 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 2
RIBS (AMT)...................................................... 12.039+ 9/10/30 6,414,375
4,010 North Carolina Housing Finance Agency, Ser Q (AMT)............... 8.00 3/ 1/18 4,301,006
3,900 Ohio Housing Finance Agency, GNMA-Backed 1991 Ser A-2 RIBS
(AMT)........................................................... 10.998+ 3/24/31 4,465,500
Pennsylvania Housing Finance Agency,
8,000 Ser 1993--37A................................................... 5.45 10/ 1/17 7,904,720
5,000 Ser 1991--31C RIBS (AMT)........................................ 11.364+ 10/ 1/23 5,706,250
4,000 Ser 1992--RIBS (AMT)............................................ 9.175+ 4/ 1/25 4,210,000
Tennessee Housing Development Agency, Mortgage Finance
4,000 1993 Ser A...................................................... 5.90 7/ 1/18 4,083,720
12,700 1993 Ser A...................................................... 5.95 7/ 1/28 12,911,328
5,000 Wisconsin Housing & Economic Development Authority, Home
Ownership 1991 Ser 3 RIBS (AMT)................................. 11.326+ 10/25/22 5,875,000
-------- -------------
103,660 68,791,389
-------- -------------
</TABLE>
34
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
<TABLE>
PORTFOLIO OF INVESTMENTS December 31, 1993 (continued)
===================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ------ ------ -----
<C> <S> <C> <C> <C>
NURSING & HEALTH RELATED FACILITIES REVENUE (0.3%)
$ 4,000 Maine Health & Higher Educational Facilities Authority, Ser 1992 B
--------- (FSA Insured)................................................... 5.50 % 7/ 1/22 $ 4,006,320
PUBLIC FACILITIES REVENUE (6.3%)
Los Angeles Convention & Exhibition Center Authority, California,
12,500 1993 Refg Ser A (MBIA Insured).................................. 5.375 8/15/18 12,473,625
9,000 Ser 1985 (Prerefunded).......................................... 9.00 12/ 1/20 12,555,450
7,000 Palm Beach County, Florida, Criminal Justice Ser 1990 (FGIC Insured) 6.00 6/ 1/13 7,348,530
10,000 Metropolitan Pier & Exposition Authority, Illinois, McCormick Place
Ser 1992 A...................................................... 6.50 6/15/27 10,709,300
3,000 Maine Municipal Bond Bank, 1988 Ser B (Prerefunded).............. 7.85 11/ 1/18 3,580,050
10,000 Michigan Building Authority, 1993 Refg Ser I (AMBAC Insured) .... 5.30 10/ 1/16 9,999,000
6,000 Saint Louis Industrial Development Authority, Missouri, Kiel Center
Refg Ser 1992 (AMT)............................................. 7.75 12/ 1/13 6,526,200
14,000 New York State Dormitory Authority, Suffolk County Judicial
Ser 1986 (ETM).................................................. 7.375 7/ 1/16 17,793,580
Ohio Building Authority, Correctional
5,000 1985 Ser C BIGS................................................. 0.00 10/ 1/05 5,012,500
10,000 1986 Ser A...................................................... 7.35 8/ 1/06 11,495,100
2,000 Refg 1986 Ser B................................................. 7.125 9/ 1/09 2,201,000
-------- -------------
88,500 99,694,335
-------- -------------
RESOURCE RECOVERY REVENUE (9.0%)
Connecticut Resources Recovery Authority,
9,000 American REF-FUEL Co of Southeastern Connecticut 1988 Ser A
(AMT)........................................................... 8.00 11/15/15 10,451,520
4,950 Bridgeport RESCO Ser A.......................................... 7.625 1/ 1/09 5,493,164
7,060 Broward County, Florida, SES Broward County South Ser 1984....... 7.95 12/ 1/08 8,057,296
8,500 Savannah Resource Recovery Development Authority, Georgia,
Savannah Energy Systems Co Ser 1992............................. 6.30 12/ 1/06 9,122,200
13,050 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT)................................................ 6.30 7/ 1/16 13,670,006
Massachusetts Industrial Finance Agency, SEMASS
15,000 Ser 1991 A...................................................... 9.00 7/ 1/15 17,110,050
20,000 Ser 1991 B (AMT)................................................ 9.25 7/ 1/15 22,911,400
3,000 Greater Detroit Resource Recovery Authority, Michigan, Ser C..... 9.25 12/13/08 3,281,400
9,000 Mercer County Improvement Authority, New Jersey, Refg Ser A 1992
(AMT) (FGIC Insured)............................................ 6.70 4/ 1/13 10,116,090
9,000 Union County Utilities Authority, New Jersey, 1991 Ser A (AMT)... 7.20 6/15/14 10,039,500
10,000 Hempstead Industrial Development Agency, New York, 1985 American
REF-FUEL Co of Hempstead........................................ 7.40 12/ 1/10 10,902,000
9,680 New York State Environmental Facilities Corporation, Huntington
1989 Ser A (AMT)................................................ 7.50 10/ 1/12 10,652,840
5,000 Onondaga County Resource Recovery Agency, New York, 1992 Ser
(AMT)........................................................... 6.875 5/ 1/06 5,404,750
5,000 Fairfax County Economic Development Authority, Virginia,
Ogden Martin Systems of Fairfax Inc Ser 1988 A (AMT)............ 7.75 2/ 1/11 5,761,150
-------- -------------
128,240 142,973,366
-------- -------------
RETIREMENT & LIFECARE FACILITIES REVENUE (0.00%)
2,268 Alachua County, Florida, Atrium Apartments Ser 1990 (b).......... 9.00 10/15/05 79,453
-------- -------------
TRANSPORTATION FACILITIES REVENUE (14.4%)
10,000 San Francisco Bay Area Rapid Transit District, California, Sales Tax
Ser 1985 (Prerefunded).......................................... 9.00 7/ 1/11 11,152,600
Connecticut, Infrastructure
4,000 1988 Ser C (Prerefunded)........................................ 7.50 10/ 1/05 4,671,800
3,000 1988 Ser C (Prerefunded)........................................ 7.50 10/ 1/06 3,503,850
</TABLE>
35
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
<TABLE>
PORTFOLIO OF INVESTMENTS December 31, 1993 (continued)
===================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ------ ------ -----
<C> <S> <C> <C> <C>
Mid-Bay Bridge Authority, Florida,
$ 8,965 Sr Lien Crossover Refg Ser 1993 A............................... 6.00 % 10/ 1/13 $ 9,332,386
2,500 Jr Lien Advance Refg Ser 1993 D................................. 6.125 10/ 1/22 2,568,225
2,500 Ser 1991 A (Crossover Refunded)................................. 6.875 10/ 1/22 3,152,125
10,000 Atlanta, Georgia, Airport Ser 1990 (AMT)......................... 6.25 1/ 1/21 10,628,900
8,100 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax
Refg Ser K...................................................... 7.25 7/ 1/10 9,148,545
5,000 Hawaii, Airports Second Ser 1991 (AMT)........................... 7.00 7/ 1/18 5,509,400
7,900 Chicago, Illinois, Chicago--O'Hare Intl Airport Refg 1993 Ser A.. 5.00 1/ 1/16 7,437,771
Kentucky Turnpike Authority,
5,135 Economic Development Road Revitalization Ser 1990 (Prerefunded). 7.25 5/15/10 6,039,325
30,000 Resource Recovery Road Refg 1987 Ser A.......................... 5.00 7/ 1/08 29,907,600
7,000 Maryland Transportation Authority, Ser 1985 (Prerefunded)........ 9.00 7/ 1/15 7,735,560
Massachusetts Port Authority,
2,255 Refg Ser 1985 B................................................. 9.375 7/ 1/15 2,490,805
5,745 Refg Ser 1985 B (Prerefunded)................................... 9.375 7/ 1/15 6,377,295
New Jersey Highway Authority, Sr Parkway
11,000 Refg Ser 1992................................................... 6.25 1/ 1/14 11,900,680
10,000 1986 Ser (Prerefunded).......................................... 7.125 1/ 1/14 10,915,600
630 1989 Ser........................................................ 6.00 1/ 1/19 650,261
1,370 1989 Ser (ETM).................................................. 6.00 1/ 1/19 1,532,729
Albuquerque, New Mexico, Gross Receipts Tax--Airport Supported
7,000 Sub Lien Ser 12/84.............................................. 8.25 7/ 1/14 7,681,100
7,000 Sub Lien Ser 12/84.............................................. 8.25 7/ 1/14 7,683,270
10,000 Port Authority of New York & New Jersey, Cons 53rd Ser........... 8.70 7/15/20 10,976,700
Pennsylvania Turnpike Commission,
5,000 Ser L of 1991 (MBIA Insured).................................... 6.00 6/ 1/15 5,302,200
15,000 Ser A of 1986................................................... 6.00 12/ 1/17 15,320,100
6,000 Ser K of 1989 (Prerefunded)..................................... 7.50 12/ 1/19 7,159,680
15,000 Puerto Rico Highway & Transportation Authority, Refg Ser X....... 5.50 7/ 1/15 15,237,300
4,000 Virginia Transportation Board, US Route 58 Corridor Ser 1993 B... 5.625 5/15/13 4,123,480
9,000 Port of Seattle, Washington, Ser 1992 B (AMT).................... 6.00 11/ 1/17 9,285,210
-------- -------------
213,100 227,424,497
-------- -------------
WATER & SEWER REVENUE (9.3%)
7,500 South Central Connecticut Regional Water Authority, 1986 Ser
(Prerefunded)................................................... 7.125 8/ 1/12 8,302,725
10,000 Atlanta, Georgia, Water & Sewer Ser 1985 (Prerefunded)........... 9.50 1/ 1/08 10,890,600
4,750 Baltimore, Maryland, Water Refg Ser 1990-A (MBIA Insured)
(Prerefunded)................................................... 6.50 7/ 1/20 5,371,585
Boston Water & Sewer Commission, Massachusetts,
6,000 Ser A 1984 (Prerefunded)........................................ 7.00 1/ 1/11 6,388,200
2,315 Ser A 1986 (Prerefunded)........................................ 7.875 11/ 1/13 2,601,551
1,440 Ser A 1986 (Prerefunded)........................................ 7.875 11/ 1/13 1,638,720
Massachusetts Water Resources Authority,
10,000 Refg 1992 Ser B................................................. 5.50 11/ 1/15 9,843,000
14,250 1993 Ser C...................................................... 5.25 12/ 1/15 13,887,053
4,000 Detroit, Michigan, Sewage Refg Ser 1993--A (FGIC Insured)........ 5.70 7/ 1/13 4,132,960
8,500 Albuquerque, New Mexico, Joint Water & Sewer 1986 Ser A.......... 6.00 7/ 1/15 8,785,855
New York City Municipal Water Finance Authority, New York,
8,500 1994 Ser B...................................................... 5.30 6/15/06 8,491,925
3,700 1991 Ser C (Prerefunded)........................................ 7.375 6/15/13 4,461,312
5,000 1986 Ser B (Prerefunded)........................................ 7.875 6/15/16 5,616,450
10,000 1993 Ser A...................................................... 6.00 6/15/17 10,344,900
2,500 Hamilton County, Ohio, Sewer 1985 Ser A (Prerefunded)............ 7.50 12/ 1/10 2,774,425
10,000 Philadelphia, Pennsylvania, Water & Wastewater Ser 1993
(Capital Guaranty Insured)...................................... 5.50 6/15/15 10,024,800
6,000 San Antonio, Texas, Prior Lien Sewer Impr & Refg Ser 1986
(Prerefunded)................................................... 7.25 5/ 1/12 6,615,840
</TABLE>
36
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
<TABLE>
PORTFOLIO OF INVESTMENTS December 31, 1993 (continued)
===================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ------ ------ -----
<C> <S> <C> <C> <C>
$ 13,000 Fairfax County, Virginia, Sewer Ser A (AMBAC Insured) (Prerefunded) 7.00 % 11/15/16 $ 15,094,430
10,000 Richmond, Virginia, Public Utilities Ser A (Prerefunded)......... 8.00 1/15/18 11,652,400
-------- -------------
137,455 146,918,731
-------- -------------
OTHER REVENUE (2.3%)
3,500 Denver, Colorado, Excise Tax Ser 1985 A.......................... 5.00 11/ 1/08 3,503,325
New York Local Government Assistance Corporation,
11,000 Ser 1993 C Refg................................................. 5.50 4/ 1/17 11,143,660
8,000 Ser 1991 D (Prerefunded)........................................ 7.00 4/ 1/18 9,540,080
11,000 New York State Dormitory Authority, The Metropolitan Museum of Art
Ser 1987 (Prerefunded).......................................... 7.625 7/ 1/15 11,659,340
--------- -------------
33,500 35,846,405
--------- -------------
1,464,469 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $1,340,377,418)........... 1,500,891,249
--------- -------------
SHORT-TERM MUNICIPAL OBLIGATIONS (3.9%)
13,000 San Francisco Redevelopment Agency, California, Bayside Village
Ser 1985 A (Tender 1/6/94)...................................... 2.80* 12/ 1/05 13,000,000
12,000 Volusia County Health Facilities Authority, Florida, Pooled Ser 1985
(FGIC Insured) (Tender 1/5/94).................................. 3.50* 11/ 1/15 12,000,000
12,150 Illinois Health Facilities Authority, Resurrection Health Care
Ser 1993 (Tender 1/3/94)........................................ 4.50* 5/ 1/11 12,150,000
4,000 Ascension Parish, Louisiana, Shell Oil Co (Tender 1/3/94)........ 4.75* 9/ 1/23 4,000,000
12,300 Louisiana Recovery District, Sales Tax Ser 1988 (FGIC Insured)
(Tender 1/3/94)................................................. 4.30* 7/ 1/97 12,300,000
4,000 Massachusetts, Dedicated Income Tax Ser 1990 B (Tender 1/3/94)... 4.25* 12/ 1/97 4,000,000
4,200 District of Columbia, Ser 1992 A--3 (Tender 1/3/94).............. 4.25* 10/ 1/07 4,200,000
- ---------- -------------
61,650 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $61,650,000)................................... 61,650,000
- ---------- -------------
$1,526,119 TOTAL INVESTMENTS (IDENTIFIED COST $1,402,027,418) (C)........... 98.8% 1,562,541,249
- ---------
- --------- CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES................... 1.2 19,444,797
----- --------------
NET ASSETS....................................................... 100.0% $1,581,986,046
----- --------------
----- -------------
<FN>
+ Current coupon rate for residual interest bonds. This rate resets periodically as the auction rate on the related short-term
securities fluctuates.
* Variable or floating rate securities. Coupon rate shown reflects current rate.
(a) Security purchased on a when issued basis.
(b) Security in default. Partial interest paid. Interest income is recorded as received.
(c) The aggregate cost for federal income tax purposes is $1,402,027,418; the aggregate gross unrealized appreciation is
$172,969,734 and the aggregate gross unrealized depreciation is $12,455,903, resulting in net unrealized appreciation of
$160,513,831.
See Notes to Financial Statements
</TABLE>
37
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
<TABLE>
FINANCIAL HIGHLIGHTS
===================================================================================================================================
<CAPTION>
Selected data and ratios for a share of beneficial interest outstanding throughout each period:
For the year ended December 31,
----------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $11.88 $11.65 $11.09 $11.28 $10.96 $10.45 $11.50 $10.79 $ 9.80 $ 9.85
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Investment income--net...... 0.77 0.79 0.80 0.80 0.81 0.81 0.80 0.85 0.92 1.06
Realized and unrealized gain
(loss) on investments--net.. 0.54 0.23 0.56 (0.18) 0.32 0.51 (0.97) 1.21 1.07 (0.19)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................... 1.31 1.02 1.36 0.62 1.13 1.32 (0.17) 2.06 1.99 0.87
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less dividends and
distributions:
Dividends from net
investment income........... (0.77) (0.79) (0.80) (0.81) (0.81) (0.81) (0.83) (0.87) (1.00) (0.92)
Distributions from net
realized gain on
investments................. (0.01) -0- -0- -0- -0- -0- (0.05) (0.48) -0- -0-
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions................ (0.78) (0.79) (0.80) (0.81) (0.81) (0.81) (0.88) (1.35) (1.00) (0.92)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period................ $12.41 $11.88 $11.65 $11.09 $11.28 $10.96 $10.45 $11.50 $10.79 $ 9.80
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT
RETURN+....................... 11.23% 9.09% 12.71% 5.86% 10.61% 13.02% (1.44%) 20.17% 21.35% 9.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)...............$1,581,986$1,323,469$1,144,716$1,010,355$1,033,250$907,822 $896,419 $965,834 $489,367 $173,147
Ratio of expenses to average
net assets................... 0.47% 0.49% 0.51% 0.51% 0.51% 0.54% 0.52% 0.56% 0.61% 0.68%
Ratio of net investment income
to average net assets........ 6.23% 6.74% 7.05% 7.25% 7.31% 7.51% 7.42% 7.51% 8.90% 11.71%
Portfolio turnover rate....... 13% 4% 10% 19% 13% 17% 37% 42% 116% 102%
<FN>
- ------------
+ Does not reflect the deduction of sales load.
See Notes to Financial Statements
</TABLE>
38
<PAGE>
APPENDIX
- --------
RATINGS OF INVESTMENTS
===============================================================================
Moody's Investors Service Inc. ("Moody's")
MUNICIPAL BOND RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and therefore not well safeguarded during both good and bad times in
the future. Uncertainty of position characterizes bonds in this
class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Conditional Rating: Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These bonds are secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3
in each generic rating classification from Aa though B in its municipal bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and a modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
39
<PAGE>
MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal note and other short-term loans
are designated Moody's Investment Grade (MIG). MIG 1 denotes best quality and
means there is present strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing. MIG 2 denotes high quality and means that margins of protection
are ample although not as large as in MIG 1. MIG 3 denotes favorable quality
and means that all security elements are accounted for but that the undeniable
strength of the previous grades, MIG 1 and MIG 2, is lacking. MIG 4 denotes
adequate quality and means that the protection commonly regarded as required of
an investment security is present and that while the notes are not distinctly
or predominantly speculative, there is specific risk.
VARIABLE RATE DEMAND OBLIGATIONS
A short-term rating, in addition to the Bond or MIG ratings, designated
VMIG may also be assigned to an issue having a demand feature. The assignment
of the VMIG symbol reflects such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. The VMIG rating criteria are identical to the MIG criteria discussed
above.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. These ratings apply to Municipal Commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-
term promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
MUNICIPAL BOND RATINGS
A Standard & Poor's municipal bond rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion,
rely on unaudited financial information. The ratings may be changed, suspended
or withdrawn as a result of changes in, or unavailability of, such information,
or for other reasons.
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small
degree.
A Debt rated "A" has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
40
<PAGE>
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally eibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt
in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than
other speculative grade debt. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which would lead to inadequate capacity or willingness to
pay interest and repay principal.
B Debt rated "B" has a greater vulnerability to default but presently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions would likely
impair capacity or willingness to pay interest and repay principal.
CCC Debt rated "CCC" has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayments of
principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC" rating.
C The rating "C" is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating.
Cl The rating "Cl" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The 'D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
The 'D' rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having
predominantly speculative characteristics with respect to capacity to
pay interest and repay principal. "BB" indicates the least degree of
speculation and "C" the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures
to adverse conditions.
Plus (+) or minus(-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing
within the major ratings categories.
The foregoing ratings are sometimes followed by a "p" which indicates
that the rating is provisional. A provisional rating assumes the
successful completion of the project being financed by the bonds
being rated and indicates that payment of debt service requirements
is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no
comment on the likelihood or risk of default upon failure of such
completion.
MUNICIPAL NOTE RATINGS
Commencing on July 27, 1984, Standard & Poor's instituted a new rating
category with respect to certain municipal note issues with a maturity of less
than three years. The new note ratings denote the
following:
SP-1 denotes a very strong or strong capacity to pay principal and
interest. Issues determined to possess overwhelming safety characteristics are
given a plus (+) designation (SP-1+).
41
<PAGE>
SP-2 denotes a satisfactory capacity to pay principal and interest.
SP-3 denotes a speculative capacity to pay principal and interest.
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to purchase
or sell a security. The ratings are based upon current information furnished by
the issuer or obtained by S&P from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information. Ratings are graded into group categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Ratings are applicable to both taxable and tax-exempt commercial paper. The
categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity
for timely payment. Issues in this category are further refined with the
designation 1, 2 and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payments is
very strong.
A-2 indicates capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is not as
overwhelming as for issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations
carrying this designation are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
42
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
Financial highlights from the years
ended December 31, 1984, 1985, 1986, 1987, 1988,
1989, 1990, 1991, 1992 and 1993...................... 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
Statement of assets and liabilities at
December 31, 1993.................................... 29
Statement of operations for the year
ended December 31, 1993.............................. 29
Statement of changes in net assets for the years
ended December 31, 1992 and 1993..................... 29
Notes to Financial Statements ....................... 30
Portfolio of Investments at December 31, 1993........ 32
(3) Financial statements included in Part C:
None
(b) Exhibits:
5. - Form of Investment Management Agreement between
Registrant and Dean Witter InterCapital Inc.
6. - Form of Distribution Agreement between
Registrant and Dean Witter Distributors Inc.
8. - Form of Amended and Restated Transfer Agency and
Service Agreement
1
<PAGE>
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services
Company Inc.
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance
Quotations
All other exhibits previously filed and incorporated
by reference.
Item 25. Persons Controlled by or Under Common Control With
Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at January 12, 1994
Shares of Beneficial Interest 36,479
Item 27. Indemnification
Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the
indemnification of the Registrant's trustees, officers, employees
and agents is permitted if it is determined that they acted under
the belief that their actions were in or not opposed to the best
interest of the Registrant, and, with respect to any criminal
proceeding, they had reasonable cause to believe their conduct
was not unlawful. In addition, indemnification is permitted only
if it is determined that the actions in question did not render
them liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be
indemnified for the expense of litigation if it is determined
that they are entitled to indemnification against any liability
established in such litigation. The Registrant may also advance
money for these expenses provided that they give their
undertakings to repay the Registrant unless their conduct is
later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of
Trust and paragraph 8 of the Registrant's Investment Management
Agreement, neither the Investment Manager nor any trustee,
officer, employee or agent of the Registrant shall be liable for
2
<PAGE>
any action or failure to act, except in the case of bad faith,
willful misfeasance, gross negligence or reckless disregard of
duties to the Registrant.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Act") may be permitted to
trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of the Registrant in connection with the
successful defense of any action, suit or proceeding) is asserted
against the Registrant by such trustee, officer or controlling
person in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act, and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent
with Release 11330 of the Securities and Exchange Commission
under the Investment Company Act of 1940, so long as the
interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager,
Registrant's Trustees, and other registered investment management
companies managed by the Investment Manager, maintains insurance
on behalf of any person who is or was a Trustee, officer,
employee, or agent of Registrant, or who is or was serving at the
request of Registrant as a trustee, director, officer, employee
or agent of another trust or corporation, against any liability
asserted against him and incurred by him or arising out of his
position. However, in no event will Registrant maintain
insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment adviser. The following information is
given regarding officers of Dean Witter InterCapital Inc.
Information regarding the other officers of InterCapital is
included in Item 29(b) below. The term "Dean Witter Funds" used
below refers to the following Funds: (1) InterCapital Income
3
<PAGE>
Securities Inc., (2) High Income Advantage Trust, (3) High Income
Advantage Trust II, (4) High Income Advantage Trust III, (5)
Municipal Income Trust, (6) Municipal Income Trust II, (7)
Municipal Income Trust III, (8) Dean Witter Government Income
Trust, (9) Municipal Premium Income Trust, (10) Municipal Income
Opportunities Trust, (11) Municipal Income Opportunities Trust
II, (12) Municipal Income Opportunities Trust III, (13) Prime
Income Trust, (14) InterCapital Insured Municipal Bond Trust,
(15) InterCapital Quality Municipal Income Trust, (16)
InterCapital Quality Municipal Investment Trust, (17)
InterCapital Insured Municipal Income Trust, (18) InterCapital
California Insured Municipal Income Trust, (19) InterCapital
Insured Municipal Trust, (20) InterCapital Quality Municipal
Securities (21) InterCapital New York Quality Municipal
Securities, and (22) InterCapital California Municipal
Securities, registered closed-end investment companies, and (1)
Dean Witter Equity Income Trust, (2) Dean Witter Tax-Exempt
Securities Trust, (3) Dean Witter Tax-Free Daily Income Trust,
(4) Dean Witter Dividend Growth Securities Inc., (5) Dean Witter
Convertible Securities Trust, (6) Dean Witter Liquid Asset Fund
Inc., (7) Dean Witter Developing Growth Securities Trust, (8)
Dean Witter Retirement Series, (9) Dean Witter Federal Securities
Trust, (10) Dean Witter World Wide Investment Trust, (11) Dean
Witter U.S. Government Securities Trust, (12) Dean Witter Select
Municipal Reinvestment Fund, (13) Dean Witter High Yield
Securities Inc., (14) Dean Witter Intermediate Income Securities,
(15) Dean Witter New York Tax-Free Income Fund, (16) Dean Witter
California Tax-Free Income Fund, (17) Dean Witter Health Sciences
Trust, (18) Dean Witter California Tax-Free Daily Income Trust,
(19) Dean Witter Managed Assets Trust, (20) Dean Witter American
Value Fund, (21) Dean Witter Strategist Fund, (22) Dean Witter
Utilities Fund, (23) Dean Witter World Wide Income Trust, (24)
Dean Witter New York Municipal Money Market Trust, (25) Dean
Witter Capital Growth Securities, (26) Dean Witter Precious
Metals and Minerals Trust, (27) Dean Witter European Growth Fund
Inc., (28) Dean Witter Global Short-Term Income Fund Inc., (29)
Dean Witter Pacific Growth Fund Inc., (30) Dean Witter Multi-
State Municipal Series Trust, (31) Dean Witter Premier Income
Trust, (32) Dean Witter Short-Term U.S. Treasury Trust, (33) Dean
Witter Diversified Income Trust, (34) Dean Witter U.S. Government
Money Market Trust, (35) Dean Witter Global Dividend Growth
Securities, (36) Active Assets California Tax-Free Trust, (37)
Dean Witter Natural Resource Development Securities Inc., (38)
Active Assets Government Securities Trust, (39) Active Assets
Money Trust, (40) Active Assets Tax-Free Trust, (41) Dean Witter
Limited Term Municipal Trust, (42) Dean Witter Variable
Investment Series, (43) Dean Witter Value-Added Market Series and
(44) Dean Witter Short-Term Bond Fund, registered open-end
investment companies. InterCapital is a wholly-owned subsidiary
of Dean Witter, Discover & Co. The principal address of the Dean
Witter Funds is Two World Trade Center, New York, New York 10048.
The term "TCW/DW Funds" refers to the following Funds: (1) TCW/DW
4
<PAGE>
Core Equity Trust, (2) TCW/DW North American Government Income
Trust, (3) TCW/DW Latin American Growth Fund, (4) TCW/DW Income
and Growth Fund, (5) TCW/DW Small Cap Growth Fund, (6) TCW/DW
Balanced Fund, registered open-end investment companies and (7)
TCW/DW Term Trust 2000, (8) TCW/DW Term Trust 2002 and (9)
TCW/DW Term Trust 2003, registered closed-end investment
companies.
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
- --------------- ------------------ ------------------------
Charles A. Chairman, Chief Executive Vice
Fiumefreddo Executive Officer President and Director
and Director of Dean Witter
Reynolds Inc.
("DWR"); Chairman,
Director or Trustee,
President and Chief
Executive Officer of
the Dean Witter Funds;
Chairman, Chief
Executive Officer and
Trustee of the TCW/DW
Funds; Chairman and
Director of Dean
Witter Trust Company
("DWTC"); Chairman,
Chief Executive
Officer and Director
of Dean Witter
Distributors Inc.
("Distributors") and
Dean Witter Services
Company Inc. ("DWSC");
Formerly Executive
Vice President and
Director of Dean
Witter, Discover & Co.
("DWDC"); Director
and/or officer of DWDC
subsidiaries.
5
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
- --------------- ------------------ ------------------------
Philip J. Director Chairman, Chief
Purcell Executive Officer and
Director of DWDC and
DWR; Director of
DWSC and Distributors.
Richard M. Director President and Chief
DeMartini Operating Officer of
Dean Witter Capital
and Director of DWDC,
DWR and Distributors.
James F. Director President and Chief
Higgins Operating Officer of
Dean Witter Financial;
Director of DWDC, DWR,
DWSC and Distributors.
Thomas C. Executive Vice Executive Vice
Schneider President, Chief President, Chief
Financial Officer Financial Officer
and Director and Director of
DWDC, DWR, DWSC
and Distributors.
Christine A. Director Executive Vice
Edwards President, Secretary,
General Counsel and
Director of DWDC, DWR,
DWSC and Distributors.
Robert M. Scanlan President and Vice President of
Chief Operating the Dean Witter Funds
Officer and the TCW/DW Funds;
President of DWSC;
Executive Vice
President of
Distributors;
Executive Vice
President and
Director of DWTC.
6
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
- --------------- ------------------ ------------------------
David A. Hughey Executive Vice Vice President of the
President and Dean Witter Funds and
Chief Administrative the TCW/DW Funds;
Officer Executive Vice
President, Chief
Administrative Officer
and Director of DWTC;
Executive Vice
President and Chief
Administrative Officer
of DWSC and
Distributors.
Edmund C. Executive Vice Vice President of the
Puckhaber President Dean Witter Funds.
John Van Heuvelen Executive Vice President and Chief
President Executive Officer of
DWTC.
Sheldon Curtis Senior Vice Vice President,
President, Secretary and
General Counsel General Counsel of the
and Secretary Dean Witter Funds and
the TCW/DW Funds;
Senior Vice President
and Secretary of
DWTC; Assistant
Secretary of DWR and
DWDC; Senior Vice
President, General
Counsel and Secretary
of DWSC; Senior Vice
President, Assistant
General Counsel and
Assistant Secretary of
Distributors.
Peter M. Avelar Senior Vice Vice President of
President various Dean Witter
Funds.
Mark Bavoso Senior Vice Vice President of
President various Dean Witter
Funds.
Thomas H. Connelly Senior Vice Vice President of
President various Dean Witter
Funds.
7
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
- --------------- ------------------ ------------------------
Edward Gaylor Senior Vice Vice President of
President various Dean Witter
Funds.
Rajesh K. Gupta Senior Vice Vice President of
President various Dean Witter
Funds.
Kenton J. Senior Vice Vice President of
Hinchliffe President various Dean Witter
Funds.
John B. Kemp, III Senior Vice Director of the
President Provident Savings
Bank, Jersey City,
New Jersey.
Anita Kolleeny Senior Vice Vice President of
President various Dean Witter
Funds.
Jonathan R. Page Senior Vice Vice President of
President various Dean Witter
Funds.
Ira Ross Senior Vice Vice President of
President various Dean Witter
Funds.
Rochelle G. Siegel Senior Vice Vice President of
President various Dean Witter
Funds.
Paul D. Vance Senior Vice Vice President of
President various Dean Witter
Funds.
Elizabeth A. Senior Vice
Vetell President
James F. Willison Senior Vice Vice President of
President various Dean Witter
Funds.
Ronald Worobel Senior Vice Vice President of
President various Dean Witter
Funds.
8
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
- --------------- ------------------ ------------------------
Thomas F. Caloia First Vice Treasurer of the
President and Dean Witter Funds
Assistant Treasurer and the TCW/DW Funds;
First Vice President
and Assistant Treasury
of DWSC; Assistant
Treasurer of
Distributors.
Barry Fink First Vice Assistant Secretary
President of the Dean Witter
Funds and TCW/DW
Funds; First Vice
President and
Assistant Secretary of
DWSC.
Michael First Vice First Vice President
Interrante President and and Controller of
Controller DWSC; Assistant
Treasurer of
Distributors.
Robert Zimmerman First Vice
President
Joseph Arcieri Vice President
Douglas Brown Vice President
Rosalie Clough Vice President
B. Catherine Vice President
Connelly
Marilyn K. Cranney Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC;
Assistant
Secretary of DWR and
DWDC.
Salvatore DeSteno Vice President Vice President of
DWSC.
9
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
- --------------- ------------------ ------------------------
Dwight Doolan Vice President
Bruce Dunn Vice President
Geoffrey D. Flynn Vice President Vice President of
DWSC.
Bette Freedman Vice President
Deborah Genovese Vice President
Peter W. Gurman Vice President
Shant Harootunian Vice President
John Hechtlinger Vice President
David Johnson Vice President
Christopher Jones Vice President
Stanley Kapica Vice President
Paula LaCosta Vice President Vice President of
various Dean Witter
Funds.
Lawrence S. Lafer Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
Thomas Lawlor Vice President
Lou Anne D. McInnis Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
James Mulcahy Vice President
James Nash Vice President
Hugh Rose Vice President
10
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
- --------------- ------------------ ------------------------
Ruth Rossi Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
Howard A. Schloss Vice President
Rose Simpson Vice President
Diane Lisa Sobin Vice President Vice President of
various Dean Witter
Funds.
Kathleen Stromberg Vice President Vice President of
various Dean Witter
Funds.
Vinh Q. Tran Vice President Vice President of
various Dean Witter
Funds.
Alice Weiss Vice President Vice President of
various Dean Witter
Funds.
Marianne Zalys Vice President
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
11
<PAGE>
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Equity Income Trust
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Short-Term Bond Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
- ---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
12
<PAGE>
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained by the Investment Manager at its offices,
except records relating to holders of shares issued by the Registrant,
which are maintained by the Registrant's Transfer Agent, at its place of
business as shown in the prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 24th day of February, 1994.
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
By /s/ Sheldon Curtis
---------------------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No.16 has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 02/24/94
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 02/24/94
----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Edward R. Telling
By /s/ Sheldon Curtis 02/24/94
------------------------------
Sheldon Curtis
Attorney-in-Fact
Jack F. Bennett Paul Kolton
John R. Haire Michael E. Nugent
John E. Jeuck
Manuel H. Johnson Edwin J. Garn
By /s/ David M. Butowsky 02/24/94
-------------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
5. - Investment Management Agreement between
Registrant and Dean Witter InterCapital Inc.
6. - Distribution Agreement between Registrant and
Dean Witter Distributors Inc.
8. - Amended and Restated Transfer Agency and Service
Agreement
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services
Company Inc.
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance
Quotations
yh:\taxex\exhibit.94
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of June, 1993 by and between Dean
Witter Tax-Exempt Securities Trust, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (hereinafter called the
"Fund"), and Dean Witter InterCapital Inc., a Delaware corporation (hereinafter
called the "Investment Manager"):
Whereas, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
Whereas, The Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, and engages in the business of
acting as investment adviser; and
Whereas, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
Whereas, The Investment Manager desires to be retained to perform
services on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as
investment manager of the Fund and, subject to the supervision of the Trustees,
to supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously
manage the assets of the Fund in a manner consistent with the investment
objectives and policies of the Fund; shall determine the securities and
commodities to be purchased, sold or otherwise disposed of by the Fund and the
timing of such purchases, sales and dispositions; and shall take such further
action, including the placing of purchase and sale orders on behalf of the
Fund, as the Investment Manager shall deem necessary or appropriate. The
Investment Manager shall also furnish to or place at the disposal of the Fund
such of the information, evaluations, analyses and opinions formulated or
obtained by the Investment Manager in the discharge of its duties as the Fund
may, from time to time, reasonably request.
2. The Investment Manager shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other persons
as it shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Investment Manager
shall be deemed to include persons employed or otherwise retained by the
Investment Manager to furnish statistical and other factual data, advice
regarding economic factors and trends, information with respect to technical
and scientific developments, and such other information, advice and assistance
as the Investment Manager may desire. The Investment Manager shall, as agent
for the Fund, maintain the Fund's records and books of account (other than
those maintained by the Fund's transfer agent, registrar, custodian and other
agencies). All such books and records so maintained shall be the property of
the Fund and, upon request therefor, the Investment Manager shall surrender to
the Fund such of the books and records so requested.
3. The Fund will, from time to time, furnish or otherwise make
available to the Investment Manager such financial reports, proxy statements
and other information relating to the business and affairs of the Fund as the
Investment Manager may reasonably require in order to discharge its duties and
obligations hereunder.
4. The Investment Manager shall bear the cost of rendering the
investment management and supervisory services to be performed by it under this
Agreement, and shall, at its own expense, pay the compensation of the officers
and employees, if any, of the Fund, and provide such office space, facilities
and equipment and such clerical help and bookkeeping services as the Fund shall
reasonably require in the conduct of its
<PAGE>
business, including the preparation of prospectuses, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). The Investment Manager shall also bear the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including without limitation: the charges and expenses of
any registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities or commodities and other
property, and any stock transfer or dividend agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with portfolio
transactions to which the Fund is a party; all taxes, including securities or
commodities issuance and transfer taxes, and fees payable by the Fund to
federal, state or other governmental agencies; the cost and expense of
engraving or printing certificates representing shares of the Fund; all costs
and expenses in connection with the registration and maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees
and legal fees and disbursements of counsel); the cost and expense of printing,
including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Trustees or members of any advisory board or
committee who are not employees of the Investment Manager or any corporate
affiliate of the Investment Manager; all expenses incident to the payment of
any dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel, including counsel to the
Trustees of the Fund who are not interested persons (as defined in the Act) of
the Fund or the Investment Manager, and of independent accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Trustees) of the Fund which
inure to its benefit; extraordinary expenses (including but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation
unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and
the expenses assumed by the Investment Manager, the Fund shall pay to the
Investment Manager monthly compensation determined by applying the following
annual rates to the Fund's daily net assets: 0.50% of daily net assets up to
$500 million; 0.425% of the next $250 million; 0.375% of the next $250 million;
0.35% of the next $250 million; and 0.325% of daily net assets over $1.25
billion. Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. Such calculations shall be made by applying 1/365ths of
the annual rates to the Fund's net assets each day determined as of the close
of business on that day or the last previous business day. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above.
Subject to the provisions of paragraph 7 hereof, payment of the
Investment Manager's compensation for the preceding month shall be made as
promptly as possible after completion of the computations contemplated by
paragraph 7 hereof.
7. In the event the operating expenses of the Fund, including
amounts payable to the Investment Manager pursuant to paragraph 6 hereof, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund imposed by state securities laws
or regulations thereunder, as such limitations may be raised or lowered from
time to time, the Investment Manager shall reduce its management fee to the
extent of such excess and, if required, pursuant to any such laws or
regulations, will reimburse the Fund for annual operating expenses in excess of
any expense limitation that may be applicable; provided, however, there shall
be excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to
legal claims
2
<PAGE>
and liabilities and litigation costs and any indemnification related thereto)
paid or payable by the Fund. Such reduction, if any, shall be computed and
accrued daily, shall be settled on a monthly basis, and shall be based upon the
expense limitation applicable to the Fund as at the end of the last business
day of the month. Should two or more such expense limitations be applicable as
at the end of the last business day of the month, that expense limitation which
results in the largest reduction in the Investment Manager's fee shall be
applicable.
For purposes of this provision, should any applicable expense
limitation be based upon the gross income of the Fund, such gross income shall
include, but not be limited to, interest on debt securities in the Fund's
portfolio accrued to and including the last day of the Fund's fiscal year, and
dividends declared on equity securities in the Fund's portfolio, the record
dates for which fall on or prior to the last day of such fiscal year, but shall
not include gains from the sale of securities.
8. The Investment Manager will use its best efforts in the
supervision and management of the investment activities of the Fund, but in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations hereunder, the Investment Manager shall not be
liable to the Fund or any of its investors for any error of judgment or mistake
of law or for any act or omission by the Investment Manager or for any losses
sustained by the Fund or its investors.
9. Nothing contained in this Agreement shall prevent the
Investment Manager or any affiliated person of the Investment Manager from
acting as investment adviser or manager for any other person, firm or
corporation and shall not in any way bind or restrict the Investment Manager or
any such affiliated person from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom they
may be acting. Nothing in this Agreement shall limit or restrict the right of
any Trustee, officer or employee of the Investment Manager to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.
10. This Agreement shall remain in effect until April 30, 1994 and
from year to year thereafter provided such continuance is approved at least
annually by the vote of holders of a majority, as defined in the Investment
Company Act of 1940, as amended (the "Act"), of the outstanding voting
securities of the Fund or by the Trustees of the Fund; provided that in either
event such continuance is also approved annually by the vote of a majority of
the Trustees of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party, which vote must be cast in
person at a meeting called for the purpose of voting on such approval;
provided, however, that (a) the Fund may, at any time and without the payment
of any penalty, terminate this Agreement upon thirty days' written notice to
the Investment Manager, either by majority vote of the Trustees of the Fund or
by the vote of a majority of the outstanding voting securities of the Fund; (b)
this Agreement shall immediately terminate in the event of its assignment (to
the extent required by the Act and the rules thereunder) unless such automatic
terminations shall be prevented by an exemptive order of the Securities and
Exchange Commission; and (c) the Investment Manager may terminate this
Agreement without payment of penalty on thirty days' written notice to the
Fund. Any notice under this Agreement shall be given in writing, addressed and
delivered, or mailed post-paid, to the other party at the principal office of
such party.
11. This Agreement may be amended by the parties without the vote
or consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Agreement to the
requirements of applicable federal laws or regulations, but neither the Fund
nor the Investment Manager shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws
of the State of New York and the applicable provisions of the Act. To the
extent the applicable law of the State of New York, or any of the provisions
herein, conflicts with the applicable provisions of the Act, the latter shall
control.
13. The Investment Manager and the Fund each agree that the name
"Dean Witter", which comprises a component of the Fund's name, is a property
right of Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it
will only use the name "Dean Witter" as a component of its name and for no
other
3
<PAGE>
purpose, (ii) it will not purport to grant to any third party the right to use
the name "Dean Witter" for any purpose, (iii) the Investment Manager or its
parent, Dean Witter Reynolds Inc., or any corporate affiliate of the Investment
Manager's parent, may use or grant to others the right to use the name "Dean
Witter", or any combination or abbreviation thereof, as all or a portion of a
corporate or business name or for any commercial purpose, including a grant of
such right to any other investment company, (iv) at the request of the
Investment Manager or its parent, the Fund will take such action as may be
required to provide its consent to the use of the name "Dean Witter", or any
combination or abbreviation thereof, by the Investment Manager or its parent or
any corporate affiliate of the Investment Manager's parent, or by any person to
whom the Investment Manager or its parent or any corporate affiliate of the
Investment Manager's parent shall have granted the right to such use, and (v)
upon the termination of any investment advisory agreement into which the
Investment Manager and the Fund may enter, or upon termination of affiliation
of the Investment Manager with its parent, the Fund shall, upon request by the
Investment Manager or its parent, cease to use the name "Dean Witter" as a
component of its name, and shall not use the name, or any combination or
abbreviation thereof, as a part of its name or for any other commercial
purpose, and shall cause its officers, Trustees and shareholders to take any
and all actions which the Investment Manager or its parent may request to
effect the foregoing and to reconvey to the Investment Manager or its parent
any and all rights to such name.
14. The Declaration of Trust establishing Dean Witter Tax-Exempt
Securities Trust, dated April 6, 1987, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Tax-Exempt Securities Trust refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of Dean Witter Tax-Exempt Securities
Trust shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise,
in connection with the affairs of said Dean Witter Tax-Exempt Securities Trust,
but the Trust Estate only shall be liable.
In Witness Whereof, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
Dean Witter Tax-Exempt Securities Trust
By . . . . . . . . . . . . . .
Attest: . . . . . . . . . . . .
Dean Witter InterCapital Inc.
By . . . . . . . . . . . . . .
Attest: . . . . . . . . . . . .
4
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 30th day of June, 1993 between Dean Witter Tax-
Exempt Securities Trust, an incorporated business Fund organized under the laws
of the Commonwealth of Massachusetts (the "Fund"), and Dean Witter Distributors
Inc., a Delaware corporation (the "Distributor");
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a diversified open-end investment company and it
is in the interest of the Fund to offer its shares for sale continuously; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's transferable
shares of beneficial interest, of $.01 par value ("Shares"), in order to
promote the growth of the Fund and facilitate the distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Distributor. (a) The Fund hereby appoints the
Distributor as the principal underwriter of the Fund to sell Shares to the
public on the terms set forth in this Agreement and the Fund's Prospectus and
the Distributor hereby accepts such appointment and agrees to act hereunder.
The Fund, during the term of this Agreement, shall sell Shares to the
Distributor upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Fund and to sell Shares as principal to investors and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate
of the Distributor, upon the terms described herein and in the Fund's
prospectus (the "Prospectus") and statement of additional information included
in the Fund's registration statement (the "Registration Statement") most
recently filed from time to time with the Securities and Exchange Commission
(the "SEC") and effective under the Securities Act of 1933, as amended (the
"1933 Act") and 1940 Act or as said Prospectus may be otherwise amended or
supplemented and filed with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive principal underwriter and distributor of the Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by the Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; or
(ii) pursuant to reinvestment of dividends or capital gains distributions; or
(iii) pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. Purchase of Shares from the Fund. (a) The Distributor shall have
the right to buy from the Fund the Shares needed, but not more than the Shares
needed (except for clerical errors in transmission), to fill unconditional
orders for Shares placed with the Distributor by investors and securities
dealers. The price which the Distributor shall pay for the Shares so purchased
from the Fund shall be the net asset value, determined as set forth in the
Prospectus, used in determining the public offering price on which such orders
were based.
(b) The Shares are to be resold by the Distributor at the public offering
price, as set forth in Section 3(c) hereof to investors or to securities
dealers including DWR, who have entered into selected dealer agreements with
the Distributor pursuant to Section 7 ("Selected Dealers").
(c) The public offering price(s) of the Shares, i.e., the price per share at
which the Distributor may sell Shares to the public, shall be the public
offering price as set forth in the Prospectus relating to such Shares, but not
to exceed the net asset value at which the Distributor is to purchase the
shares, plus a sales charge not to exceed 4.0% of the public offering price,
subject to reductions for volume purchases. If the public offering price does
not equal an even cent, the public offering price may be adjusted to the
nearest cent. All payments to the Fund hereunder shall be made in the manner
set forth in Section 3(e).
1
<PAGE>
(d) The Fund shall have the right to suspend the sale of the Shares at times
when redemption is suspended pursuant to the conditions set forth in Section
4(d) hereof. The Fund shall also have the right to suspend the sale of the
Shares if trading on the New York Stock Exchange shall have been suspended, if
a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of the Fund, makes it impracticable to sell the Shares.
(e) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that the
Fund will not arbitrarily or without reasonable cause refuse to accept orders
for the purchase of Shares. The Distributor will confirm orders upon their
receipt, and the Fund (or its agent) upon receipt of payment therefor and
instructions will deliver share certificates for such Shares or a statement
confirming the issuance of Shares. Payment shall be made to the Fund in New
York Clearing House funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its agent).
With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to the Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. Repurchase or Redemption of Shares. (a) Any of the outstanding
Shares may be tendered for redemption at any time, and the Fund agrees to
redeem the Shares so tendered in accordance with the applicable provisions set
forth in the Prospectus. The price to be paid to redeem the Shares shall be
equal to the net asset value determined as set forth in the Prospectus. All
payments by the Fund hereunder shall be made in the manner set forth below. The
redemption by the Fund of any of the Shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor in the
course of the original sale, except that if any Shares are tendered for
redemption within seven business days after the date of the confirmation of the
original purchase, the right to the sales charge shall by forfeited by the
Distributor.
Upon any redemption of Shares the Fund shall pay the total amount of the
redemption price in accordance with applicable provisions of the Prospectus in
New York Clearing House funds.
(b) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of
the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Fund, to repurchase
Shares held in a share- holder's account with the Fund for which no share
certificate has been issued, upon the telephonic or telegraphic request of the
shareholder, or at the discretion of the Distributor. The Distributor shall
promptly transmit to the transfer agent of the Fund, for redemption, all such
orders for repurchase of shares. Payment for shares repurchased may be made by
the Fund to the Distributor for the account of the shareholder. The Distributor
shall be responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
With respect to Shares tendered for redemption or repurchase by any Selected
Dealer on behalf of its customers, the Distributor is authorized to instruct
the transfer agent of the Fund to accept orders for redemption or repurchase
directly from the Selected Dealer on behalf of the Distributor and to instruct
the Fund to transmit payments for such redemptions and repurchases directly to
the Selected Dealer on behalf of the Distributor for the account of the
shareholder. The Distributor shall obtain from the Selected Dealer and maintain
a record of such orders. The Distributor is further authorized to obtain from
the Fund and shall maintain, a record of payments made directly to the Selected
Dealer on behalf of the Distributor.
2
<PAGE>
(d) Redemption of Shares or payment by the Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by order,
so permits.
SECTION 5. Duties of the Fund. (a) The Fund shall furnish to the Distributor
copies of all information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the distribution
of the Shares, including one certified copy, upon request by the Distributor,
of all financial statements prepared by the Fund and examined by independent
accountants. The Fund shall, at the expense of the Distributor, make available
to the Distributor such number of copies of the Prospectus as the Distributor
shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of its share- holders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund shall, at the expense of the Distributor, furnish, in reasonable
quantities upon request by the Distributor, copies of annual and interim
reports by the Fund.
SECTION 6. Duties of the Distributor. (a) The Distributor shall sell Shares
of the Fund through DWR and may sell Shares through other securities dealers
and its own Account Executives and shall devote reasonable time and effort to
promote sales of the Shares, but shall not be obligated to sell any specific
number of Shares. The services of the Distributor hereunder are not exclusive
and it is understood that the Distributor acts as principal underwriter for
other registered investment companies and intends to do so in the future. It is
also understood that Selected Dealers, including DWR, may also sell shares for
other registered investment companies.
(b) The Distributor and any Selected Dealers shall not give any information
or make any representations, other than those contained in the Registration
Statement or related Prospectus and any sales literature specifically approved
by the Fund.
(c) The Distributor agrees that it will comply with the terms and limitations
of the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (NASD).
SECTION 7. Selected Dealer Agreements. (a) The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public
offering price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales of Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. Payment of Expenses. (a) The Fund shall bear all costs and
expenses of the Fund, including fees and disbursements of legal counsel
including counsel to the Trustees of the Fund who are not interested persons
(as defined in the 1940 Act) of the Fund or the Distributor, and independent
accountants, in connection with the preparation and filing of any required
Registration Statements and
3
<PAGE>
Prospectuses and Statements of Additional Information and all amendments and
supplements thereto, and the expense of preparing, printing, mailing and
otherwise distributing prospectuses and statements of additional information,
annual or interim reports or proxy materials to shareholders.
(b) After the Prospectuses and annual and interim reports have been prepared,
set in type and mailed to shareholders, the Distributor shall bear the costs
and expenses of printing and distributing any copies thereof which are used in
connection with the offering of Shares to investors. The Distributor shall bear
the costs and expenses of preparing, printing and distributing any
supplementary sales literature used by the Distributor in connection with the
offering of the Shares for sale. Any expenses of advertising incurred in
connection with such offering will also be the obligation of the Distributor.
(c) The Fund shall bear the cost and expenses of qualification of the Shares
for sale, and, if necessary or advisable in connection therewith, of qualifying
the Fund as a broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor pursuant to
Section 5(c) hereof and the cost and expenses payable to each such state for
continuing qualification therein until the Fund decides to discontinue such
qualification pursuant to Section 5(c) hereof.
SECTION 9. Indemnification. (a) The Fund shall indemnify and hold harmless
the Distributor and each person, if any, who controls the Distributor against
any loss, liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any Shares, which may be based upon the 1933
Act, or on any other statute or at common law, on the ground that the
Registration Statement or related Prospectus and Statements of Additional
Information, as from time to time amended and supplemented, or an annual or
interim reports to shareholders of the Fund, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, unless
such statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of the
Fund in favor of the Distributor and any such controlling persons to be deemed
to protect the Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Fund in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Fund will be entitled to participate at its
own expense in the defense or if it so elects, to assume the defense, of any
suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless the Fund and each
of its Trustees and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
4
<PAGE>
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus and Statement of Additional Information, as from time to time may be
amended, or the annual or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless the Fund and the
Fund's transfer agent, individually and in its capacity as the Fund's transfer
agent, from and against any claims, damages and liabilities which arise as a
result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to subsection 4(c) hereof and pay the proceeds to, or as directed by,
the Distributor for the account of each shareholder whose Shares are so
redeemed; and (2) register Shares in the names of investors, confirm the
issuance thereof and receive payment therefor pursuant to subsection 3(e).
(iii) In case any action shall be brought against the Fund or any person so
indemnified by this subsection 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to the Fund, and the Fund and each person so indemnified shall have the rights
and duties given to the Distributor by the provisions of subsection (a) of this
Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Fund on the one hand and the Distributor on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Fund on the one hand and
the Distributor on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Fund on the one hand and
the Distributor on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received
by the Fund bear to the total compensation received by the Distributor, in each
case set forth in the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Fund or the Distributor
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Fund and the
Distributor agree that it would not be just and equitable if contribution were
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damage, liabilities or expenses (or actions in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such claim. Notwithstanding the provisions of this subsection
(c), the Distributor shall not be required to contribute any amount in excess
of the amount by which the total price at which the Shares distributed by it to
the public were offered to the public exceeds the amount of any damages which
it has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
SECTION 10. Duration and Termination of this Agreement. This Agreement shall
become effective as of the date first above written and shall remain in force
until April 30, 1994 and thereafter, but only so long as such continuance is
specifically approved at least annually by (i) the Board of Trustees of the
Fund, or by the vote of a majority of the outstanding voting securities of the
Fund, cast in person or by proxy, and (ii) a majority of those Trustees who are
not parties to this Agreement or interested persons of any such party and who
have no direct or indirect financial interest in this Agree-
5
<PAGE>
ment or in the operation of the Fund's Rule 12b-1 Plan or in any agreement
related thereto, cast in person at a meeting called for the purpose of voting
upon such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Fund, or by the Distributor, on sixty
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person", when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Trustees
of the Fund, or by the vote of a majority of outstanding voting securities of
the Fund, and (ii) a majority of those Trustees of the Fund who are not parties
to this Agreement or interested persons of any such party and who have no
direct or indirect financial interest in this Agreement, cast in person at a
meeting called for the purpose of voting on such approval.
SECTION 12. Governing Law. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the 1940 Act,
the latter shall control.
SECTION 13. Personal Liability. The Declaration of Trust establishing Dean
Witter Tax-Exempt Securities Trust, dated March 27, 1991, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name Dean Witter Tax-Exempt Securities Trust refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of Dean Witter Tax-Exempt
Securities Trust shall be held to any personal liability, nor shall resort be
had to their private property for the satisfaction of any obligation or claim
or otherwise, in connection with the affairs of said Dean Witter Tax-Exempt
Securities Trust, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
By: .....................
DEAN WITTER DISTRIBUTORS INC.
By: .....................
6
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
DEAN WITTER TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of DWTC . . . 2
Article 2 Fees and Expenses. . . . . . . . . . . . . 6
Article 3 Representations and Warranties of DWTC . . 7
Article 4 Representations and Warranties of the
Fund . . . . . . . . . . . . . . . . . . . 8
Article 5 Duty of Care and Indemnification . . . . . 9
Article 6 Documents and Covenants of the Fund and
DWTC . . . . . . . . . . . . . . . . . . . 12
Article 7 Duration and Termination of Agreement. . . 16
Article 8 Assignment . . . . . . . . . . . . . . . . 16
Article 9 Affiliations . . . . . . . . . . . . . . . 17
Article 10 Amendment. . . . . . . . . . . . . . . . . 18
Article 11 Applicable Law . . . . . . . . . . . . . . 18
Article 12 Miscellaneous. . . . . . . . . . . . . . . 18
Article 13 Merger of Agreement. . . . . . . . . . . . 20
Article 14 Personal Liability . . . . . . . . . . . . 21
<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 1st
day of August, 1993 by and between each of the Dean Witter
Funds listed on the signature pages hereof, each of such Funds
acting severally on its own behalf and not jointly with any of
such other Funds (each such Fund hereinafter referred to as
the "Fund"), each such Fund having its principal office and
place of business at Two World Trade Center, New York, New
York, 10048, and DEAN WITTER TRUST COMPANY, a trust company
organized under the laws of New Jersey, having its principal
office and place of business at Harborside Financial Center,
Plaza Two, Jersey City, New Jersey 07311 ("DWTC").
WHEREAS, the Fund desires to appoint DWTC as its
transfer agent, dividend disbursing agent and shareholder
servicing agent and DWTC desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual
covenants herein contained, the parties hereto agree as
follows:
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<PAGE>
Article 1 Terms of Appointment; Duties of DWTC
1.1 Subject to the terms and conditions set
forth in this Agreement, the Fund hereby employs and appoints
DWTC to act as, and DWTC agrees to act as, the transfer agent
for each series and class of shares of the Fund, whether now
or hereafter authorized or issued ("Shares"), dividend
disbursing agent and shareholder servicing agent in connection
with any accumulation, open-account or similar plans provided
to the holders of such Shares ("Shareholders") and set out in
the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without
limitation any periodic investment plan or periodic withdrawal
program.
1.2 DWTC agrees that it will perform the fol-
lowing services:
(a) In accordance with procedures established
from time to time by agreement between the Fund and DWTC, DWTC
shall:
(i) Receive for acceptance, orders for the
purchase of Shares, and promptly deliver payment and
appropriate documentation therefor to the custodian of the
assets of the Fund (the "Custodian");
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<PAGE>
(ii) Pursuant to purchase orders, issue the
appropriate number of Shares and issue certificates therefor
or hold such Shares in book form in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption
requests and redemption directions and deliver the appropriate
documentation therefor to the Custodian;
(iv) At the appropriate time as and when it
receives monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the
registered owners thereof upon receipt of appropriate
instructions;
(vi) Prepare and transmit payments for divi-
dends and distributions declared by the Fund;
(vii) Calculate any sales charges payable by
a Shareholder on purchases and/or redemptions of Shares of the
Fund as such charges may be reflected in the prospectus;
(viii) Maintain records of account for and
advise the Fund and its Shareholders as to the foregoing; and
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<PAGE>
(ix) Record the issuance of Shares of the Fund
and maintain pursuant to Rule 17Ad-10(e) under the Securities
Exchange Act of 1934 ("1934 Act") a record of the total number
of Shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. DWTC
shall also provide to the Fund on a regular basis the total
number of Shares which are authorized, issued and outstanding
and shall notify the Fund in case any proposed issue of Shares
by the Fund would result in an overissue. In case any issue
of Shares would result in an overissue, DWTC shall refuse to
issue such Shares and shall not countersign and issue any
certificates requested for such Shares. When recording the
issuance of Shares, DWTC shall have no obligation to take
cognizance of any Blue Sky laws relating to the issue of sale
of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the
services set forth in the above paragraph (a), DWTC shall: (i)
perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder ser-
vicing agent in connection with dividend reinvestment,
accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal
program), including but not limited to, maintaining all
Shareholder accounts, preparing Shareholder meeting lists,
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<PAGE>
mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing appropriate forms required with
respect to dividends and distributions by federal tax
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other confirm-
able transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders and providing
Shareholder account information; (ii) open any and all bank
accounts which may be necessary or appropriate in order to
provide the foregoing services; and (iii) provide a system
which will enable the Fund to monitor the total number of
Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall (i) identify
to DWTC in writing those transactions and assets to be treated
as exempt from Blue Sky reporting for each State and (ii)
verify the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of DWTC for the
Fund's registration status under the Blue Sky or securities
laws of any State or other jurisdiction is solely limited to
the initial establishment of transactions subject to Blue Sky
compliance by the Fund and the reporting of such transactions
-5-
<PAGE>
to the Fund as provided above and as agreed from time to time
by the Fund and DWTC.
(d) DWTC shall provide such additional
services and functions not specifically described herein as
may be mutually agreed between DWTC and the Fund. Procedures
applicable to such services may be established from time to
time by agreement between the Fund and DWTC.
Article 2 Fees and Expenses
2.1 For performance by DWTC pursuant to this
Agreement, each Fund agrees to pay DWTC an annual maintenance
fee for each Shareholder account and certain transactional
fees, if applicable, as set out in the respective fee schedule
attached hereto as Schedule A. Such fees and out-of-pocket
expenses and advances identified under Section 2.2 below may
be changed from time to time subject to mutual written
agreement between the Fund and DWTC.
2.2 In addition to the fees paid under Section
2.1 above, the Fund agrees to reimburse DWTC in connection
with the services rendered by DWTC hereunder. In addition,
any other expenses incurred by DWTC at the request or with the
consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and
reimbursable expenses within a reasonable period of time
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<PAGE>
following the mailing of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced
to DWTC by the Fund upon request prior to the mailing date of
such materials.
Article 3 Representations and Warranties of DWTC
DWTC represents and warrants to the Fund that:
3.1 It is a trust company duly organized and
existing and in good standing under the laws of New Jersey and
it is duly qualified to carry on its business in New Jersey.
3.2 It is and will remain registered with the
U.S. Securities and Exchange Commission ("SEC") as a Transfer
Agent pursuant to the requirements of Section 17A of the 1934
Act.
3.3 It is empowered under applicable laws and
by its charter and By-Laws to enter into and perform this
Agreement.
3.4 All requisite corporate proceedings have
been taken to authorize it to enter into and perform this
Agreement.
3.5 It has and will continue to have access to
the necessary facilities, equipment and personnel to perform
its duties and obligations under this Agreement.
-7-
<PAGE>
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to DWTC that:
4.1 It is a corporation duly organized and
existing and in good standing under the laws of Delaware or
Maryland or a trust duly organized and existing and in good
standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and
by its Articles of Incorporation or Declaration of Trust, as
the case may be, and under its By-Laws to enter into and
perform this Agreement.
4.3 All corporate proceedings necessary to
authorize it to enter into and perform this Agreement have
been taken.
4.4 It is an investment company registered
with the SEC under the Investment Company Act of 1940, as
amended (the "1940 Act").
4.5 A registration statement under the
Securities Act of 1933 (the "1933 Act") is currently effective
and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
-8-
<PAGE>
Article 5 Duty of Care and Indemnification
5.1 DWTC shall not be responsible for, and the
Fund shall indemnify and hold DWTC harmless from and against,
any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTC or its agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in good faith
and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with
the terms of this Agreement, or which arise out of the Fund's
lack of good faith, negligence or willful misconduct or which
arise out of breach of any representation or warranty of the
Fund hereunder.
(c) The reliance on or use by DWTC or its agents or
subcontractors of information, records and documents which (i)
are received by DWTC or its agents or subcontractors and
furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTC or
its agents or subcontractors of, any instructions or requests
-9-
<PAGE>
of the Fund.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations
or the securities or Blue Sky laws of any State or other
jurisdiction that such Shares be registered in such State or
other jurisdiction or in violation of any stop order or other
determination or ruling by any federal agency or any State or
other jurisdiction with respect to the offer or sale of such
Shares in such State or other jurisdiction.
5.2 DWTC shall indemnify and hold the Fund
harmless from or against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability
arising out of or attributable to any action or failure or
omission to act by DWTC as a result of the lack of good faith,
negligence or willful misconduct of DWTC, its officers,
employees or agents.
5.3 At any time, DWTC may apply to any officer
of the Fund for instructions, and may consult with legal
counsel to the Fund, with respect to any matter arising in
connection with the services to be performed by DWTC under
this Agreement, and DWTC and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund for
any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. DWTC, its
-10-
<PAGE>
agents and subcontractors shall be protected and indemnified
in acting upon any paper or document furnished by or on behalf
of the Fund, reasonably believed to be genuine and to have
been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided
to DWTC or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any
change of authority of any person, until receipt of written
notice thereof from the Fund. DWTC, its agents and
subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed
to bear the proper manual or facsimile signature of the
officers of the Fund, and the proper countersignature of any
former transfer agent or registrar, or of a co-transfer agent
or co-registrar.
5.4 In the event either party is unable to
perform its obligations under the terms of this Agreement
because of acts of God, strikes, equipment or transmission
failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be
liable for damages to the other for any damages resulting from
such failure to perform or otherwise from such causes.
-11-
<PAGE>
5.5 Neither party to this Agreement shall be
liable to the other party for consequential damages under any
provision of this Agreement or for any act or failure to act
hereunder.
5.6 In order that the indemnification
provisions contained in this Article 5 shall apply, upon the
assertion of a claim for which either party may be required to
indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall
keep the other party advised with respect to all developments
concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party
seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any
claim or make any compromise in any case in which the other
party may be required to indemnify it except with the other
party's prior written consent.
Article 6 Documents and Covenants of the Fund and DWTC
6.1 The Fund shall promptly furnish to DWTC
the following:
(a) If a corporation:
(i) A certified copy of the resolution of the Board
of Directors of the Fund authorizing the appointment of DWTC
and the execution and delivery of this Agreement;
-12-
<PAGE>
(ii) A certified copy of the Articles of
Incorporation and By-Laws of the Fund and all amendments
thereto;
(iii) Certified copies of each vote of the Board
of Directors designating persons authorized to give
instructions on behalf of the Fund and signature cards bearing
the signature of any officer of the Fund or any other person
authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the
Fund in the form approved by the Board of Directors, with a
certificate of the Secretary of the Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board
of Trustees of the Fund authorizing the appointment of DWTC
and the execution and delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust
and By-laws of the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board
of Trustees designating persons authorized to give
instructions on behalf of the Fund and signature cards bearing
the signature of any officer of the Fund or any other person
authorized to sign written instructions on behalf of the Fund;
-13-
<PAGE>
(iv) A specimen of the certificate for Shares of the
Fund in the form approved by the Board of Trustees, with a
certificate of the Secretary of the Fund as to such approval;
(c) The current registration statements and any
amendments and supplements thereto filed with the SEC pursuant
to the requirements of the 1933 Act or the 1940 Act;
(d) All account application forms or other
documents relating to Shareholder accounts and/or relating to
any plan, program or service offered or to be offered by the
Fund; and
(e) Such other certificates, documents or opinions
as DWTC deems to be appropriate or necessary for the proper
performance of its duties.
6.2 DWTC hereby agrees to establish and
maintain facilities and procedures reasonably acceptable to
the Fund for safekeeping of Share certificates, check forms
and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.3 DWTC shall prepare and keep records
relating to the services to be performed hereunder, in the
form and manner as it may deem advisable and as required by
applicable laws and regulations. To the extent required by
-14-
<PAGE>
Section 31 of the 1940 Act, and the rules and regulations
thereunder, DWTC agrees that all such records prepared or
maintained by DWTC relating to the services performed by DWTC
hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section
31 of the 1940 Act, and the rules and regulations thereunder,
and will be surrendered promptly to the Fund on and in
accordance with its request.
6.4 DWTC and the Fund agree that all books,
records, information and data pertaining to the business of
the other party which are exchanged or received pursuant to
the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to
any other person except as may be required by law or with the
prior consent of DWTC and the Fund.
6.5 In case of any request or demands for the
inspection of the Shareholder records of the Fund, DWTC will
endeavor to notify the Fund and to secure instructions from an
authorized officer of the Fund as to such inspection. DWTC
reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the
Shareholder records to such person.
-15-
<PAGE>
Article 7 Duration and Termination of Agreement
7.1 This Agreement shall remain in full force
and effect until July 31, 1996 and from year-to-year
thereafter unless terminated by either party as provided in
Section 7.2 hereof.
7.2 This Agreement may be terminated by the
Fund on 60 days written notice, and by DWTC on 90 days written
notice, to the other party without payment of any penalty.
7.3 Should the Fund exercise its right to
terminate, all out-of-pocket expenses associated with the
movement of records and other materials will be borne by the
Fund. Additionally, DWTC reserves the right to charge for any
other reasonable fees and expenses associated with such
termination.
Article 8 Assignment
8.1 Except as provided in Section 8.3 below,
neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent of
the other party.
8.2 This Agreement shall inure to the benefit
of and be binding upon the parties and their respective
permitted successors and assigns.
-16-
<PAGE>
8.3 DWTC may, in its sole discretion and
without further consent by the Fund, subcontract, in whole or
in part, for the performance of its obligations and duties
hereunder with any person or entity including but not limited
to companies which are affiliated with DWTC; provided,
however, that such person or entity has and maintains the
qualifications, if any, required to perform such obligations
and duties, and that DWTC shall be as fully responsible to the
Fund for the acts and omissions of any agent or subcontractor
as it is for its own acts or omissions under this Agreement.
Article 9 Affiliations
9.1 DWTC may now or hereafter, without the
consent of or notice to the Fund, function as transfer agent
and/or shareholder servicing agent for any other investment
company registered with the SEC under the 1940 Act and for any
other issuer, including without limitation any investment
company whose adviser, administrator, sponsor or principal
underwriter is or may become affiliated with Dean Witter,
Discover & Co. or any of its direct or indirect subsidiaries
or affiliates.
9.2 It is understood and agreed that the
Directors or Trustees (as the case may be), officers,
employees, agents and shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the
-17-
<PAGE>
Fund's investment adviser and/or distributor, are or may be
interested in DWTC as directors, officers, employees, agents
and shareholders or otherwise, and that the directors,
officers, employees, agents and shareholders of DWTC may be
interested in the Fund as Directors or Trustees (as the case
may be), officers, employees, agents and shareholders or
otherwise, or in the investment adviser and/or distributor as
directors, officers, employees, agents, shareholders or
otherwise.
Article 10 Amendment
10.1 This Agreement may be amended or modified
by a written agreement executed by both parties and authorized
or approved by a resolution of the Board of Directors or the
Board of Trustees (as the case may be) of the Fund.
Article 11 Applicable Law
11.1 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with
the laws of the State of New York.
Article 12 Miscellaneous
12.1 In the event that one or more additional
investment companies managed or administered by Dean Witter
InterCapital Inc. or any of its affiliates ("Additional
Funds") desires to retain DWTC to act as transfer agent,
dividend disbursing agent and/or shareholder servicing agent,
-18-
<PAGE>
and DWTC desires to render such services, such services shall
be provided pursuant to a letter agreement, substantially in
the form of Exhibit A hereto, between DWTC and each Additional
Fund.
12.2 In the event of an alleged loss or
destruction of any Share certificate, no new certificate shall
be issued in lieu thereof, unless there shall first be
furnished to DWTC an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been
lost or destroyed, supported by an appropriate bond
satisfactory to DWTC and the Fund issued by a surety company
satisfactory to DWTC, except that DWTC may accept an affidavit
of loss and indemnity agreement executed by the registered
holder (or legal representative) without surety in such form
as DWTC deems appropriate indemnifying DWTC and the Fund for
the issuance of a replacement certificate, in cases where the
alleged loss is in the amount of $1000 or less.
12.3 In the event that any check or other order for
payment of money on the account of any Shareholder or new
investor is returned unpaid for any reason, DWTC will (a) give
prompt notification to the Fund's distributor ("Distributor")
(or to the Fund if the Fund acts as its own distributor) of
such non-payment; and (b) take such other action, including
imposition of a reasonable processing or handling fee, as DWTC
-19-
<PAGE>
may, in its sole discretion, deem appropriate or as the Fund
and, if applicable, the Distributor may instruct DWTC.
12.4 Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Fund
or to DWTC shall be sufficiently given if addressed to that
party and received by it at its office set forth below or at
such other place as it may from time to time designate in
writing.
To the Fund:
(Name of Fund)
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTC:
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 Merger of Agreement
13.1 This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior
agreement with respect to the subject matter hereof whether
oral or written.
-20-
<PAGE>
Article 14 Personal Liability
14.1 In the case of a Fund organized as a
Massachusetts business trust, a copy of the Declaration of
Trust of the Fund is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees
of the Fund as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the
Trustees or shareholders individually but are binding only
upon the assets and property of the Fund; provided, however,
that the Declaration of Trust of the Fund provides that the
assets of a particular Series of the Fund shall under no
circumstances be charged with liabilities attributable to any
other Series of the Fund and that all persons extending credit
to, or contracting with or having any claim against, a
particular Series of the Fund shall look only to the assets of
that particular Series for payment of such credit, contract or
claim.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Amended and Restated Agreement to be executed in their
names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Equity Income Trust
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
-22-
<PAGE>
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Select Municipal Reinvestment Fund
(44) Dean Witter Variable Investment Series
By:/s/ Sheldon Curtis
------------------------------------
Sheldon Curtis
Vice President and General Counsel
ATTEST:
/s/ Barry Fink
- --------------------------
Barry Fink
Assistant Secretary
DEAN WITTER TRUST COMPANY
By:/s/ Charles A. Fiumefreddo
----------------------------------
Charles A. Fiumefreddo
Chairman
ATTEST:
/s/ David A. Hughey
- -------------------------
David A. Hughey
Executive Vice President
f:\transfer.dw
-23-
<PAGE>
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (THE FUND NAME) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to
employ and appoint Dean Witter Trust Company ("DWTC") to act
as transfer agent for each series and class of shares of the
Fund, whether now or hereafter authorized or issued
("Shares"), dividend disbursing agent and shareholder
servicing agent, registrar and agent in connection with any
accumulation, open-account or similar plan provided to the
holders of Shares, including without limitation any periodic
investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for
the payment by the Fund to DWTC of fees as set out in the fee
schedule attached hereto as Schedule A, DWTC shall provide
such services to the Fund pursuant to the terms and conditions
set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
-24-
<PAGE>
Please indicate DWTC's acceptance of employment and
appointment by the Fund in the capacities set forth above by
so indicating in the space provided below.
Very truly yours,
(NAME OF THE FUND)
By:__________________________________
Sheldon Curtis
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST COMPANY
By:_______________________
Its:______________________
Date:_____________________
f:\transfer.dw
-25-
<PAGE>
SCHEDULE A
Fund: Dean Witter Tax-Exempt Securities Trust
Fees: (1) Annual maintenance fee of $11.50 per
shareholder account, payable monthly.
(2) A fee equal to 1/12 of the fee set forth
in (1) above, for providing Forms 1099 for
accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with
Section 2.2 of the Agreement.
(4) Fees for additional services not set
forth in this Agreement shall be as negotiated
between the parties.
f:\schedA\10
-26-
SERVICES AGREEMENT
AGREEMENT made as of the 31st day of December, 1993 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a New Jersey
corporation (herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which InterCapital is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as hereinafter
set forth. Without limiting the generality of the foregoing, DWS shall (i)
administer the Fund's business affairs and supervise the overall day-to-day
operations of the Fund (other than rendering investment advice); (ii) provide
the Fund with full administrative services, including the maintenance of
certain books and records, such as journals, ledger accounts and other records
required under the Investment Company Act of 1940, as amended (the"Act"), the
notification to the Fund and InterCapital of available funds for investment,
the reconciliation of account information and balances among the Fund's
custodian, transfer agent and dividend disbursing agent and InterCapital, and
the calculation of the net asset value of the Fund's shares; (iii) provide the
Fund with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary to provide effective
operation of the Fund; (iv) oversee the performance of administrative and
professional services rendered to the Fund by others, including its custodian,
transfer agent and dividend disbursing agent, as well as accounting, auditing
and other services; (v) provide the Fund with adequate general office space and
facilities; (vi) assist in the preparation and the printing of the periodic
updating of the Fund's registration statement and prospectus (and, in the case
of an open-end Fund, the statement of additional information), tax returns,
proxy statements, and reports to its shareholders and the Securities and
Exchange Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that InterCapital enters into an Investment Management Agreement
with another investment company, and wishes to retain DWS to perform
administrative services hereunder, it shall notify DWS in writing. If DWS is
willing to render such services, it shall notify InterCapital in writing,
whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to
time determine to be necessary or useful to the performance of its obligations
under this Agreement. Without limiting the generality of the foregoing, the
staff and personnel of DWS shall be deemed to include officers of DWS and
persons employed or otherwise retained by DWS (including officers and employees
of InterCapital, with the consent of InterCapital) to furnish services,
statistical and other factual data, information with respect to technical and
scientific developments, and such other information, advice and assistance as
DWS may desire. DWS shall maintain each Fund's records and books of account
(other than those maintained by the Fund's transfer agent, registrar, custodian
and other agencies). All such books and records so maintained shall be the
property of the Fund and, upon request therefor, DWS shall surrender to
InterCapital or to the Fund such of the books and records so requested.
3. InterCapital will, from time to time, furnish or otherwise make available
to DWS such financial reports, proxy statements and other information relating
to the business and affairs of the Fund as DWS may
1
<PAGE>
reasonably require in order to discharge its duties and obligations to the Fund
under this Agreement or to comply with any applicable law and regulation or
request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or
weekly (in the case of a closed-end Fund) by applying the annual rate or rates
set forth on Schedule B to the net assets of each Fund. Except as hereinafter
set forth, (i) in the case of an open-end Fund, compensation under this
Agreement shall be calculated by applying 1/365th of the annual rate or rates
to the Fund's or the Series' daily net assets determined as of the close of
business on that day or the last previous business day and (ii) in the case of
a closed-end Fund, compensation under this Agreement shall be calculated by
applying the annual rate or rates to the Fund's average weekly net assets
determined as of the close of the last business day of each week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth on Schedule B. Subject to the
provisions of paragraph 5 hereof, payment of DWS' compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any Series
thereof, or of InterCapital Income Securities Inc., including amounts payable
to InterCapital pursuant to the Investment Management Agreement, for any fiscal
year ending on a date on which this Agreement is in effect, exceed the expense
limitations applicable to the Fund and/or any Series thereof imposed by state
securities laws or regulations thereunder, as such limitations may be raised or
lowered from time to time, or, in the case of InterCapital Income Securities
Inc. or Dean Witter Variable Investment Series or any Series thereof, the
expense limitation specified in the Fund's Investment Management Agreement, the
fee payable hereunder shall be reduced on a pro rata basis in the same
proportion as the fee payable by the Fund under the Investment Management
Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by
DWS, and such clerical help and bookkeeping services as DWS shall reasonably
require in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations hereunder,
DWS shall not be liable to the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by DWS or for any losses
sustained by the Fund or its investors. It is understood that, subject to the
terms and conditions of the Investment Management Agreement between each Fund
and InterCapital, InterCapital shall retain ultimate responsibility for all
services to be performed hereunder by DWS. DWS shall indemnify InterCapital and
hold it harmless from any liability that InterCapital may incur arising out of
any act or failure to act by DWS in carrying out its responsibilities
hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person controlling,
controlled by or under common control with DWS, and that DWS and any person
controlling, controlled by or under common control with DWS may have an
interest in the Fund. It is also understood that DWS and any affiliated persons
thereof or any persons controlling, controlled by or under common control with
DWS have and may have advisory, management, administration service or other
contracts with other organizations and persons, and may have other interests
and businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
9. This Agreement shall continue until April 30, 1994, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the
2
<PAGE>
event that the Investment Management Agreement between any Fund and
InterCapital is terminated, this Agreement will automatically terminate with
respect to such Fund.
10. This Agreement may be amended or modified by the parties in any manner by
mutual written agreement executed by each of the parties hereto.
11. This Agreement shall be construed and interpreted in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By: .....................
Attest:
.....................
DEAN WITTER SERVICES COMPANY INC.
By: .....................
Attest:
.....................
C 65500
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
AT DECEMBER 31, 1993
OPEN-END FUNDS
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter California Tax-Free Daily Income Trust
7. Dean Witter California Tax-Free Income Fund
8. Dean Witter Capital Growth Securities
9. Dean Witter Convertible Securities Trust
10. Dean Witter Developing Growth Securities Trust
11. Dean Witter Diversified Income Trust
12. Dean Witter Dividend Growth Securities Inc.
13. Dean Witter Equity Income Trust
14. Dean Witter European Growth Fund Inc.
15. Dean Witter Federal Securities Trust
16. Dean Witter Global Dividend Growth Securities
17. Dean Witter Global Short-Term Income Fund Inc.
18. Dean Witter Health Sciences Trust
19. Dean Witter High Yield Securities Inc.
20. Dean Witter Intermediate Income Securities
21. Dean Witter Limited Term Municipal Trust
22. Dean Witter Liquid Asset Fund Inc.
23. Dean Witter Managed Assets Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter Natural Resource Development Securities Inc.
26. Dean Witter New York Municipal Money Market Trust
27. Dean Witter New York Tax-Free Income Fund
28. Dean Witter Pacific Growth Fund Inc.
29. Dean Witter Precious Metals and Minerals Trust
30. Dean Witter Premier Income Trust
31. Dean Witter Retirement Series
32. Dean Witter Select Municipal Reinvestment Fund
33. Dean Witter Short-Term U.S. Treasury Trust
34. Dean Witter Strategist Fund
35. Dean Witter Tax-Exempt Securities Trust
36. Dean Witter Tax-Free Daily Income Trust
37. Dean Witter U.S. Government Money Market Trust
38. Dean Witter U.S. Government Securities Trust
39. Dean Witter Utilities Fund
40. Dean Witter Value-Added Market Series
41. Dean Witter Variable Investment Series
42. Dean Witter World Wide Income Trust
43. Dean Witter World Wide Investment Trust
CLOSED-END FUNDS
44. High Income Advantage Trust
45. High Income Advantage Trust II
46. High Income Advantage Trust III
47. InterCapital Income Securities Inc.
48. Dean Witter Government Income Trust
49. InterCapital Insured Municipal Bond Trust
50. InterCapital Insured Municipal Trust
51. InterCapital Insured Municipal Income Trust
52. InterCapital California Insured Municipal Income Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. InterCapital Quality Municipal Securities
56. InterCapital California Quality Municipal Securities
57. InterCapital New York Quality Municipal Securities
4
<PAGE>
DEAN WITTER SERVICES COMPANY
SCHEDULE OF ADMINISTRATIVE FEES - JANUARY 1, 1994
Monthly compensation calculated daily by applying the following annual rates to
a fund's net assets:
Dean Witter Tax-Exempt
Securities Trust
0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion ofthe daily net assets exceeding $500 million
but not exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but notexceeding $1 billion; and 0.035% of the portion
of the daily net assets exceeding $1 billion but not exceeding $1.25 billion;
.0325% of the portion of the daily net assets exceeding $1.25 billion.
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment
No.16 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 10, 1994, relating to the
financial statements and financial highlights of Dean Witter Tax
Exempt Securities Trust, which appears in such Statement of
Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the references to us
under the headings "Independent Accountants" and "Experts" in such
Statement of Additional Information and to the reference to us
under the heading "Financial Highlights" in such prospectus.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York 10036
February 22, 1994
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER TAX-EXEMPT SECURITIES
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
FORMULA:
_ _
| ______________________ |
| | |
| /\ n | ERV |
T = | \ | ------------------ | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-93 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ -------------- ------------ --------- ----------------
31-Dec-92 $1,067.80 6.78% 1 6.78%
31-Dec-88 $1,537.20 53.72% 5 8.98%
31-Dec-83 $2,730.90 173.09% 10.00 10.57%
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
FORMULA:
_ _
| ______________________ |
| | |
| /\ n | EV |
t = | \ | ------------------ | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-93 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ -------------- ------------ --------- ----------------
31-Dec-92 $1,112.30 11.23% 1 11.23%
31-Dec-88 $1,601.30 60.13% 5.00 9.87%
31-Dec-83 $2,844.70 184.47% 10.00 11.02%
(D) GROWTH OF $10,000*
(E) GROWTH OF $50,000*
(F) GROWTH OF $100,000*
FORMULA:
G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ -------------- ---------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
27-Mar-80 309.16 $39,279 $197,931 $397,908
</TABLE>
*INITIAL INVESTMENT $9,600, $48,375 & $97,250 RESPECTIVELY REFLECTS A 4%, 3.25%
& 2.75% SALES CHARGE
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FOR THE 30-DAY PERIOD ENDED DECEMBER 31, 1993
6
YIELD = 2{(((a-b)/cd) + 1) -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = The maximum offering price per share on the last
day of the period.
6
YIELD = 2{(((6,771,443 - 603,722)/126,573,633*12.93)+1) -1}
= 4.57%
TAX EQUIVALENT YIELD
TAX EQUIVALENT YIELD = SEC Yield - (1-stated tax rate)
= 4.57%/(1-.3600)
7.14%
6,168,280.79/ 1,636,597,074.69= 0.003769+ 1.00= 1.003769= 1.022828
1.02283- 1.00= 0.02283x 2= 0.045656
4.57%
