<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1997
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. 19 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 20 [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
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
--------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on March 26, 1997 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, 1996, WITH THE SECURITIES AND EXCHANGE
COMMISSION ON FEBRUARY 5, 1997.
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; Risk Considerations; 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
</TABLE>
<TABLE>
<CAPTION>
PART B STATEMENT OF ADDITIONAL INFORMATION
- ------ -----------------------------------
<S> <C>
10. ........ Cover Page
11. ........ Table of Contents
12. ........ The Fund and Its Management Investment Practices and Policies;
Investment
13. ........ Restrictions; Portfolio Transactions and Brokerage
14. ........ The Fund and Its Management; Trustees and Officers
15. ........ Trustees and Officers The Fund and Its Management; The
Distributor; Shareholder Services; Custodian and Transfer Agent;
16. ........ Independent Accountants
17. ........ Portfolio Transactions and Brokerage
18. ........ Shares of the Fund The Distributor; Redemptions and Repurchases;
19. ........ Financial Statements; Shareholder Services Dividends,
Distributions and Taxes; Performance
20. ........ 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
MARCH 26, 1997
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 March 26, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
Dean Witter
Tax-Exempt Securities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
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
Risk Considerations and Investment Practices/ 8
Investment Restrictions/ 10
Purchase of Fund Shares/ 11
Shareholder Services/ 14
Redemptions and Repurchases/ 16
Dividends, Distributions and Taxes/ 17
Performance Information/ 19
Additional Information/ 20
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
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 The Fund is organized as a Trust, commonly known as a
Fund 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 20).
- -------------------------------------------------------------------------------
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 11-13).
- -------------------------------------------------------------------------------
Minimum Minimum initial purchase is $1,000; ($100 if the account is
Purchase opened through EasyInvest (Service Mark) ); minimum
subsequent purchase is $100 (see page 11).
- -------------------------------------------------------------------------------
Investment The investment objective of the Fund is to provide a high
Objective level of current income exempt from federal income tax,
consistent with the preservation of capital (see page 5).
- -------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the
Manager 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 102 investment companies and
other portfolios with assets of approximately $93 billion at
February 28, 1997 (see pages 4-5).
- -------------------------------------------------------------------------------
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 Income dividends are declared daily and paid monthly;
Capital Gains capital gains, if any, may be distributed annually or
Distributions 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 pages 17-19).
- -------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (see page 11).
- -------------------------------------------------------------------------------
Sales Charge 4.0% of offering price (4.17% of amount invested); reduced
charges on purchases of $25,000 or more (see pages 11-13).
- -------------------------------------------------------------------------------
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 or, if the account was
opened through EasyInvest (Service Mark), if after twelve
months the shareholder has invested less than $1,000 in the
account. (see pages 16-17).
- -------------------------------------------------------------------------------
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 8).
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 8-10).
- -------------------------------------------------------------------------------
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, 1996.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
- --------------------------------
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
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
- ----------------------------------------------------------------------
Management Fee............................................................ 0.43%
Other Expenses............................................................ 0.05%
Total Fund Operating Expenses............................................. 0.48%
</TABLE>
<TABLE>
<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 $55 $66 $98
</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 LLP,
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,
----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- --------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period .... $12.09 $11.01 $12.41 $11.88 $11.65 $11.09 $11.28 $10.96 $10.45 $11.50
-------- -------- --------- -------- -------- -------- -------- -------- -------- ---------
Net investment income ... 0.65 0.67 0.70 0.77 0.79 0.80 0.80 0.81 0.81 0.80
Net realized and
unrealized gain (loss) . (0.24) 1.19 (1.37) 0.54 0.23 0.56 (0.18) 0.32 0.51 (0.97)
-------- -------- --------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations ............. 0.41 1.86 (0.67) 1.31 1.02 1.36 0.62 1.13 1.32 (0.17)
-------- -------- --------- -------- -------- -------- -------- -------- -------- ---------
Less dividends and
distributions from:
Net investment income .. (0.65) (0.67) (0.70) (0.77) (0.79) (0.80) (0.81) (0.81) (0.81) (0.83)
Net realized gain ....... (0.08) (0.11) (0.03) (0.01) -- -- -- -- -- (0.05)
-------- -------- --------- -------- -------- -------- -------- -------- -------- ---------
Total dividends and
distributions .......... (0.73) (0.78) (0.73) (0.78) (0.79) (0.80) (0.81) (0.81) (0.81) (0.88)
-------- -------- --------- -------- -------- -------- -------- -------- -------- ---------
Net asset value,
end of period ........... $11.77 $12.09 $11.01 $12.41 $11.88 $11.65 $11.09 $11.28 $10.96 $10.45
======== ======== ========= ======== ======== ======== ======== ======== ======== =========
TOTAL INVESTMENT RETURN+ 3.61% 17.37% (5.55)% 11.23% 9.09% 12.71% 5.86% 10.61% 13.02% (1.44)%
RATIOS TO AVERAGE NET
ASSETS:
Expenses ................. 0.48% 0.48% 0.47% 0.47% 0.49% 0.51% 0.51% 0.51% 0.54% 0.52%
Net investment income .... 5.52% 5.76% 6.02% 6.23% 6.74% 7.05% 7.25% 7.31% 7.51% 7.42%
SUPPLEMENTAL DATA:
Net assets, end of
period, in millions ..... $1,190 $1,325 $1,295 $1,582 $1,323 $1,145 $1,010 $1,033 $908 $896
Portfolio turnover rate . 18% 21% 16% 13% 4% 10% 19% 13% 17% 37%
</TABLE>
- --------------
+ Does not reflect the deduction of sales load. Calculated based on the net
asset value as of the last business day of the period.
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 &
4
<PAGE>
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 102 investment companies, 30 of which
are listed on the New York Stock Exchange, with combined total net assets of
approximately $89.8 billion as of February 28, 1997. The Investment Manager
also manages portfolios of pension plans, other institutions and individuals
which aggregated approximately $3.2 billion at such date.
On February 5, 1997, DWDC and Morgan Stanley Group Inc. announced that they
had entered into an Agreement and Plan of Merger, with the combined company to
be named Morgan Stanley, Dean Witter, Discover & Co. The business of Morgan
Stanley Group Inc. and its affiliated companies is providing a wide range of
financial services for sovereign governments, corporations, institutions and
individuals throughout the world. DWDC is the direct parent of InterCapital and
Dean Witter Distributors Inc., the Fund's distributor. It is currently
anticipated that the transaction will close in mid-1997. Thereafter,
InterCapital and Dean Witter Distributors Inc. will be direct subsidiaries of
Morgan Stanley, Dean Witter, Discover & Co.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. 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 net assets over $1.25 billion. For the fiscal
year ended December 31, 1996, the Fund accrued total compensation to the
Investment Manager amounting to 0.43% of the Fund's average daily net assets
and the Fund's total expenses amounted to 0.48% 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 Commer-
5
<PAGE>
cial Paper which at the time of purchase are rated P-1 by Moody's or 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 (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. The Fund may purchase Municipal Obligations which had
originally been issued by the same issuer as two separate series of the same
issue with different interest rates, but which are now linked together to form
one series.
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 commer-
6
<PAGE>
cial 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 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 type of financing that may not have 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 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.
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 result-
7
<PAGE>
ing 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.
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.
Zero Coupon Securities. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payments in cash on the
security during the year.
RISK CONSIDERATIONS AND INVESTMENT PRACTICES
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
Fund's yield will also vary based on the yield of the Fund's portfolio
securities.
Futures Contracts and Options on Futures. The Fund may enter into financial
futures contracts ("futures contracts"), options on such futures and municipal
bond index futures contracts for hedging purposes. 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 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
8
<PAGE>
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 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 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 or sale of an offsetting contract for the same
delivery month prior to expiration of the contract.
9
<PAGE>
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.
For a discussion of the risks of certain types of Municipal Obligations,
such as lease obligations, see above in "Investment Objective and Policies."
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 Tax-Exempt Group, which manages 40 tax-exempt
municipal funds and fund portfolios, with approximately $10.8 billion in assets
as of February 28, 1997. James F. Willison, Senior Vice President of
InterCapital and Manager of Inter Capital's Municipal Fixed Income Group and
Joseph R. Arcieri, Vice President of InterCapital and a member of
InterCapital's Municipal Fixed Income Group, have been the primary portfolio
co-managers of the Fund since its inception and February, 1997, respectively,
and have been portfolio managers 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
10
<PAGE>
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 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. The minimum initial purchase in the
case of investments through EasyInvest (Service Mark), an automatic purchase
plan (see "Shareholder Services"), is $100, provided that the schedule of
automatic investments will result in investments totalling at least $1,000
within the first twelve months.
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:
11
<PAGE>
<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 3.63
$50,000 but less than
$100,000...................... 3.25 3.36
$100,000 but less than
$250,000...................... 2.75 2.83
$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 qualified or non-qualified under Section 401 of the
Internal Revenue Code; (e) tax-exempt organizations enumerated in Section
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer
or of employers who are "affiliated persons" of each other within the meaning
of Section 2(a)(3)(c) of the Act; or (g) any other organized group of persons,
whether incorporated or not, provided the organization has been in existence
for at least six months and has some purpose other than the purchase of
redeemable securities of a registered investment company at a discount.
Sales personnel are compensated for selling shares of the Fund at the time
of their sale by the Distributor and/or Selected Broker-Dealer. In addition,
some sales personnel of the Selected Broker-Dealer will receive various types
of non-cash compensation as special sales incentives, including trips,
educational and/or business seminars and merchandise.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment generally is due on or before
the third 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.
Analogous Dean Witter Funds. The Distributor and the Investment Manager
serve in the same capacities for Dean Witter National Municipal Trust, an
open-end investment company with investment objectives and policies similar to
those of the Fund. Unlike the Fund, however, shares of Dean Witter National
Municipal Trust are offered to the public at net asset value, with a contingent
deferred sales charge assessed upon redemptions within three years of purchase,
as well as an annual Rule 12b-1 distribution fee, rather than a sales charge
imposed at the time of purchase. These two Dean Witter Funds have differing
fees and expenses, which will affect performance. Investors who would like to
receive a prospectus for Dean Witter National Municipal Trust should call the
telephone numbers listed on the front cover of this Prospectus, or may call
their account executive for additional information.
12
<PAGE>
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 (or,
on days when the New York Stock Exchange closes prior to 4:00 p.m., at such
earlier time), 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 may utilize a computerized
grid matrix of tax-exempt securities and 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' market value, in which case
these securities will be valued at their fair 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
13
<PAGE>
61st day unless the Trustees determine such does not reflect the securities'
market value, in which case these securities will be valued at their fair
market value as determined by the Board of Trus tees. 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 Distri-butions. 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, at the net asset value per share (without
sales charge), in shares of the Fund (or in cash if the shareholder so
requests) 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.
EasyInvest (Service Mark). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which pro-vides 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 (see "Purchase of Fund Shares" and
"Redemptions and Repurchases--Involuntary Redemption").
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 exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
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.
14
<PAGE>
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, Dean Witter Limited Term Municipal Trust, Dean Witter Balanced
Income Fund, Dean Witter Balanced Growth Fund and Dean Witter Intermediate
Term U.S. Treasury Trust (the foregoing eleven 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
investing. Exchanges are subject to the minimum investment requirement and
other conditions imposed by each fund. In the case of any
15
<PAGE>
shareholder holding a share 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) 869-NEWS (toll-free). The Fund will employ reasonable
procedures to confirm that exchange instructions communicated over the
telephone are genuine. Such procedures may include requiring various forms of
personal identification such as name, mailing address, social security or
other tax identification number and DWR or other Selected Broker-Dealer
account number (if any). Telephone instructions may also be recorded. If such
procedures are not employed, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her 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
16
<PAGE>
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 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, to gether with the proceeds, is
received by the Transfer Agent.
Involuntary Redemption. The Fund reserves the right, on sixty days notice,
to redeem at 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 or, in the case of an
account opened through EasyInvest, if after twelve months the shareholder has
invested less than $1,000 in the account. However, before the Fund redeems
such shares and sends the proceeds to the shareholder, it will notify the
shareholder that the value of the shares is less than the applicable amount
and allow the shareholder to make an additional investment in an amount which
will increase the value of the account to at least the applicable amount
before the redemption is processed. No 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
17
<PAGE>
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 calendar year which are paid
in the following calendar year prior to February 1 will be deemed received by
the shareholder in the prior calendar 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.
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.
18
<PAGE>
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.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments will not be taxable to shareholders.
Shareholders should consult their tax advisers as to the applicability of
the above to their own tax situation.
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.).
19
<PAGE>
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 share holder 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.
Code of Ethics. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within 60 days of a sale or a sale
within 60 days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within 30 days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute
Advisory Group on Personal Investing.
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.
20
<PAGE>
Dean Witter
Tax-exempt Securities Trust
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and
General Counsel
James F. Willison
Vice President
Joseph R. Arcieri
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 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 LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
DEAN WITTER
TAX-EXEMPT
SECURITIES
TRUST
PROSPECTUS--MARCH 26, 1997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MARCH 26, 1997
DEAN WITTER
TAX-EXEMPT
SECURITIES
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 March 26, 1997, 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 numbers 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 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management........................................ 3
Trustees and Officers............................................... 6
Investment Practices and Policies .................................. 11
Investment Restrictions............................................. 17
Portfolio Transactions and Brokerage ............................... 18
Purchase of Fund Shares............................................. 20
Shareholder Services................................................ 22
Redemptions and Repurchases......................................... 25
Dividends, Distributions and Taxes ................................. 26
Performance Information............................................. 28
Shares of the Fund.................................................. 29
Custodian and Transfer Agent........................................ 29
Independent Accountants............................................. 30
Reports to Shareholders............................................. 30
Legal Counsel....................................................... 30
Experts............................................................. 30
Registration Statement.............................................. 30
Financial Statements--December 31,
1996............................................................... 31
Report of Independent Accountants .................................. 45
Appendix............................................................ 46
</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. Information as to these trustees and officers is contained under
the caption "Trustees and Officers."
InterCapital is the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., InterCapital Insured Municipal Bond
Trust, InterCapital Quality Municipal Investment Trust, InterCapital Insured
Municipal Trust, InterCapital Quality Municipal Income Trust, InterCapital
Insured Municipal Income Trust, InterCapital California Insured Municipal
Income Trust, InterCapital Quality Municipal Securities, InterCapital
California Quality Municipal Securities, InterCapital New York Quality
Municipal Securities, InterCapital Insured Municipal Securities, InterCapital
California Insured Municipal Securities, Dean Witter High Yield Securities
Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter Developing Growth
Securities Trust, Dean Witter Tax-Exempt Securities Trust, Dean Witter
Natural Resource Development Securities Inc., Dean Witter Dividend Growth
Securities Inc., Dean Witter American Value Fund, Dean Witter U.S. Government
Money Market Trust, 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 California Tax-Free
Income Fund, 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 Utilities Fund, Dean Witter California Tax-Free
Daily Income Trust, Dean Witter Strategist Fund, Dean Witter World Wide
Income Trust, Dean Witter Intermediate Income Securities, Dean Witter New
York Municipal Money Market Trust, Dean Witter Capital Growth Securities,
Dean Witter European Growth Fund Inc., Dean Witter Precious Metals and
Minerals Trust, Dean Witter Global Short-Term Income Fund Inc., Dean Witter
Pacific Growth Fund Inc., Dean Witter Multi-State Municipal Series Trust,
Dean Witter Premier Income Trust, Dean Witter Short-Term U.S. Treasury Trust,
Dean Witter Health Sciences Trust, Dean Witter Retirement Series, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter
Global Dividend Growth Securities, Dean Witter Global Utilities Fund, Dean
Witter National Municipal Trust, Dean Witter High Income Securities, Dean
Witter International Small Cap Fund, Dean Witter Mid-Cap Growth Fund, Dean
Witter Select Dimensions Investment Series, Dean Witter Global Asset
Allocation Fund, Dean Witter Balanced Growth Fund, Dean Witter Balanced
Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter Capital
Appreciation Fund, Dean Witter Intermediate Term U.S. Treasury Trust, Dean
Witter Japan Fund, Dean Witter Income Builder Fund, Dean Witter Special Value
Fund, Dean Witter Financial Services Trust, Dean Witter Market Leader Trust,
Dean Witter Information Fund, Active Assets Money Trust, Active Assets
Tax-Free Trust, Active Assets California 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 Opportu-
3
<PAGE>
nities Trust II, Municipal Income Opportunities Trust III, Prime Income Trust
and Municipal Premium 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 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 Total Return Trust, TCW/DW Mid-Cap Equity
Trust, TCW/DW Global Telecom Trust, TCW/DW Strategic Income Trust, TCW/DW
Emerging Market Opportunities Trust, 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 Black Rock 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.
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. On April
17, 1995, DWSC was reorganized in the State of Delaware, necessitating the
entry into a new Services Agreement by InterCapital and DWSC on that date.
The foregoing internal reorganizations 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 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;
4
<PAGE>
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 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, 1994, 1995 and 1996, the Fund accrued to the Investment Manager total
compensation of $6,003,589, $5,608,466 and $5,320,578, respectively.
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 had an initial term ending April 30, 1994,
and provides that it will continue in effect 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. At their meeting held on
April 17, 1996, the Fund's Board of Trustees, including a majority of the
Independent Trustees, approved continuation of the Agreement until April 30,
1997.
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 Agreement 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 company 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 84 Dean Witter Funds and the 14 TCW/DW Funds, are
shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
<S> <C>
Michael Bozic (56) Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly variously Chairman, Chief Executive Officer,
President and Chief Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services, Inc., the United Negro College
Fund and Weirton Steel Corporation.
Charles A. Fiumefreddo* (63) Chairman, Chief Executive Officer and Director of InterCapital,
Trustee, Chairman, President and Chief Distributors and DWSC; Executive Vice President and Director
Executive Officer of DWR; Chairman, Director or Trustee, President and Chief
Two World Trade Center Executive Officer of the Dean Witter Funds; Chairman, Chief
New York, New York Executive Officer and Trustee of the TCW/DW Funds; Chairman
and Director of Dean Witter Trust Company ("DWTC"); Director
and/or officer of various DWDC subsidiaries; formerly Executive
Vice President and Director of DWDC (until February, 1993).
Edwin J. Garn (64) Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah)(1974-1992) and Chairman, Senate
c/o Huntsman Chemical Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
500 Huntsman Way City, Utah (1972-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman Chemical
Corporation (since January, 1993); Director of Franklin Quest
(time management systems) and John Alden Financial Corp.;
Member of the board of various civic and charitable
organizations.
John R. Haire (72) Chairman of the Audit Committee and Chairman of the Committee
Trustee of Independent Directors or Trus-tees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly
New York, New York President, Council for Aid to Education (1978-1989) and Chairman
and Chief Executive Officer of Anchor Corporation, an Investment
Adviser (1964-1978); Director of Washington National
Corporation (insurance).
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Dr. Manuel H. Johnson (48) Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Trustee of the Financial Accounting Foundation (oversight
c/o Johnson Smick International, Inc. organization for the FSB); Co-Chairman and a founder of the
1133 Connecticut Avenue, N.W. Group of Seven Council (G7C), an international economic
Washington, D.C. commission; Director or Trustee of the Dean Witter Funds;
Trustee of the TCW/DW Funds; Director of NASDAQ (since June,
1995); Director of Greenwich Capital Markets Inc.
(broker-dealer); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System (1986-1990) and
Assistant Secretary of the U.S. Treasury.
Michael E. Nugent (60) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Director or Trustee of the Dean Witter Funds;
c/o Triumph Capital, L.P. Trustee of the TCW/DW Funds; formerly Vice President, Bankers
237 Park Avenue Trust Company and BT Capital Corporation (1984-1988); Director
New York, New York of various business organizations.
Philip J. Purcell* (53) Chairman of the Board of Directors and Chief Executive Officer
Trustee of DWDC, DWR and Novus Credit Services Inc.; Director of
Two World Trade Center InterCapital, DWSC and Distributors; Director or Trustee of
New York, New York the Dean Witter Funds; Director and/or officer of various
DWDC subsidiaries.
John L. Schroeder (66) Retired; Director or Trustee of the Dean Witter Funds; Trustee
Trustee of the TCW/DW Funds; Director of Citizens Utilities Company;
c/o Gordon Altman Butowsky Formerly Executive Vice President and Chief Investment Officer
Weitzen Shalov & Wein of the Home Insurance Company (August, 1991-September, 1995)
Counsel to the Independent Trustees and formerly Chairman and Chief Investment Officer of
114 W. 47th Street Axe-Houghton Management and the Axe-Houghton Funds (April,
New York, NY 1983-June, 1991).
Barry Fink (42) Senior Vice President (since March, 1997) and Secretary and
Vice President, Secretary General Counsel (since February, 1997) of InterCapital and
and General Counsel DWSC; Senior Vice President (since March, 1997) and Assistant
Two World Trade Center Secretary and Assistant General Counsel (since February, 1997) of
New York, New York Distributors; Assistant Secretary of DWR (since August, 1996);
Vice President, Secretary and General Counsel of the Dean Witter
Funds and the TCW/DW Funds (since February, 1997); previously
First Vice President (June, 1993-February, 1997), Vice President
(until June, 1993) and Assistant Secretary and Assistant General
Counsel of InterCapital and DWSC and Assistant Secretary of the
Dean Witter Funds and the TCW/DW Funds.
James F. Willison (53) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Joseph R. Arcieri (48) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Thomas F. Caloia (51) First Vice President and Assistant Treasurer of InterCapital
Treasurer and DWSC; Treasurer of the Dean Witter Funds and the TCW/DW
Two World Trade Center Funds.
New York, New York
</TABLE>
- --------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
a Director of DWTC, Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC and a Director of DWTC, Joseph J.
McAlinden, Executive Vice President and Chief Investment Officer of
InterCapital and a Director of DWTC, Peter M. Avelar, and Jonathan R. Page,
Senior Vice Presidents of InterCapital, Katherine H. Stromberg and Gerard J.
Lian, Vice Presidents of InterCapital, are Vice Presidents of the Fund, and
Marilyn K. Cranney, First Vice President and Assistant General Counsel of
InterCapital, and DWSC, and Lou Anne D. McInnis and Ruth Rossi, Vice
Presidents and Assistant General Counsels of InterCapital and DWSC, and Frank
Bruttomesso and Carsten Otto, Staff Attorneys with InterCapital, are
Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of eight (8) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of
this Statement of Additional Information, there are a total of 84 Dean Witter
Funds, comprised of 126 portfolios. As of February 28, 1997, the Dean Witter
Funds had total net assets of approximately $83.6 billion and more than five
million shareholders.
Six Trustees (75% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, DWDC.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Four
of the six independent Trustees are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1996, the three Committees held a combined total of sixteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Most of the Dean Witter Funds
have such a plan.
8
<PAGE>
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT
COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and
the Funds' operations and management. He screens and/or prepares written
materials and identifies critical issues for the Independent Trustees to
consider, develops agendas for Committee meetings, determines the type and
amount of information that the Committees will need to form a judgment on
various issues, and arranges to have that information furnished to Committee
members. He also arranges for the services of independent experts and
consults with them in advance of meetings to help refine reports and to focus
on critical issues. Members of the Committees believe that the person who
serves as Chairman of both Committees and guides their efforts is pivotal to
the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination
of chief executive and support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since
July 1, 1996, as Chairman of the Committee of the Independent Trustees and
the Audit Committee of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the
9
<PAGE>
Fund pays the Chairman of the Audit Committee an annual fee of $750 and pays
the Chairman of the Committee of the Independent Trustees an additional
annual fee of $1,200). The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending
such meetings. Trustees and officers of the Fund who are or have been
employed by the Investment Manager or an affiliated company receive no
compensation or expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended December 31, 1996.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- ---------------
<S> <C>
Michael Bozic ............. $1,800
Edwin J. Garn ............. 1,800
John R. Haire ............. 3,900
Dr. Manuel H. Johnson .... 1,750
Michael E. Nugent ......... 1,800
John L. Schroeder.......... 1,750
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1996 for
services to the 82 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 14 TCW/DW Funds that were in operation at
December 31, 1996. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the TCW/DW Funds are included solely because of a limited exchange
privilege between those Funds and five Dean Witter Money Market Funds.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF
COMMITTEES OF FOR SERVICE AS
INDEPENDENT CHAIRMAN OF TOTAL CASH
FOR SERVICE DIRECTORS/ COMMITTEES OF COMPENSATION
AS DIRECTOR OR FOR SERVICE AS TRUSTEES AND INDEPENDENT PAID
TRUSTEE AND TRUSTEE AND AUDIT TRUSTEES FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER COMMITTEES OF 82 AND AUDIT 82 DEAN WITTER
NAME OF OF 82 DEAN WITTER OF 14 TCW/DW DEAN WITTER COMMITTEES OF 14 FUNDS AND 14
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS TCW/DW FUNDS TCW/DW FUNDS
- ---------------------- ----------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Michael Bozic ......... $138,850 -- -- -- $138,850
Edwin J. Garn ......... 140,900 -- -- -- 140,900
John R. Haire ......... 106,400 $64,283 $195,450 $12,187 378,320
Dr. Manuel H. Johnson 137,100 66,483 -- -- 203,583
Michael E. Nugent .... 138,850 64,283 -- -- 203,133
John L. Schroeder...... 137,150 69,083 -- -- 206,233
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under
which an Independent Trustee who retires after serving for at least five
years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service. Currently, upon
retirement, each Eligible Trustee is entitled to receive from the Adopting
Fund, commencing as of his or her retirement date and continuing for the
remainder of his or her life, an annual retirement benefit (the "Regular
Benefit") equal to 25.0% of his or her Eligible Compensation plus 0.4166666%
of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the
10
<PAGE>
Board.(1) "Eligible Compensation" is one-fifth of the total compensation
earned by such Eligible Trustee for service to the Adopting Fund in the five
year period prior to the date of the Eligible Trustee's retirement. Benefits
under the retirement program are not secured or funded by the Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended December
31, 1996 and by the 57 Dean Witter Funds (including the Fund) for the year
ended December 31, 1996, and the estimated retirement benefits for the Fund's
Independent Trustees, to commence upon their retirement, from the Fund as of
December 31, 1996 and from the 57 Dean Witter Funds as of December 31, 1996.
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
-------------------------------- ESTIMATED ANNUAL
ESTIMATED RETIREMENT BENEFITS BENEFITS
CREDITED ACCRUED AS EXPENSES UPON RETIREMENT(2)
YEARS ESTIMATED ---------------------- -------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
NAME OF RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- -------------------------- --------------- --------------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic ............. 10 50.0% $ 338 $20,147 $ 850 $ 51,325
Edwin J. Garn ............. 10 50.0 473 27,772 850 51,325
John R. Haire ............. 10 50.0 (376)(3) 46,952 2,304 129,550
Dr. Manuel H. Johnson .... 10 50.0 202 10,926 850 51,325
Michael E. Nugent ......... 10 50.0 338 19,217 850 51,325
John L. Schroeder.......... 8 41.7 645 38,700 708 42,771
</TABLE>
- -------------------
(1) An Eligible Trustee may elect alternate payments of his or her
retirement benefits based upon the combined life expectancy of such
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. The amount estimated to be payable under this
method, through the remainder of the later of the lives of such
Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit. In addition, the Eligible Trustee may elect that the
surviving spouse's periodic payment of benefits will be equal to either
50% or 100% of the previous periodic amount, an election that,
respectively, increases or decreases the previous periodic amount so
that the resulting payments will be the actuarial equivalent of the
Regular Benefit.
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
(3) This number reflects the effect of the extension of Mr. Haire's term as
Trustee until June 1, 1998.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest 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 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.
11
<PAGE>
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.
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
12
<PAGE>
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. In
addition, new laws and potential new laws 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 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
13
<PAGE>
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, 1996 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
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.
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<PAGE>
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.
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.
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<PAGE>
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 liquid portfolio securities 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
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.
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<PAGE>
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 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.
17
<PAGE>
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.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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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,
1994, 1995 and 1996, 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, various factors may be considered including the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client
accounts.
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<PAGE>
In the case of certain initial and secondary public offerings, the Investment
Manager may utilize a pro-rata allocation process based on the size of the
Dean Witter Funds involved and the number of shares available from the public
offering.
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.
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, 1994, 1995 and 1996.
19
<PAGE>
PURCHASE OF FUND SHARES
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As discussed in the Prospectus, the Fund offers its shares 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, 1996 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 had 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. At their
meeting held on April 17, 1996, the Trustees, including a majority of the
Independent Trustees, approved the continuation of the Distribution Agreement
until April 30, 1997.
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
$2,276,000, $972,000 and $1,050,000, for the fiscal years ended December 31,
1994, 1995 and 1996, respectively.
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, Dean Witter Limited Term Municipal Trust,
Dean Witter Balanced Income Fund, Dean Witter Balanced Growth Fund and Dean
Witter Intermediate Term U.S. Treasury 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.
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<PAGE>
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 Dealer
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 U.S. Government Money Market Trust, Dean Witter Short-Term
U.S. Treasury Trust, Dean Witter Short-Term Bond Fund, Dean Witter Limited
Term Municipal Trust, Dean Witter Balanced Income Fund, Dean Witter Balanced
Growth Fund and Dean Witter Intermediate Term U.S. Treasury 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
21
<PAGE>
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 (or, on days when the
New York Stock Exchange closes prior to 4 p.m., at such earlier 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 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. (Service Mark) 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 payment date of
the dividend or distribution 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. (Service Mark) 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
22
<PAGE>
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.
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
23
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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, Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Balanced Growth
Fund, Dean Witter Balanced Income Fund and Dean Witter Intermediate Term U.S.
Treasury Trust (the foregoing eleven 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).
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.
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 is $5,000 for Dean Witter
Special Value Fund. 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
24
<PAGE>
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.
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 supplement to the prospectus or a
new 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.
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<PAGE>
If the shares to be redeemed have recently been purchased by check
(including a certified or bank cashier's check), payment of redemption
proceeds may be delayed for the minimum time needed to verify that the check
used for investment has been honored (not more than fifteen days from the
time of receipt of the check by the Transfer Agent). Shareholders maintaining
margin accounts with DWR or another selected broker-dealer are referred to
their account executive regarding restrictions on redemption of shares of the
Fund pledged in the margin account.
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 thirty 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 sixty 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.
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
26
<PAGE>
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.
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.
27
<PAGE>
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, 1996, the Fund's yield, calculated pursuant
to the formula described above, was 4.69%.
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 39.60% (the highest current individual marginal tax rate), for the 30-day
period ended December 31, 1996 was 7.76% 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, 1996, for the five years ended December 31, 1996, and for the ten years
ended December 31, 1996, were - 0.53%, 6.00% and 7.00%, respectively.
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, 1996 was 3.61%, the average annual total return for the
five years ended December 31, 1996 was 6.86% and the average annual total
return for the ten years ended December 31, 1996 was 7.44%.
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
28
<PAGE>
investment and subtracting 1 from the result. Based on the foregoing
calculation, the Fund's total return for the year ended December 31, 1996 was
3.61%, the total return for five years ended December 31, 1996 was 39.37%,
and the total return for the ten years ended December 31, 1996 was 104.87%.
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 $45,115, $227,338 and $457,026, respectively, at
December 31, 1996. 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 shareholders of the
Fund are entitled to a full vote for each full share held. All of the
Trustees, except for Messrs. Bozic, Purcell and Schroeder, have been elected
by the shareholders of the Fund, most recently at a Special Meeting of
Shareholders held on January 12, 1993. Messrs. Bozic, Purcell and Schroeder
were elected by the other Trustees of the Fund on April 8, 1994. 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). The Trustees have not
presently authorized any such additional series or classes 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.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Bank of New York, 90 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.
29
<PAGE>
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; including providing subaccounting and recordkeeping services for
certain retirement 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 LLP 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
- -----------------------------------------------------------------------------
Barry Fink, 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, 1996, 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 LLP, 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.
30
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (94.5%)
General Obligation (11.4%)
North Slope Borough, Alaska,
$ 5,000 Ser 1992 A Conv (MBIA) ......................................... 5.90% 06/30/03 $ 5,358,450
15,000 Ser 1994 B (FSA) ............................................... 0.00 06/30/05 9,679,800
18,500 Ser 1995 A (MBIA) .............................................. 0.00 06/30/06 11,223,950
11,000 Ser 1996 B (MBIA) .............................................. 0.00 06/30/06 6,673,700
10,000 Ser 1996 B (MBIA) .............................................. 0.00 06/30/07 5,697,600
4,000 Connecticut, College Savings 1989 Ser A ........................ 0.00 07/01/08 2,209,080
Massachusetts,
20,000 Refg 1996 Ser A (AMBAC) ........................................ 6.00 11/01/10 21,480,800
10,000 Refg 1993 Ser A ................................................ 5.50 02/01/11 10,051,300
4,000 Clark County, Nevada, Transportation Ser 1992 A (AMBAC) ........ 6.50 06/01/17 4,518,640
New York City, New York,
10,000 1990 Ser D ..................................................... 6.00 08/01/07 10,077,700
10,000 1990 Ser D ..................................................... 6.00 08/01/08 10,053,900
10,000 Pennsylvania, First Ser 1995 (FGIC) ............................. 5.50 05/01/12 10,074,700
7,500 Shelby County, Tennessee, Refg 1995 Ser A ...................... 5.625 04/01/14 7,610,025
20,120 King County, Washington, Ltd Tax 1995 (MBIA) .................... 6.00 01/01/23 20,632,255
- ------------ --------------
155,120 135,341,900
- ------------ --------------
Educational Facilities Revenue (5.4%)
10,000 Indiana University, Student Fee Ser K (MBIA) .................... 5.875 08/01/20 10,089,600
7,000 Massachusetts Health & Educational Facilities Authority, Boston
University Ser 1991 (MBIA) ..................................... 6.66 10/01/31 7,524,650
15,000 New Hampshire Higher Educational & Health Facilities Authority,
Dartmouth College Ser 1993 ..................................... 5.375 06/01/23 14,239,800
2,000 New Jersey Development Authority, The Seeing Eye Inc 1991 ....... 7.30 04/01/11 2,100,380
New York State Dormitory Authority,
5,000 State University Ser 1989 B .................................... 0.00 05/15/02 3,879,350
20,000 State University Ser 1990 B .................................... 7.00 05/15/16 21,422,400
5,000 Vermont Educational & Health Buildings Financing Agency,
Middlebury College Ser 1996 .................................... 5.375 11/01/26 4,795,450
- ------------ --------------
64,000 64,051,630
- ------------ --------------
Electric Revenue (11.7%)
25,000 Salt River Project Agricultural Improvement & Power District,
Arizona, Refg 1993 Ser C ....................................... 5.50 01/01/10 25,702,250
10,000 Sacramento Municipal Utility District, California, Refg 1994 Ser
I (MBIA) ....................................................... 5.75 01/01/15 10,104,900
10,000 Municipal Electric Authority of Georgia, Fifth Crossover Ser .... 6.50 01/01/17 10,922,200
8,000 New York State Power Authority, General Purpose Ser CC .......... 5.25 01/01/18 7,581,200
15,000 Puerto Rico Electric Power Authority, Power Ser O ............... 0.00 07/01/17 4,599,750
15,000 South Carolina Public Service Authority, 1995 Refg Ser A
(AMBAC) ........................................................ 6.25 01/01/22 15,957,600
6,000 Austin, Texas, Combined Utilities Refg Ser 1993 A ............... 5.75 11/15/13 6,019,320
24,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C .............. 4.70 02/01/06 23,072,160
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
Intermountain Power Agency, Utah,
$ 10,000 Refg 1996 Ser D ................................................ 5.00% 07/01/21 $ 9,069,600
10,000 Refg 1997 Ser B (MBIA)(WI) ..................................... 5.75 07/01/19 9,806,300
15,000 Washington Public Power System, Proj #2 Refg Ser 1994 A
(Secondary MBIA) ............................................... 6.00 07/01/07 16,061,850
- ------------ --------------
148,000 138,897,130
- ------------ --------------
Hospital Revenue (7.4%)
10,000 Birmingham - Carraway Special Care Facilities Financing
Authority, Alabama, Carraway Methodist Health Systems Ser 1995
A (Connie Lee) ................................................. 6.25 08/15/09 10,808,000
3,000 Baxter County, Arkansas, Baxter County Regional Hospital Inc
Impr & Refg Ser 1992 ........................................... 7.50 09/01/21 3,216,660
10,000 California Health Facilities Financing Authority, Kaiser
Permanente Ser 1985 ............................................ 5.55 08/15/25 9,544,900
1,500 Massachusetts Health & Educational Facilities Authority, Malden
Hospital - FHA Ins Mtge Ser A .................................. 5.00 08/01/16 1,343,580
Rochester, Minnesota,
5,000 Mayo Foundation/Mayo Medical Center Ser 1992 I ................. 5.75 11/15/21 4,999,600
3,700 Mayo Foundation/Mayo Medical Center Ser 1992 F ................. 6.25 11/15/21 3,870,274
10,000 Missouri Health & Educational Facilities Authority,
Barnes-Jewish Inc/
Christian Health Services Ser 1993 A ........................... 5.25 05/15/14 9,581,600
6,000 New York State Medical Care Facilities Finance Agency,
Presbyterian Hospital - FHA Ins Mtge 1984 Ser A Refg ........... 5.25 08/15/14 5,779,320
10,000 Charlotte-Mecklenburg County Hospital Authority, North Carolina,
Ser 1992 ....................................................... 6.00 01/01/22 10,136,700
5,000 University of North Carolina, Hospitals at Chapel Hill Ser 1996 . 5.00 02/15/29 4,486,600
4,000 Cuyahoga County, Ohio, The Cleveland Clinic Foundation Refg Ser
1988 A ......................................................... 8.00 12/01/15 4,156,680
5,000 North Central Texas Health Facilities Development Corporation,
University Medical Center Inc Ser 1997 (FSA)(WI) ............... 5.45 04/01/15 4,889,900
7,000 Fairfax County Industrial Development Authority, Virginia, Inova
Health System Foundation Refg Ser 1993 A ....................... 5.25 08/15/19 6,601,840
10,000 Fredericksburg Industrial Development Authority, Virginia,
Medicorp Health System Refg Ser 1996 (AMBAC) ................... 5.25 06/15/16 9,634,000
- ------------ --------------
90,200 89,049,654
- ------------ --------------
Industrial Development/Pollution Control Revenue (6.7%)
1,300 Jefferson County, Kentucky, Louisville Gas & Electric Co 1993
Ser B .......................................................... 5.625 08/15/19 1,289,223
1,450 Maryland Industrial Development Financing Authority, Medical
Waste Assocs LP 1989 Ser (AMT) ................................. 8.75 11/15/10 1,450,000
5,000 Becker, Minnesota, Northern States Power Co Ser A 1989 .......... 6.80 04/01/07 5,300,250
15,000 Claiborne County, Mississippi, Middle South Energy Inc Ser C ... 9.875 12/01/14 16,619,100
10,000 Clark County, Nevada, Nevada Power Co Ser 1992 A (AMT) (FGIC) ... 6.70 06/01/22 10,757,700
10,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987 (AMBAC) . 6.30 12/01/14 10,585,600
5,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT) ...... 7.50 12/01/29 5,355,400
10,000 Dallas-Fort Worth International Airport Facility Improvement
Corporation, Texas, American Airlines Inc Ser 1995 ............. 6.00 11/01/14 9,923,400
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 7,000 Matagorda County Navigation District #1, Texas, Central Power &
Light Co Collateralized Ser 1984 A ............................. 7.50% 12/15/14 $ 7,718,830
10,000 Weston, Wisconsin, Wisconsin Public Service Corp Refg Ser 1993
A .............................................................. 6.90 02/01/13 10,991,400
- ------------ --------------
74,750 79,990,903
- ------------ --------------
Mortgage Revenue - Multi-Family (2.1%)
7,000 Michigan Housing Development Authority, Rental Ser A (Bifurcated
FSA) ........................................................... 6.50 04/01/23 7,253,050
9,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A
(AMBAC) ........................................................ 6.05 11/01/20 9,179,190
New York City Housing Developement Corporation, New York,
4,514 Ruppert Proj - FHA Ins Sec 223F ................................ 6.50 11/15/18 4,637,092
4,371 Stevenson Commons Proj - FHA Ins Sec 223F ...................... 6.50 05/15/18 4,463,777
- ------------ --------------
24,885 25,533,109
- ------------ --------------
Mortgage Revenue - Single Family (6.7%)
10,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA) ......................................................... 5.875 12/01/24 9,965,400
2,440 California Housing Finance Agency, Home Cap Apprec 1983 Ser B .. 0.00 08/01/15 381,372
12,100 Illinois Housing Development Authority, Residential 1991 Ser C
(AMT) .......................................................... 6.875 02/01/18 12,554,355
4,000 Missouri Housing Development Commission, Homeownership GNMA/FNMA
1996 Ser C (AMT) ............................................... 7.45 09/01/27 4,419,760
6,900 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser
(AMT) .......................................................... 7.631 09/10/30 7,305,306
4,010 North Carolina Housing Finance Agency, Ser Q (AMT) .............. 8.00 03/01/18 4,275,783
6,950 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser A (AMT) ....... 6.903 03/01/31 7,285,824
10,000 Pennsylvania Housing Finance Agency, Ser 1991-31 (AMT) .......... 7.00 10/01/23 10,541,100
Tennessee Housing Development Agency,
4,000 Mortgage Finance 1993 Ser A .................................... 5.90 07/01/18 4,031,880
11,000 Mortgage Finance 1993 Ser A .................................... 5.95 07/01/28 11,065,560
7,600 Wisconsin Housing & Economic Development Authority, Home
Ownership 1991 Ser (AMT) ....................................... 7.097 10/25/22 7,965,864
- ------------ --------------
79,000 79,792,204
- ------------ --------------
Public Facilities Revenue (2.3%)
5,000 Palm Beach County, Florida, Criminal Justice Ser 1990 (FGIC) .... 6.00 06/01/13 5,092,200
10,000 Michigan Building Authority, 1993 Refg Ser I (AMBAC) ............ 5.30 10/01/16 9,494,500
6,000 Saint Louis Industrial Development Authority, Missouri, Kiel
Center Refg Ser 1992 (AMT) ..................................... 7.75 12/01/13 6,423,540
5,000 Ohio Building Authority, Correctional 1985 Ser C BIGS ........... 9.75 10/01/05 6,619,750
- ------------ --------------
26,000 27,629,990
- ------------ --------------
Resource Recovery Revenue (5.8%)
Connecticut Resources Recovery Authority,
9,000 American REF-FUEL Co of Southeastern Connecticut 1988 Ser A
(AMT) .......................................................... 8.00 11/15/15 9,720,540
4,950 Bridgeport RESCO Ser A ......................................... 7.625 01/01/09 5,107,707
7,000 Savannah Resource Recovery Development Authority, Georgia,
Savannah Energy Systems Co Ser 1992 ............................ 6.30 12/01/06 7,385,210
10,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) ............................................... 6.30 07/01/16 10,197,500
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 9,000 Mercer County Improvement Authority, New Jersey, Refg Ser A 1992
(AMT)(FGIC) .................................................... 6.70% 04/01/13 $ 9,009,990
10,000 Hempstead Industrial Development Agency, New York, 1985 American
REF-FUEL Co of Hempstead ....................................... 7.40 12/01/10 10,250,000
6,000 New York State Environmental Facilities Corporation, Huntington
1989 Ser A (AMT) ............................................... 7.50 10/01/12 6,344,220
5,000 Onondaga County Resource Recovery Agency, New York, 1992 Ser
(AMT) .......................................................... 6.875 05/01/06 5,219,800
5,000 Fairfax County Economic Development Authority, Virginia, Ogden
Martin Systems of Fairfax Inc Ser 1988 A (AMT) ................. 7.75 02/01/11 5,387,800
- ------------ --------------
65,950 68,622,767
- ------------ --------------
Transportation Facilities Revenue (12.5%)
8,965 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg Ser
1993 A ......................................................... 6.00 10/01/13 8,954,601
Atlanta, Georgia,
5,000 Airport Refg Ser 1996 (AMBAC) ................................. 6.00 01/01/07 5,393,800
10,000 Airport Ser 1990 (AMT) ......................................... 6.25 01/01/21 10,281,300
8,100 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax
Refg Ser K ..................................................... 7.25 07/01/10 8,574,822
5,000 Hawaii, Airports Second Ser 1991 (AMT) .......................... 7.00 07/01/18 5,365,450
Kentucky Turnpike Authority,
9,000 Economic Development Road Refg Ser 1995 (AMBAC) ................ 6.50 07/01/08 10,153,080
30,000 Resource Recovery Road Refg 1987 Ser A ........................ 5.00 07/01/08 29,232,300
11,000 New Jersey Highway Authority, Sr Parkway Refg 1992 Ser .......... 6.25 01/01/14 11,532,510
6,595 Albuquerque, New Mexico, Airport Refg Ser 1997 (AMT)(AMBAC)
(WI) ........................................................... 6.375 07/01/15 6,955,878
Ohio Turnpike Commission,
4,000 1994 Ser A .................................................... 5.75 02/15/24 3,988,800
20,000 1996 Ser A (MBIA) .............................................. 5.50 02/15/26 19,656,600
5,000 Pennsylvania Turnpike Commission, Ser L of 1991 (MBIA) .......... 6.00 06/01/15 5,141,500
10,000 Puerto Rico Highway & Transportation Authority, Refg Ser X ...... 5.50 07/01/15 9,931,200
10,000 Texas Turnpike Authority, Dallas North Tollway Refg Ser 1997
(FGIC) ......................................................... 5.25 01/01/23 9,550,000
4,000 Virginia Transportation Board, US Route 58 Corridor Ser 1993 B .. 5.625 05/15/13 4,008,960
- ------------ --------------
146,660 148,720,801
- ------------ --------------
Water & Sewer Revenue (9.7%)
10,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994 ......... 5.50 01/01/20 9,935,500
10,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water
Ser 1994 ....................................................... 5.45 07/01/19 9,734,700
10,000 California Department of Water Resources, Central Valley Refg
Ser L ......................................................... 5.50 12/01/23 9,766,200
10,000 East Bay Municipal Utility District, California, Water Refg Ser
1993 (MBIA) .................................................... 5.00 06/01/21 9,131,900
10,000 Los Angeles, California, Wastewater Ser 1994-A (MBIA) ........... 5.875 06/01/24 10,198,600
10,000 Dade County, Florida, Water & Sewer Ser 1995 (FGIC) ............. 5.50 10/01/25 9,814,900
5,000 Rockdale County Water & Sewerage Authority, Georgia, Ser 1996
(FSA) .......................................................... 5.00 07/01/22 4,659,400
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
Massachusetts Water Resources Authority,
$ 10,000 Refg 1992 Ser B ................................................ 5.50% 11/01/15 $ 9,747,500
10,000 1993 Ser C ..................................................... 5.25 12/01/15 9,707,800
10,000 1996 Ser A (FGIC) .............................................. 5.50 11/01/21 9,826,400
4,000 Detroit, Michigan, Sewage Refg Ser 1993-A (FGIC) ................ 5.70 07/01/13 4,040,240
8,500 New York City Municipal Water Finance Authority, New York, 1994
Ser B ......................................................... 5.30 06/15/06 8,592,055
10,000 Philadelphia, Pennsylvania, Water & Wastewater Ser 1993 (FSA) ... 5.50 06/15/15 9,773,200
- ------------ --------------
117,500 114,928,395
- ------------ --------------
Other Revenue (2.4%)
3,500 Denver, Colorado, Excise Tax Ser 1985 A ......................... 5.00 11/01/08 3,414,320
New York Local Government Assistance Corporation,
5,000 Ser 1993 C Refg ................................................ 5.375 04/01/14 4,881,500
10,000 Ser 1994 A .................................................... 5.50 04/01/17 9,987,000
5,000 Ser 1995 A .................................................... 6.00 04/01/24 5,106,900
5,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA) . 5.50 07/01/11 5,011,000
- ------------ --------------
28,500 28,400,720
- ------------ --------------
Refunded (10.4%)
5,000 Central Coast Water Authority, California, Ser 1992 (AMBAC) ..... 6.60 10/01/02++ 5,647,550
9,000 Los Angeles Convention & Exhibition Center Authority,
California, Ser 1985 COPs ...................................... 9.00 12/01/05++ 11,869,290
6,000 Connecticut Health & Educational Facilities Authority, Yale-New
Haven Hospital Ser F (MBIA) .................................... 7.10 07/01/00++ 6,633,600
2,500 Mid-Bay Bridge Authority, Florida, Ser 1991 A (ETM) ............. 6.875 10/01/22 2,854,200
9,790 Metropolitan Pier & Exposition Authority, Illinois, McCormick
Place Ser 1992 A ............................................... 6.50 06/15/03++ 10,994,366
8,000 Massachusetts, 1994 Ser C (FGIC) ................................ 6.75 11/01/04++ 9,164,640
14,000 New York State Dormitory Authority, Suffolk County Judicial Ser
1986 (ETM) ..................................................... 7.375 07/01/16 16,952,460
25,000 Intermountain Power Agency, Utah, Refg 1985 Ser H (GAINS) ....... 0.00 + 07/01/03++ 24,159,500
5,000 Salt Lake City, Utah, IHC Hospital Inc Ser of 1983 (ETM) ........ 5.00 06/01/15 4,835,050
28,000 Fairfax County Industrial Development Authority, Virginia,
Fairfax Hospital System Inc/Inova Health Ser 1991 .............. 6.801 08/15/01++ 30,990,680
- ------------ --------------
112,290 124,101,336
- ------------ --------------
1,132,855 TOTAL TAX-EXEMPT MUNICIPAL BONDS
(Identified Cost $1,051,723,235) ..................................................... 1,125,060,539
- ------------ --------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (6.1%)
9,700 Dade County Health Facilities Authority, Florida, Miami
Childrens Hospital Ser 1990 (Demand 01/02/97) ................. 5.05* 09/01/20 9,700,000
13,900 Hapeville Development Authority, Georgia, Hapeville Hotel Ltd
Ser 1985 (Demand 01/02/97) ..................................... 5.00* 11/01/15 13,900,000
8,700 University of Michigan, Hospital Ser 1995 A (Demand 01/02/97) ... 5.10* 12/01/19 8,700,000
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 18,900 Missouri Health & Educational Facilities Authority, Washington
University Ser 1996 D (Demand 01/02/97) ........................ 4.75*% 02/01/30 $ 18,900,000
9,000 North Central Texas Health Facilities Development Corporation,
University Medical Center Inc Ser 1987 ......................... 7.75 04/01/97++ 9,294,570
11,600 Kemmerer, Wyoming, Exxon Corp Ser 1984 (Demand 01/02/97) ........ 5.10* 11/01/14 11,600,000
- ------------ --------------
71,800 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
- ------------
(Identified Cost $71,447,050) ........................................................ 72,094,570
--------------
$1,204,655 TOTAL INVESTMENTS (Identified Cost $1,123,170,285) (a) ................... 100.6% 1,197,155,109
============
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ........................... (0.6) (7,121,119)
--------------
NET ASSETS ............................................................... 100.0% $1,190,033,990
=========== ==============
</TABLE>
- --------------
AMT Alternative Minimum Tax.
BIGS Bond Income Growth Security.
COPs Certificates of Participation.
ETM Escrowed to Maturity.
GAINS Growth and Income Security.
WI Security purchased on a when issued basis.
+ Zero coupon; will convert to 10.00% on July 1, 2000.
++ Prerefunded to call date shown.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$77,142,347 and the aggregate gross unrealized depreciation is
$3,157,523, resulting in net unrealized appreciation of
$73,984,824.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Alabama 1.7%
Alaska 4.1
Arizona 3.0
Arkansas 0.3
California 5.6
Colorado 0.3
Connecticut 2.0
Florida 3.1
Georgia 5.1
Hawaii 0.4
Illinois 2.0
Indiana 0.8
Kentucky 3.4
Maryland 1.0%
Massachusetts 6.6
Michigan 2.5
Minnesota 1.2
Mississippi 1.4
Missouri 3.3
Nebraska 0.6
Nevada 2.2
New Hampshire 1.2
New Jersey 2.7
New Mexico 0.6
New York 11.4
North Carolina 1.6
Ohio 3.5%
Pennsylvania 3.0
Puerto Rico 1.2
South Carolina 1.3
Tennessee 1.9
Texas 6.8
Utah 4.0
Vermont 0.4
Virginia 4.7
Washington 3.1
Wisconsin 1.6
Wyoming 1.0
-------
Total 100.6%
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,123,170,285) ..................................... $1,197,155,109
Cash .................................................................. 887,063
Receivable for:
Interest ............................................................ 17,424,216
Shares of beneficial interest sold .................................. 244,066
Prepaid expenses and other assets ..................................... 27,394
--------------
TOTAL ASSETS ........................................................ 1,215,737,848
--------------
LIABILITIES:
Payable for:
Investments purchased ............................................... 20,777,892
Dividends and distributions ......................................... 3,724,283
Shares of beneficial interest repurchased ........................... 596,522
Investment management fee ........................................... 452,931
Accrued expenses ...................................................... 152,230
--------------
TOTAL LIABILITIES ................................................... 25,703,858
--------------
NET ASSETS:
Paid-in-capital ....................................................... 1,115,886,458
Net unrealized appreciation ........................................... 73,984,824
Accumulated undistributed net realized gain ........................... 162,708
--------------
NET ASSETS .......................................................... $1,190,033,990
==============
NET ASSET VALUE PER SHARE,
101,083,561 shares outstanding (unlimited shares authorized of $.01
par value) ........................................................... $ 11.77
==============
MAXIMUM OFFERING PRICE PER SHARE
(net asset value plus 4.17% of net asset value)* ..................... $ 12.26
==============
</TABLE>
- --------------
* On sales of $25,000 or more the offering price is reduced.
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $ 74,093,062
--------------
EXPENSES
Investment management fee .............. 5,320,578
Transfer agent fees and expenses ...... 387,764
Shareholder reports and notices ....... 62,672
Custodian fees ......................... 52,615
Professional fees ...................... 52,404
Registration fees ...................... 46,458
Trustees' fees and expenses ............ 15,285
Other .................................. 30,574
--------------
TOTAL EXPENSES ....................... 5,968,350
LESS: EXPENSE OFFSET ................ (40,849)
--------------
NET EXPENSES ......................... 5,927,501
--------------
NET INVESTMENT INCOME ................ 68,165,561
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ...................... 2,959,135
Net change in unrealized appreciation . (29,830,436)
--------------
NET LOSS ............................. (26,871,301)
--------------
NET INCREASE ........................... $ 41,294,260
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 68,165,561 $ 76,135,601
Net realized gain ..................................... 2,959,135 17,721,238
Net change in unrealized appreciation/depreciation ... (29,830,436) 117,785,387
----------------- -----------------
NET INCREASE......................................... 41,294,260 211,642,226
----------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ................................. (68,543,874) (75,983,289)
Net realized gain ..................................... (8,374,759) (12,426,304)
----------------- -----------------
TOTAL ............................................... (76,918,633) (88,409,593)
----------------- -----------------
Net decrease from transactions in shares of beneficial
interest ............................................. (99,650,138) (93,207,593)
----------------- -----------------
NET INCREASE (DECREASE) ............................. (135,274,511) 30,025,040
NET ASSETS:
Beginning of period ................................... 1,325,308,501 1,295,283,461
----------------- -----------------
END OF PERIOD
(Including undistributed net investment income of
$0 and $378,313, respectively) ...................... $1,190,033,990 $1,325,308,501
================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Tax-Exempt Securities Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to provide
a high level of current income which is exempt from federal income tax,
consistent with the preservation of capital. The Fund was incorporated in
Maryland in 1979, commenced operations on March 27, 1980 and reorganized as a
Massachusetts business trust on April 30, 1987.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the Fund
by an outside independent pricing service approved by the Trustees. The
pricing service has informed the Fund that in valuing the Fund's portfolio
securities, it uses both a computerized 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. Short-term debt securities having a maturity date of more than
sixty days at time of purchase are valued on a mark-to-market basis until
sixty days prior to maturity and thereafter at amortized cost based on their
value on the 61st day. Short-term debt securities having a maturity date of
sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. The Fund amortizes premiums and accretes discounts over the life of
the respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable 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
41
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1996, continued
and net realized capital gains are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their
federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized capital gains. To the
extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the Fund's net assets determined as of the close of each
business day: 0.50% to the portion of daily net assets not exceeding $500
million; 0.425% to the portion of daily net assets exceeding $500 million but
not exceeding $750 million; 0.375% to the portion of daily net assets
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of
daily net assets exceeding $1 billion but not exceeding $1.25 billion; and
0.325% to the portion of daily net assets exceeding $1.25 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended December 31, 1996
aggregated $215,642,138 and $383,666,566, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At December 31, 1996, the Fund had transfer agent fees
and expenses payable of approximately $52,400.
The Fund has 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
42
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1996, continued
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, 1996 included in Trustees' fees and expenses
in the Statement of Operations amounted to $837. At December 31, 1996, the
Fund had an accrued pension liability of $48,696 which is included in accrued
expenses in the Statement of Assets and Liabilities.
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 for the year ended December 31, 1996, it received
approximately $1,050,000 in commissions from the sale of the Fund's shares.
Such commissions are not an expense of the Fund; they are deducted from the
proceeds of the shares.
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold 3,179,464 $ 37,259,996 3,469,058 $ 40,446,608
Reinvestment of dividends and distributions 3,684,669 43,078,883 4,260,271 50,182,467
-------------- --------------- -------------- ---------------
6,864,133 80,338,879 7,729,329 90,629,075
Repurchased (15,389,992) (179,989,017) (15,722,604) (183,836,668)
-------------- --------------- -------------- ---------------
Net decrease (8,525,859) $ (99,650,138) (7,993,275) $ (93,207,593)
============== =============== ============== ===============
</TABLE>
5. FEDERAL INCOME TAX STATUS
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $146,000 during fiscal 1996.
As of December 31, 1996, the Fund had temporary book/tax differences
primarily attributable to post-October losses.
43
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period ...... $12.09 $11.01 $12.41 $11.88 $11.65
-------- -------- --------- -------- --------
Net investment income .... 0.65 0.67 0.70 0.77 0.79
Net realized and
unrealized gain (loss) .. (0.24) 1.19 (1.37) 0.54 0.23
-------- -------- --------- -------- --------
Total from investment
operations .............. 0.41 1.86 (0.67) 1.31 1.02
-------- -------- --------- -------- --------
Less dividends and
distributions from:
Net investment income ... (0.65) (0.67) (0.70) (0.77) (0.79)
Net realized gain ........ (0.08) (0.11) (0.03) (0.01) --
-------- -------- --------- -------- --------
Total dividends and
distributions ........... (0.73) (0.78) (0.73) (0.78) (0.79)
-------- -------- --------- -------- --------
Net asset value,
end of period ............ $11.77 $12.09 $11.01 $12.41 $11.88
======== ======== ========= ======== ========
TOTAL INVESTMENT RETURN+ 3.61% 17.37% (5.55)% 11.23% 9.09%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................. 0.48% 0.48% 0.47% 0.47% 0.49%
Net investment income ..... 5.52% 5.76% 6.02% 6.23% 6.74%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions ............. $1,190 $1,325 $1,295 $1,582 $1,323
Portfolio turnover rate .. 18% 21% 16% 13% 4%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period ...... $11.09 $11.28 $10.96 $10.45 $11.50
-------- -------- -------- -------- ---------
Net investment income .... 0.80 0.80 0.81 0.81 0.80
Net realized and
unrealized gain (loss) .. 0.56 (0.18) 0.32 0.51 (0.97)
-------- -------- -------- -------- ---------
Total from investment
operations .............. 1.36 0.62 1.13 1.32 (0.17)
-------- -------- -------- -------- ---------
Less dividends and
distributions from:
Net investment income ... (0.80) (0.81) (0.81) (0.81) (0.83)
Net realized gain ........ -- -- -- -- (0.05)
-------- -------- -------- -------- ---------
Total dividends and
distributions ........... (0.80) (0.81) (0.81) (0.81) (0.88)
-------- -------- -------- -------- ---------
Net asset value,
end of period ............ $11.65 $11.09 $11.28 $10.96 $10.45
======== ======== ======== ======== =========
TOTAL INVESTMENT RETURN+ 12.71% 5.86% 10.61% 13.02% (1.44)%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................. 0.51% 0.51% 0.51% 0.54% 0.52%
Net investment income ..... 7.05% 7.25% 7.31% 7.51% 7.42%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions ............. $1,145 $1,010 $1,033 $908 $896
Portfolio turnover rate .. 10% 19% 13% 17% 37%
</TABLE>
- --------------
+ Does not reflect the deduction of sales load. Calculated based on the net
asset value as of the last business day of the period.
SEE NOTES TO FINANCIAL STATEMENTS
44
<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, 1996, 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 at
December 31, 1996 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 10, 1997
1996 FEDERAL TAX NOTICE (unaudited)
During the year ended December 31, 1996, the Fund paid to the shareholders
$0.65 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 year ended December 31, 1996,
the Fund paid to shareholders $0.08 per share from long-term capital gains.
<PAGE>
APPENDIX
- --------
RATINGS OF INVESTMENTS
- -----------------------------------------------------------------------------
Moody's Investors Service Inc. ("Moody's")
MUNICIPAL BOND RATINGS
<TABLE>
<CAPTION>
<S> <C>
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 a 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.
</TABLE>
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.
46
<PAGE>
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.
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.
47
<PAGE>
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.
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.
48
<PAGE>
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+).
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.
49
<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 for the fiscal years ended
December 31, 1987, 1988, 1989, 1990, 1991, 1992, 1993,
1994, 1995 and 1996................................... 4
(2) Financial statements included in the Statement of
Additional Information (Part B):
Page in
SAI
---
Portfolio of Investments at December 31, 1996......... 31
Statement of assets and liabilities at
December 31, 1996..................................... 38
Statement of operations for the year ended
December 31, 1996..................................... 39
Statement of changes in net assets for the
years ended December 31, 1995 and 1996................ 40
Notes to Financial Statements......................... 41
Financial highlights for the fiscal years ended
December 31, 1987, 1988, 1989, 1990, 1991, 1992, 1993,
1994, 1995 and 1996................................... 44
(3) Financial statements included in Part C:
None
(b) Exhibits:
---------
2. -- Amended and Restated By-Laws of the Registrant dated as of
October 25, 1996.
8. -- Amendment to the Custodian Agreement between the Registrant and
The Bank of New York.
11. -- Consent of Independent Accountants
16. -- Schedule for Computation of Performance Quotations
<PAGE>
27. -- Financial Data Schedule
All other exhibits were previously filed and are hereby
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 February 28, 1997
-------------- ---------------------
Shares of Beneficial Interest 26,066
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 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
2
<PAGE>
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. 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 "Dean Witter Funds" used below refers to the following registered
investment companies:
Closed-End Investment Companies
- -------------------------------
(1) InterCapital Income 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
3
<PAGE>
(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
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
Open-end Investment Companies:
- ------------------------------
(1) Dean Witter Short-Term Bond Fund
(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 Global Asset Allocation Fund
(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
4
<PAGE>
(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
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund
(59) Dean Witter Financial Services Trust
(60) Dean Witter Market Leader Trust
The term "TCW/DW Funds" refers to the following registered investment
companies:
Open-End Investment Companies
- -----------------------------
(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
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
Closed-End Investment Companies
- -------------------------------
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
5
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
and Director of Dean Witter Trust
Company ("DWTC"); Chairman,
Director or Trustee, President and
Chief Executive Officer of the Dean
Witter Funds and Chairman, Chief
Executive Officer and Trustee of
the TCW/DW Funds; Formerly
Executive Vice President and
Director of Dean Witter, Discover &
Co. ("DWDC"); Director and/or
officer of various DWDC
subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee
of the Dean Witter Funds; Director
and/or officer of various DWDC
subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors
and DWTC; Trustee of the TCW/DW
Funds; Member (since January, 1993)
and Chairman (since January,
1995) of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of DWTC.
and Chief Investment
Officer
Peter M. Avelar Vice President of various Dean Witter Funds.
Senior Vice President
Mark Bavoso Vice President of various Dean Witter Funds.
Senior Vice President
Richard Felegy
Senior Vice President
Edward Gaylor Vice President of various Dean Witter Funds.
Senior Vice President
Robert S. Giambrone Vice President Senior Vice President of DWSC,
Senior Distributors and DWTC and Director of DWTC; Vice
President of the Dean Witter Funds and the TCW/DW
Funds.
Rajesh K. Gupta Vice President of various Dean Witter Funds.
Senior Vice President
Kenton J. Hinchcliffe Vice President of various Dean Witter Funds.
Senior Vice President
Kevin Hurley Vice President of various Dean Witter Funds.
Senior Vice President
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny Vice President of various Dean Witter Funds.
Senior Vice President
Jonathan R. Page Vice President of various Dean Witter Funds.
Senior Vice President
Ira N. Ross Vice President of various Dean Witter Funds.
Senior Vice President
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader Trust.
Senior Vice President
Rochelle G. Siegel Vice President of various Dean Witter Funds.
Senior Vice President
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Paul D. Vance Vice President of various Dean Witter Funds.
Senior Vice President
Elizabeth A. Vetell
Senior Vice President
James F. Willison Vice President of various Dean Witter Funds.
Senior Vice President
Ronald J. Worobel Vice President of various Dean Witter Funds.
Senior Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
Secretary and General President, Assistant Secretary and Assistant
Counsel General Counsel of Distributors; Vice President,
Secretary and General Counsel of the Dean Witter
Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
Joseph Arcieri Vice President of various Dean Witter Funds.
Vice President
Kirk Balzer Vice President of Various Dean Witter Funds.
Vice President
Douglas Brown
Vice President
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Philip Casparius
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy Vice President of various Dean Witter Funds.
Vice President
B. Catherine Connelly
Vice President
Salvatore DeSteno Vice President of DWSC.
Vice President
Frank J. DeVito Vice President of DWSC.
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Peter W. Gurman
Vice President
John Hechtlinger
Vice President
Peter Hermann Vice President of various Dean Witter Funds
Vice President
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
James Kastberg
Vice President
Stanley Kapica
Vice President
Michael Knox Vice President of various Dean Witter Funds
Vice President
Konrad J. Krill Vice President of various Dean Witter Funds.
Vice President
Paula LaCosta Vice President of various Dean Witter Funds.
Vice President
Thomas Lawlor
Vice President
Gerard Lian Vice President of various Dean Witter Funds.
Vice President
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell Vice President of Dean Witter Global Short-
Vice President Term Income Fund Inc.
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metals
Vice President and Minerals Trust.
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari Vice President of Prime Income Trust
Vice President
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust
Jayne M. Stevlingson Vice President of various Dean Witter Funds.
Vice President
Kathleen Stromberg Vice President of various Dean Witter Funds.
Vice President
Vinh Q. Tran Vice President of various Dean Witter Funds.
Vice President
Alice Weiss Vice President of various Dean Witter Funds.
Vice President
Katherine Wickham
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 Global Asset Allocation
(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 Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
11
<PAGE>
(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 Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(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 Federal Securities 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 Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(56) Dean Witter Income Builder Fund
(57) Dean Witter Special Value Fund
(58) Dean Witter Financial Services Trust
(59) Dean Witter Market Leader Trust
(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
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
12
<PAGE>
(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.
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
PostEffective 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 March, 1997.
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
By /s/ Barry Fink
-------------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
PostEffective Amendment No. 19 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 03/24/97
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 03/24/97
----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 03/24/97
----------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/ David M. Butowsky 03/24/97
----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
EXHIBIT INDEX
2. -- Amended and Restated By-Laws of the Registrant
dated as of October 25, 1996
8. -- Amendment to the Custodian Agreement between the
Registrant and The Bank of New York
11. -- Consent of Independent Accountants
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
- ----------
All other exhibits were previously filed and are hereby incorporated by
reference.
<PAGE>
BY-LAWS
OF
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
AMENDED AND RESTATED AS OF OCTOBER 25, 1996
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", and "Trustees" have the
respective meanings given them in the Declaration of Trust of Dean Witter
Tax-Exempt Securities Trust dated April 6, 1987, as amended from time to
time.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting. Such request
shall state the purpose or purposes of such meeting and the matters proposed
to be acted on thereat. The Secretary shall inform such Shareholders of the
reasonable estimated cost of preparing and mailing such notice of the
meeting, and upon payment to the Trust of such costs, the Secretary shall
give notice stating the purpose or purposes of the meeting to all entitled to
vote at such meeting. No meeting need be called upon the request of the
holders of Shares entitled to cast less than a majority of all votes entitled
to be cast at such meeting, to consider any matter which is substantially the
same as a matter voted upon at any meeting of Shareholders held during the
preceding twelve months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the
<PAGE>
Shareholders present or represented by proxy and entitled to vote thereat
shall have power to adjourn the meeting from time to time. Any adjourned
meeting may be held as adjourned without further notice. At any adjourned
meeting at which a quorum shall be present, any business may be transacted as
if the meeting had been held as originally called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under the Corporations and Associations Law of
the State of Maryland.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
SECTION 3.10. Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.
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SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
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(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person
shall be entitled to indemnification for any liability, whether or not
there is an adjudication of liability, arising by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties
as described in Section 17(h) and (i) of the Investment Company Act of
1940 ("disabling conduct"). A person shall be deemed not liable by reason
of disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit
or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
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(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who
are neither "interested persons" of the Trust, as defined in
Section 2(a)(19) of the 1940 Act, nor parties to the action,
suit or proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
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SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the Chairman the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. The Chairman. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.
SECTION 6.7. The President. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the Board
of Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
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SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holders' name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of
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the Trust by the President, or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
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ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
Shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
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ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Tax-Exempt Securities
Trust, dated April 6, 1987, a copy of which 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.
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AMENDMENT TO CUSTODY AGREEMENT
Amendment made as of this 17th day of April, 1996 by and between Dean
Witter Tax-Exempt Securities Trust (the "Fund") and The Bank of New York (the
"Custodian") to the Custody Agreement between the Fund and the Custodian dated
September 20, 1991 (the "Custody Agreement"). The Custody Agreement is hereby
amended as follows:
Article XV Section 8 of the Custody Agreement shall be deleted and be
replaced by Sections 8.(a), 8.(b) and 8.(c) as set forth below:
"8. (a) The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Securities and moneys
owned by the Fund. The Custodian shall indemnify the Fund against and save the
Fund harmless from all liability, claims, losses and demands whatsoever,
including attorneys' fees, howsoever arising or incurred as the result of the
failure of a subcustodian which is a banking institution located in a foreign
country and identified on Schedule A attached hereto and as amended from time
to time upon mutual agreement of the parties (each, a "Subcustodian") to
exercise reasonable care with respect to the safekeeping of such Securities and
moneys to the same extent that the Custodian would be liable to the Fund if the
Custodian were holding such securities and moneys in New York. In the event of
any loss to the Fund by reason of the failure of the Custodian or a
Subcustodian to utilize reasonable care, the Custodian shall be liable to the
Fund only to the extent of the Fund's direct damages, to be determined based on
the market value of the Securities and moneys which are the subject of the loss
at the date of discovery of such loss and without reference to any special
conditions or circumstances.
8. (b) The Custodian shall not be liable for any loss which results
from (i) the general risk of investing, or (ii) investing or holding Securities
and moneys in a particular country including, but not limited to, losses
resulting from nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency restrictions,
devaluations or fluctuations; or market conditions which prevent the orderly
execution of securities transactions or affect the value of Securities or
moneys.
8. (c) Neither party shall be liable to the other for any loss due to
forces beyond its control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
By: /s/ David A. Hughey
[SEAL] -----------------------------------
Attest:
/s/ Robert M. Scanlan
- ---------------------------------- THE BANK OF NEW YORK
By: /s/ Steven Grunton
[SEAL] -----------------------------------
Attest:
/s/ Vincent Blazewicz
- ---------------------------------
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Argentina The Bank of Boston
Australia ANZ Banking Group Limited
Austria Girocredit Bank AG
Bangladesh* Standard Chartered Bank
Belgium Banque Bruxelles Lambert
Botswana* Stanbic Bank Botswana Ltd.
Brazil The Bank of Boston
Canada Royal Trust/Royal Bank of Canada
Chile The Bank of Boston/Banco de Chile
China Standard Chartered Bank
Colombia Citibank, N.A.
Denmark Den Danske Bank
Euromarket CEDEL
Euroclear
First Chicago Clearing Centre
Finland Union Bank of Finland
France Banque Paribas/Credit Commercial de France
Germany Dresdner Bank A.G.
Ghana* Merchant Bank Ghana Ltd.
Greece Alpha Credit Bank
Hong Kong Hong Kong and Shanghai Banking Corp.
Indonesia Hong Kong and Shanghai Banking Corp.
Ireland Allied Irish Bank
Israel Israel Discount Bank
Italy Banca Commerciale Italiana
Japan Yasuda Trust & Banking Co., Lt.
Korea Bank of Seoul
Luxembourg Kredietbank S.A.
Malaysia Hong Kong Bank Malaysia Berhad
Mexico Banco Nacional de Mexico (Banamex)
Netherlands Mees Pierson
New Zealand ANZ Banking Group Limited
Norway Den Norske Bank
Pakistan Standard Chartered Bank
Peru Citibank, N.A.
Philippines Hong Kong and Shanghai Banking Corp.
Poland Bank Handlowy w Warsawie
Portugal Banco Comercial Portugues
Singapore United Overseas Bank
South Africa Standard Bank of South Africa Limited
Spain Banco Bilbao Vizcaya
Sri Lanka Standard Chartered Bank
<PAGE>
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Sweden Skandinaviska Enskilda Banken
Switzerland Union Bank of Switzerland
Taiwan Hong Kong and Shanghai Banking Corp.
Thailand Siam Commercial Bank
Turkey Citibank, N.A.
United Kingdom The Bank of New York
United States The Bank of New York
Uruguay The Bank of Boston
Venezuela Citibank N.A.
Zimbabwe* Stanbic Bank Zimbabwe Ltd.
* Not yet 17(f)5 compliant
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 19 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 10, 1997, 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 "Experts"
and "Independent Accountants" in such Statement of Additional Information
and to the reference to us under the heading "Financial Highlights" in such
Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 20, 1997
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER TAX EXEMPT SECURITIES TRUST
FOR THE 30 DAY PERIOD ENDED DECEMBER 31, 1996
6
(A) 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{[((5,261,942.43-459,905.94)/101,097,523.203 *12.26)+1]-1}
= 4.69%
(B) TAX EQUIVALENT YIELD = SEC Yield-(1-stated tax rate)
= 4.69%/(1-.3960)
= 7.76%
<PAGE>
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 EV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED-P 31-Dec-96 TOTAL RETURN YEARS-n COMPOUND RETURN-T
- ---------- --------- ------------ ------- -----------------
31-Dec-95 $994.70 -0.53% 1 -0.53%
31-Dec-91 $1,337.90 33.79% 5.00 6.00%
31-Dec-86 $1,966.70 96.67% 10.00 7.00%
(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-96 RETURN-TR YEARS-n COMPOUND RETURN-t
- ---------- --------- --------- ------- -----------------
31-Dec-95 $1,036.10 3.61% 1 3.61%
31-Dec-91 $1,393.70 39.37% 5.00 6.86%
31-Dec-86 $2,048.70 104.87% 10.00 7.44%
(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
(F)
(D) (E) GROWTH OF
$10,000 TOTAL GROWTH OF GROWTH OF $100,000
INVESTED-P RETURN-TR $10,000 INVESTMENT-G $50,000 INVESTMENT- INVESTMENT-G
- ---------- --------- -------------------- ------------------- ------------
27-Mar-80 369.95 $45,115 $227,338 $457,026
* INITIAL INVESTMENT $9600,$48,375 & $97,250 RESPECTIVELY REFLECTS A 4%,3.25% &
2.75% SALES CHARGE
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,123,170,285
<INVESTMENTS-AT-VALUE> 1,197,155,109
<RECEIVABLES> 17,668,282
<ASSETS-OTHER> 914,457
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,215,737,848
<PAYABLE-FOR-SECURITIES> 20,777,892
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,925,966
<TOTAL-LIABILITIES> 25,703,858
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,115,886,458
<SHARES-COMMON-STOCK> 101,083,561
<SHARES-COMMON-PRIOR> 109,609,420
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 162,708
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 73,984,824
<NET-ASSETS> 1,190,033,990
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 74,093,062
<OTHER-INCOME> 0
<EXPENSES-NET> 5,927,501
<NET-INVESTMENT-INCOME> 68,165,561
<REALIZED-GAINS-CURRENT> 2,959,135
<APPREC-INCREASE-CURRENT> (29,830,436)
<NET-CHANGE-FROM-OPS> 41,294,260
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 68,543,874
<DISTRIBUTIONS-OF-GAINS> 8,374,759
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,179,464
<NUMBER-OF-SHARES-REDEEMED> (15,389,992)
<SHARES-REINVESTED> 3,684,669
<NET-CHANGE-IN-ASSETS> (8,525,859)
<ACCUMULATED-NII-PRIOR> 378,313
<ACCUMULATED-GAINS-PRIOR> 5,578,332
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,320,578
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,968,350
<AVERAGE-NET-ASSETS> 1,235,317,124
<PER-SHARE-NAV-BEGIN> 12.09
<PER-SHARE-NII> 0.65
<PER-SHARE-GAIN-APPREC> (0.24)
<PER-SHARE-DIVIDEND> (0.65)
<PER-SHARE-DISTRIBUTIONS> (0.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.77
<EXPENSE-RATIO> 0.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
