<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 1998
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. 21 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 22 [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)
X immediately upon filing pursuant to paragraph (b)
-----
on (date) pursuant to paragraph (b)
-----
60 days after filing pursuant to paragraph (a)
-----
on (date) pursuant to paragraph (a) of rule 485.
-----
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
===============================================================================
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
CROSS-REFERENCE SHEET
<TABLE>
<S> <C>
FORM N-1A
ITEM CAPTION
- ---- -------
PART A PROSPECTUS
- ------ ----------
1. ..... Cover Page
2. ..... Prospectus Summary; Summary of Fund Expenses
3. ..... Financial Highlights; Performance Information
Investment Objective and Policies; Risk
Considerations; The Fund and its Management; Cover
4. ..... Page; Investment Restrictions; Prospectus Summary
The Fund and Its Management; Back Cover; Investment
5. ..... Objective and Policies
Dividends, Distributions and Taxes; Additional
6. ..... Information
7. ..... Purchase of Fund Shares; Shareholder Services
Purchase of Fund Shares; Redemptions and Repurchases;
8. ..... Shareholder Services
9. ..... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
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; Purchase of Fund Shares; Redemptions
and Repurchases; Financial Statements; Shareholder
19. ..... Services
Dividends, Distributions and Taxes; Performance
20. ..... Information
21. ..... Purchase of Fund Shares
22. ..... Not applicable
Experts; Financial Statements
23. .....
</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
APRIL 17, 1998
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.")
The Fund offers four classes of shares (each, a "Class"), each with a
different combination of sales charges, ongoing fees and other features. The
different distribution arrangements permit an investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. (See "Purchase of Fund
Shares--Alternative Purchase Arrangements.")
This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the
Statement of Additional Information, dated April 17, 1998, which has been
filed with the Securities and Exchange Commission, and which is available at
no charge upon request of the Fund at the address or telephone numbers listed
on this page. The Statement of Additional Information is incorporated herein
by reference.
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/ 4
Financial Highlights/ 6
The Fund and its Management/ 9
Investment Objective and Policies/ 9
Risk Considerations and Investment Practices/ 12
Investment Restrictions/ 15
Purchase of Fund Shares/ 16
Shareholder Services/ 26
Redemptions and Repurchases/ 29
Dividends, Distributions and Taxes/ 30
Performance Information/ 32
Additional Information/ 33
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
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
Fund open-end, diversified management investment company investing principally in investment grade,
tax-exempt fixed-income securities (see page 9).
- ---------------------------------------------------------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page 33). The Fund offers four Classes
Offered of shares, each with a different combination of sales charges, ongoing fees and other features
(see pages 16-25).
- ---------------------------------------------------------------------------------------------------------------------------
Minimum The minimum initial investment for each Class is $1,000 ($100 if the account is opened through
Purchase EasyInvest (Service Mark) ). Class D shares are only available to persons investing $5 million
or more and to certain other limited categories of investors. For the purpose of meeting the minimum
$5 million investment for Class D shares, and subject to the $1,000 minimum initial investment
for each Class of the Fund, an investor's existing holdings of Class A shares and shares of funds
for which Dean Witter InterCapital Inc. serves as investment manager ("Dean Witter Funds") that
are sold with a front-end sales charge, and concurrent investments in Class D shares of the Fund
and other Dean Witter Funds that are multiple class funds, will be aggregated. The minimum subsequent
investment is $100 (see page 16).
- ---------------------------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is to provide a high level of current income exempt from
Objective federal income tax, consistent with the preservation of capital (see page 9).
- ---------------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly-owned
Manager subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory,
management and administrative capacities to 101 investment companies and other portfolios with
assets of approximately $113.6 billion at March 31, 1998 (see page 9).
- ---------------------------------------------------------------------------------------------------------------------------
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 9).
- ---------------------------------------------------------------------------------------------------------------------------
Distributor and Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution plan pursuant
Distribution to Rule 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the distribution
Fee fees paid by the Class A, Class B and Class C shares of the Fund to the Distributor. The entire
12b-1 fee payable by Class A and a portion of the 12b-1 fee payable by each of Class B and Class
C equal to 0.15% of the average daily net assets of Class B and 0.25% of the average daily net
assets of Class C are currently each characterized as a service fee within the meaning of the
National Association of Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1
fee, if any, is characterized as an asset-based sales charge (see pages 16 and 24).
- ---------------------------------------------------------------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase o Class A shares are offered with a front-end sales charge, starting at 4.25% and reduced for
Arrangements larger purchases. Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charge at the time of purchase but a contingent
deferred sales charge ("CDSC") of 1.0% may be imposed on redemptions within one year of purchase.
The Fund is authorized to reimburse the Distributor for specific expenses incurred in promoting
the distribution of the Fund's Class A shares and servicing shareholder accounts pursuant to the
Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at an annual
rate of 0.25% of average daily net assets of the Class (see pages 16, 19 and 24).
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
o Class B shares are offered without a front-end sales charge, but will in most cases be subject to a
CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be imposed
on any redemption of shares if after such redemption the aggregate current value of a Class B account
with the Fund falls below the aggregate amount of the investor's purchase payments made during the six
years preceding the redemption. Class B shares are also subject to a 12b-1 fee assessed at the annual
rate of 0.60% of the average daily net assets of Class B. Class B shares convert to Class A shares
approximately ten years after the date of the original purchase (see pages 16, 21 and 24).
o Class C shares are offered without a front-end sales charge, but will in most cases be subject to a
CDSC of 1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the Distributor
for specific expenses incurred in promoting the distribution of the Fund's Class C shares and servicing
shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount
equal to payments at an annual rate of 0.70% of average daily net assets of the Class (see pages 16,
23 and 24).
o Class D shares are offered only to investors meeting an initial investment minimum of $5 million and
to certain other limited categories of investors. Class D shares are offered without a front-end sales
charge or CDSC and are not subject to any 12b-1 fee (see pages 16, 23 and 24). All shares of the Fund
held prior to July 28, 1997 have been designated Class D shares. Additional investments in Class D shares
by shareholders holding such shares may only be made if those shareholders are otherwise eligible to
purchase Class D shares. However, shareholders holding such shares will receive the benefit of the value
of such shares towards reduced sales charges on purchases of Class A shares pursuant to the Fund's "Right
of Accumulation" (see page 20).
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income are declared daily and paid monthly; capital gains, if any, may
Capital Gains be distributed annually or retained for reinvestment by the Fund. Dividends and capital gains distributions
Distributions paid on shares of a Class are automatically reinvested in additional shares of the same Class at net
asset value unless the shareholder elects to receive cash. Shares acquired by dividend and distribution
reinvestment will not be subject to any sales charge or CDSC (see pages 26 and 30).
- ---------------------------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A, Class
B or Class C shares. An account may be involuntarily redeemed if the total value of the account is less
than $100 or, if the account was opened through EasyInvest (Service Mark), if after twelve months the
shareholder has invested less than $1,000 in the account (see page 29).
- ---------------------------------------------------------------------------------------------------------------------------
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 12). 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 12-14).
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in the Prospectus and in the Statement of Additional Information.
3
<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
based on the expenses and fees for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------- ------- ------- -------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price) ..................... 4.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments .... None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds)............................... None(2) 5.00%(3) 1.00%(4) None
Redemption Fees..................................... None None None None
Exchange Fee........................................ None None None None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ----------------------------------------------------------------------
Management Fees .................................... 0.44% 0.44% 0.44% 0.44%
12b-1 Fees (5)(6)................................... 0.25% 0.60% 0.70% None
Other Expenses ..................................... 0.05% 0.05% 0.05% 0.05%
Total Fund Operating Expenses (7)................... 0.74% 1.09% 1.19% 0.49%
</TABLE>
- ------------
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares").
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on
redemptions made within one year after purchase, except for certain
specific circumstances (see "Purchase of Fund Shares--Initial Sales
Charge Alternative--Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1
fee payable by Class A and a portion of the 12b-1 fee payable by each
of Class B and Class C equal to 0.15% of the average daily net assets
of Class B and 0.25% of the average daily net assets of Class C are
currently each characterized as a service fee within the meaning of
National Association of Securities Dealers, Inc. ("NASD") guidelines
and are payments made for personal service and/or maintenance of
shareholder accounts. The remainder of the 12b-1 fee, if any, is an
asset-based sales charge, and is a distribution fee paid to the
Distributor to compensate it for the services provided and the expenses
borne by the Distributor and others in the distribution of the Fund's
shares (see "Purchase of Fund Shares--Plan of Distribution").
(6) Upon conversion of Class B shares to Class A shares, such shares will
be subject to the lower 12b-1 fee applicable to Class A shares. No
sales charge is imposed at the time of conversion of Class B shares to
Class A shares. Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing 0.70% distribution fee (see
"Purchase of Fund Shares--Alternative Purchase Arrangements").
(7) There were no outstanding shares of Class A, Class B or Class C prior
to July 28, 1997. Accordingly, "Total Fund Operating Expenses," as
shown above with respect to those Classes, are estimates based upon the
sum of 12b-1 Fees, Management Fees and estimated "Other Expenses."
4
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXAMPLES 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) a 5% annual return and (2) redemption at the end
of each time period:
Class A ...................................................... $50 $65 $82 $130
Class B ...................................................... $61 $65 $80 $133
Class C....................................................... $22 $38 $65 $144
Class D ...................................................... $ 5 $16 $27 $ 62
You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A ...................................................... $50 $65 $82 $130
Class B ...................................................... $11 $35 $60 $133
Class C ...................................................... $12 $38 $65 $144
Class D ...................................................... $ 5 $16 $27 $ 62
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER
OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of
Distribution" and "Redemptions and Repurchases."
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of the
maximum front-end sales charges permitted by the NASD.
5
<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,
-------------------------------------------------------------------------------------------------
1997* 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning
of period................... $11.77 $12.09 $11.01 $12.41 $11.88 $11.65 $11.09 $11.28 $10.96 $10.45
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income ....... 0.63 0.65 0.67 0.70 0.77 0.79 0.80 0.80 0.81 0.81
Net realized and unrealized
gain (loss)................. 0.36 (0.24) 1.19 (1.37) 0.54 0.23 0.56 (0.18) 0.32 0.51
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations.................. 0.99 0.41 1.86 (0.67) 1.31 1.02 1.36 0.62 1.13 1.32
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less dividends and
distributions from:
Net investment income....... (0.63) (0.65) (0.67) (0.70) (0.77) (0.79) (0.80) (0.81) (0.81) (0.81)
Net realized gain........... (0.05) (0.08) (0.11) (0.03) (0.01) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions............... (0.68) (0.73) (0.78) (0.73) (0.78) (0.79) (0.80) (0.81) (0.81) (0.81)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period...................... $12.08 $11.77 $12.09 $11.01 $12.41 $11.88 $11.65 $11.09 $11.28 $10.96
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+ .... 8.73% 3.61% 17.37% (5.55)% 11.23% 9.09% 12.71% 5.86% 10.61% 13.02%
RATIOS TO AVERAGE NET ASSETS:
Expenses..................... 0.49% 0.48% 0.48% 0.47% 0.47% 0.49% 0.51% 0.51% 0.51% 0.54%
Net investment income........ 5.34% 5.52% 5.76% 6.02% 6.23% 6.74% 7.05% 7.25% 7.31% 7.51%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions................. $1,097 $1,190 $1,325 $1,295 $1,582 $1,323 $1,145 $1,010 $1,033 $ 908
Portfolio turnover rate ..... 16% 18% 21% 16% 13% 4% 10% 19% 13% 17%
</TABLE>
- ------------
* Prior to July 28, 1997, the Fund issued one class of shares. All
shares of the Fund held prior to that date have been designated Class
D shares.
+ Calculated based on the net asset value as of the last business day
of the period.
6
<PAGE>
FINANCIAL HIGHLIGHTS, continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31, 1997
-----------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 12.00
--------
Net investment income .................. 0.25
Net realized and unrealized gain ....... 0.14
--------
Total from investment operations ...... 0.39
--------
Less dividends and distributions from:
Net investment income ................. (0.25)
Net realized gain ..................... (0.05)
--------
Total dividends and distributions ..... (0.30)
--------
Net asset value, end of period ......... $ 12.09
========
TOTAL INVESTMENT RETURN+................ 3.31%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 0.76%(2)(3)
Net investment income .................. 4.96%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 3,857
Portfolio turnover rate................. 16%
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 12.00
--------
Net investment income .................. 0.23
Net realized and unrealized gain ....... 0.19
--------
Total from investment operations ...... 0.42
--------
Less dividends and distributions from:
Net investment income ................. (0.23)
Net realized gain ..................... (0.05)
--------
Total dividends and distributions ..... (0.28)
--------
Net asset value, end of period ......... $ 12.14
========
TOTAL INVESTMENT RETURN+................ 3.57%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 1.14%(2)(3)
Net investment income .................. 4.87%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $95,573
Portfolio turnover rate ................ 16%
</TABLE>
- ------------
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on
the net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
7
<PAGE>
FINANCIAL HIGHLIGHTS, continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31, 1997
-----------------
<S> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $12.00
--------
Net investment income .................. 0.23
Net realized and unrealized gain ....... 0.16
--------
Total from investment operations ...... 0.39
--------
Less dividends and distributions from:
Net investment income ................. (0.23)
Net realized gain ..................... (0.05)
--------
Total dividends and distributions ..... (0.28)
--------
Net asset value, end of period ......... $12.11
========
TOTAL INVESTMENT RETURN+................ 3.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 1.20%(2)(3)
Net investment income .................. 4.41%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $2,953
Portfolio turnover rate ................ 16%
</TABLE>
- ------------
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on
the net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
8
<PAGE>
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 Morgan Stanley
Dean Witter & Co., a preeminent global financial services firm that maintains
leading market positions in each of its three primary businesses--securities,
asset management and credit services.
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 101 investment companies, 28 of which
are listed on the New York Stock Exchange, with combined total net assets of
approximately $109.5 billion as of March 31, 1998. The Investment Manager
also manages portfolios of pension plans, other institutions and individuals
which aggregated approximately $4.1 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. 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, 1997, the Fund accrued total compensation
to the Investment Manager amounting to 0.44% of the Fund's average daily net
assets and the total expenses of Class D amounted to 0.49% of the Fund's
average daily net assets of Class D. Shares of Class A, Class B and Class C
were first issued on July 28, 1997. The expenses of the Fund include: the fee
of the Investment Manager; the fee pursuant to the Plan of Distribution (see
"Purchase of Fund Shares"); taxes; transfer agent, custodian and auditing
fees; certain legal fees; and printing and other expenses relating to the
Fund's operations which are not expressly assumed by the Investment Manager
under its Investment Management Agreement with the Fund.
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
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 share-
9
<PAGE>
holder approval. The Fund seeks to achieve its investment objective by
investing its assets in accordance with the following policies:
1. At least 80% of the Fund's total assets will be invested in tax-exempt
securities, except as stated in paragraph (5) below. Tax-exempt securities
consist of Municipal Bonds and Municipal Notes ("Municipal Obligations") and
Municipal Commercial Paper.
2. At least 75% of the Fund's total assets will be invested in: (a)
Municipal Bonds which are rated at the time of purchase within the three
highest grades by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P"); (b) Municipal Notes which at the time of purchase
are rated in the two highest grades by Moody's or S&P, or, if not rated, have
outstanding one or more issues of Municipal Bonds rated as set forth in
clause (a) of this paragraph; and (c) Municipal Commercial Paper which at the
time of purchase are rated P-1 by Moody's 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
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characteristics and, therefore, changes in economic conditions or other
circumstances are more likely to weaken their capacity to make principal and
interest payments than would be the case with investments in securities with
higher credit ratings. Municipal Bonds rated below investment grade may not
currently be paying any interest and may have extremely poor prospects of
ever attaining any real investment standing.
The two principal classifications of Municipal Obligations and Commercial
Paper are "general obligation" and "revenue" obligations or commercial paper.
General obligation bonds, notes or commercial paper are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Issuers of general obligation bonds, notes or
commercial paper include a state, its counties, cities, towns and other state
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.
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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 resulting from market fluctuations or other
changes in the Fund's total assets will not require elimination of any
security from the Fund's portfolio until such time as the Investment Manager
determines that it is practicable to sell the security without undue market
or tax consequences to the Fund.
The ratings assigned by Moody's and S&P represent their opinions as to the
quality of the securities which they undertake to rate (see the Appendix to
the Statement of Additional Information). It should be emphasized, however,
that the ratings are general and not absolute standards of quality.
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
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<PAGE>
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 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 re-
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<PAGE>
sponse 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.
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.
Year 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the
Distributor and the Transfer Agent depend on the smooth functioning of their
computer systems. Many computer software systems in use today cannot
recognize the year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services. The Investment Manager, the Distributor and the Transfer Agent have
been actively working on necessary changes to their own computer systems to
prepare for the year 2000 and expect that their systems will be adapted
before that date, but there can be no assurance that they will be successful,
or that interaction with other non-complying computer systems will not impair
their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout
the financial services industry beginning January 1, 2000. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial. Accordingly, the Fund's investments may be
adversely affected.
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"), Morgan Stanley & Co. Incorporated and other broker-dealer affiliates
of InterCapital, the views of 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 39 tax-exempt municipal funds and fund portfolios, with
approximately $11.2 billion in assets as of March 31, 1998. James F.
Willison, Senior Vice President of InterCapital and Manager of InterCapital'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,
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<PAGE>
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, Morgan Stanley & Co. Incorporated and other brokers
and dealers that are affiliates of InterCapital.
The portfolio trading engaged in by the Fund may result in its portfolio
turnover rate exceeding 100%. A portfolio turnover rate in excess of 100% may
be considered high and the Fund will incur correspondingly higher transaction
costs. Additionally, see "Dividends, Distributions and Taxes" for a
discussion of the tax policy of the Fund. A more extensive discussion of the
Fund's portfolio brokerage policies is set forth in the Statement of
Additional Information.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as
such, may be changed without shareholder approval.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities
of the Fund, as defined in the Act.
For purposes of the following restrictions: (a) an "issuer" of a security
is the entity whose assets and revenues are committed to the payment of
interest and principal on that particular security, provided that the
guarantee of a security will be considered a separate security, and provided
further that a guarantee of a security shall not be deemed to be a security
issued by the guarantor if the value of all securities issued or guaranteed
by the guarantor and owned by the Fund does not exceed 10% of the value of
the total assets of the Fund; (b) a "taxable security" is any security the
interest on which is subject to federal income tax; and (c) all percentage
limitations apply immediately after a purchase or initial investment, and any
subsequent change in any applicable percentage resulting from market
fluctuations or other changes in the Fund's total assets does not require
elimination of any security from the portfolio.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities
of any one issuer (other than obligations issued or guaranteed by the United
States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding taxable debt securities or
any one issuer (other than 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.
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Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially
all of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and
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 Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales
charge are subject to a contingent deferred sales charge ("CDSC") of 1.0% if
redeemed within one year of purchase, except for certain specific
circumstances. Class B shares are sold without an initial sales charge but
are subject to a CDSC (scaled down from 5.0% to 1.0%) payable upon most
redemptions within six years after purchase. Class C shares are sold without
an initial sales charge but are subject to a CDSC of 1.0% on most redemptions
made within one year after purchase. Class D shares are sold without an
initial sales charge or CDSC and are available only to investors meeting an
initial investment minimum of $5 million, and to certain other limited
categories of investors. At the discretion of the Board of Trustees of the
Fund, Class A shares may be sold to categories of investors in addition to
those set forth in this prospectus at net asset value without a front-end
sales charge, and Class D shares may be sold to certain other categories of
investors, in each case as may be described in the then current prospectus of
the Fund. See "Alternative Purchase Arrangements--Selecting a Particular
Class" for a discussion of factors to consider in selecting which Class of
shares to purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million or more and
to certain other limited categories of investors. For the purpose of meeting
the minimum $5 million initial investment for Class D shares, and subject to
the $1,000 minimum initial investment for each Class of the Fund, an
investor's existing holdings of Class A shares of the Fund and other Dean
Witter Funds that are multiple class funds ("Dean Witter Multi-Class Funds")
and shares of Dean Witter Funds sold with a front-end sales charge ("FSC
Funds") and concurrent investments in Class D shares of the Fund and other
Dean Witter Multi-Class Funds will be aggregated. Subsequent purchases of
$100 or more may be made by sending a check, payable to Dean Witter
Tax-Exempt Securities Trust, directly to Morgan Stanley Dean Witter Trust FSB
(the "Transfer Agent" or "MSDW Trust") at P.O. Box 1040, Jersey City, N.J.
07303 or by contacting an account executive of DWR or other Selected
Broker-Dealer. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A, Class B, Class C or Class D shares. If
no Class is specified, the Transfer Agent will not process the transaction
until the proper Class is identified. The minimum initial purchase in the
case of investments through EasyInvest (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 (i)
systematic payroll deduction plans, (ii) the InterCapital mutual fund asset
allocation program and (iii) fee-based programs approved by the Distributor,
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<PAGE>
pursuant to which participants pay an asset based fee for services in the
nature of investment advisory, administrative and/or brokerage services, the
Fund, in its discretion, may accept such purchases without regard to any
minimum amounts which would otherwise be required, provided, in the case of
systematic payroll deduction plans, that the Distributor has reason to believe
that additional 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.
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. Sales
personnel of a Selected Broker-Dealer are compensated for selling shares of
the Fund by the Distributor or any of its affiliates and/or the Selected
Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and/or the Distributor reserve the right to reject any
purchase order.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their
needs. The general public is offered three Classes of shares: Class A shares,
Class B shares and Class C shares, which differ principally in terms of sales
charges and rate of expenses to which they are subject. A fourth Class of
shares, Class D shares, is offered only to limited categories of investors
(see "No Load Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class
A, Class B and Class C shares bear the expenses of the ongoing shareholder
service fees, Class B and Class C shares bear the expenses of the ongoing
distribution fees and Class A, Class B and Class C shares which are redeemed
subject to a CDSC bear the expense of the additional incremental distribution
costs resulting from the CDSC applicable to shares of those Classes. The
ongoing distribution fees that are imposed on Class A, Class B and Class C
shares will be imposed directly against those Classes and not against all
assets of the Fund and, accordingly, such charges against one Class will not
affect the net asset value of any other Class or have any impact on investors
choosing another sales charge option. See "Plan of Distribution" and
"Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and
the factors an investor should consider when selecting a particular Class.
This summary is qualified in its entirety by detailed discussion of each
Class that follows this summary.
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain
other limited categories of investors) are not subject to any sales charges
at the time of purchase but are subject to a CDSC of 1.0% on redemptions made
within one year after purchase, except for certain specific circumstances.
Class A shares are also subject to a 12b-1 fee of up to 0.25% of the average
daily net assets of the Class. See "Initial Sales Charge Alternative--Class A
Shares."
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Class B Shares. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to
1.0%) if redeemed within six years of purchase. This CDSC may be waived for
certain redemptions. Class B shares are also subject to an annual 12b-1 fee
of 0.60% of the average daily net assets of Class B. The Class B shares'
distribution fee will cause that Class to have higher expenses and pay lower
dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition,
a certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time.
See "Contingent Deferred Sales Charge Alternative--Class B Shares."
Class C Shares. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They
are subject to an annual 12b-1 fee of up to 0.70% of the average daily net
assets of the Class C shares. The Class C shares' distribution fee may cause
that Class to have higher expenses and pay lower dividends than Class A or
Class D shares. See "Level Load Alternative--Class C Shares."
Class D Shares. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares
are sold at net asset value with no initial sales charge or CDSC. They are
not subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
Selecting a Particular Class. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any
other relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are
not available with respect to Class B or Class C shares. Moreover, Class A
shares are subject to lower ongoing expenses than are Class B or Class C
shares over the term of the investment. As an alternative, Class B and Class
C shares are sold without any initial sales charge so the entire purchase
price is immediately invested in the Fund. Any investment return on these
additional investment amounts may partially or wholly offset the higher
annual expenses of these Classes. Because the Fund's future return cannot be
predicted, however, there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly
lower CDSC upon redemptions, they do not, unlike Class B shares, convert into
Class A shares after approximately ten years, and, therefore, are subject to
an ongoing 12b-1 fee of 0.70% (rather than the 0.25% fee applicable to Class
A shares) for an indefinite period of time. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Other investors, however, may elect to purchase Class C shares if,
for example, they determine that they do not wish to be subject to a
front-end sales charge and they are uncertain as to the length of time they
intend to hold their shares.
For the purpose of meeting the $5 million minimum investment amount for
Class D shares, holdings of Class A shares in all Dean Witter Multi-Class
Funds, shares of FSC Funds and shares of Dean Witter Funds for which such
shares have been exchanged will be included together with the current
investment amount.
Sales personnel may receive different compensation for selling each Class
of shares. Investors
18
<PAGE>
should understand that the purpose of a CDSC is the same as that of the
initial sales charge in that the sales charges applicable to each Class
provide for the financing of the distribution of shares of that Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
A Maximum 4.25% 0.25% No
Initial sales charge
reduced for
purchases of
$25,000 and over;
shares sold without
an initial sales
charge generally
subject to a 1.0%
CDSC during first
year.
- -------------------------------------------------------------------------------
B Maximum 5.0% 0.60% B shares convert
CDSC during the first to A shares
year decreasing automatically
to 0 after six years after
approximately
ten years
- -------------------------------------------------------------------------------
C 1.0% CDSC during 0.70% No
first year
- -------------------------------------------------------------------------------
D None None No
- -------------------------------------------------------------------------------
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees
for each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge.
In some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase (calculated from the last day of the month in which the
shares were purchased), except for certain specific circumstances. The CDSC
will be assessed on an amount equal to the lesser of the current market value
or the cost of the shares being redeemed. The CDSC will not be imposed (i) in
the circumstances set forth below in the section "Contingent Deferred Sales
Charge Alternative--Class B Shares--CDSC Waivers," except that the references
to six years in the first paragraph of that section shall mean one year in
the case of Class A shares, and (ii) in the circumstances identified in the
section "Additional Net Asset Value Purchase Options" below. Class A shares
are also subject to an annual 12b-1 fee of up to 0.25% of the average daily
net assets of the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net
Asset Value" below), plus a sales charge (expressed as a percentage of the
offering price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE AMOUNT INVESTED
----------- ----- ---------------
<S> <C> <C>
Less than $25,000 .. 4.25% 4.44%
$25,000 but less
than $50,000 ...... 4.00% 4.17%
$50,000 but less
than $100,000 ..... 3.50% 3.63%
$100,000 but less
than $250,000 ..... 2.75% 2.83%
$250,000 but less
than $1 million .. 1.75% 1.78%
$1 million and over 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the
sales charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or
her spouse and their children under the age of 21 purchasing shares for his,
her or their own accounts;
19
<PAGE>
(c) a trustee or other fiduciary purchasing shares for a single trust estate
or a single fiduciary account; (d) a pension, profit-sharing or other
employee benefit plan qualified or non-qualified under Section 401 of the
Internal Revenue Code; (e) tax-exempt organizations enumerated in Section
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer
or of employers who are "affiliated persons" of each other within the meaning
of Section 2(a)(3)(c) of the Act; and for investments in Individual
Retirement Accounts of employees of a single employer through Systematic
Payroll Deduction plans; or (g) any other organized group of persons, whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount.
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class
A shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The
sales charge payable on the purchase of the Class A shares of the Fund, the
Class A shares of the other Dean Witter Multi-Class Funds and the shares of
the FSC Funds will be at their respective rates applicable to the total
amount of the combined concurrent purchases of such shares.
Right of Accumulation. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single
transaction, together with shares of the Fund and other Dean Witter Funds
previously purchased at a price including a front-end sales charge (including
shares of the Fund and other Dean Witter Funds acquired in exchange for those
shares, and including in each case shares acquired through reinvestment of
dividends and distributions), which are held at the time of such transaction,
amounts to $25,000 or more. If such investor has a cumulative net asset value
of shares of FSC Funds and Class A and Class D shares that, together with the
current investment amount, is equal to at least $5 million, such investor is
eligible to purchase Class D shares subject to the $1,000 minimum initial
investment requirement of that Class of the Fund. See "No Load
Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if:
(a) such notification is not furnished at the time of the order; or (b) a
review of the records of the Selected Broker-Dealer or the Transfer Agent
fails to confirm the investor's represented holdings.
Letter of Intent. The foregoing schedule of reduced sales charges will
also be available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares
of the Fund from DWR or other Selected Broker-Dealers. The cost of Class A
shares of the Fund or shares of other Dean Witter Funds which were previously
purchased at a price including a front-end sales charge during the 90-day
period prior to the date of receipt by the Distributor of the Letter of
Intent, or of Class A shares of the Fund or shares of other Dean Witter Funds
acquired in exchange for shares of such funds purchased during such period at
a price including a front-end sales charge, which are still owned by the
shareholder, may also be included in determining the applicable reduction.
Additional Net Asset Value Purchase Options. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value
by the following:
(1) trusts for which MSDW Trust (an affiliate of the Investment Manager)
provides discretionary trustee services;
20
<PAGE>
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for
services in the nature of investment advisory, administrative and/or
brokerage services (such investments are subject to all of the terms and
conditions of such programs, which may include termination fees, mandatory
redemption upon termination and such other circumstances as specified in the
programs' agreements and restrictions on transferability of Fund shares);
(3) investors who are clients of a Dean Witter account executive who
joined Dean Witter from another investment firm within six months prior to
the date of purchase of Fund shares by such investors, if the shares are
being purchased with the proceeds from a redemption of shares of an open-end
proprietary mutual fund of the account executive's previous firm which
imposed either a front-end or deferred sales charge, provided such purchase
was made within sixty days after the redemption and the proceeds of the
redemption had been maintained in the interim in cash or a money market fund;
and
(4) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (3), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase
payment may be immediately invested in the Fund. A CDSC, however, will be
imposed on most Class B shares redeemed within six years after purchase. The
CDSC will be imposed on any redemption of shares if after such redemption the
aggregate current value of a Class B account with the Fund falls below the
aggregate amount of the investor's purchase payments for Class B shares made
during the six years preceding the redemption. In addition, Class B shares
are subject to an annual 12b-1 fee of 0.60% of the average daily net assets
of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any CDSC upon
redemption. Shares redeemed earlier than six years after purchase may,
however, be subject to a CDSC which will be a percentage of the dollar amount
of shares redeemed and will be assessed on an amount equal to the lesser of
the current market value or the cost of the shares being redeemed. The size
of this percentage will depend upon how long the shares have been held, as
set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
------------ ------------------
<S> <C>
First...................... 5.0%
Second..................... 4.0%
Third...................... 3.0%
Fourth..................... 2.0%
Fifth...................... 2.0%
Sixth...................... 1.0%
Seventh and thereafter .... None
</TABLE>
Class B shares of the Fund issued in exchange for shares of Dean Witter
National Municipal Trust ("National Municipal") in connection with the
reorganization of National Municipal with the Fund on November 7, 1997
pursuant to an Agreement and Plan of Reorganization (the "Reorganization"),
that were subject to the lower CDSC schedule of National Municipal (as
described below), will continue to be subject to that lower CDSC schedule
unless (i) such shares are subsequently exchanged for shares of a fund with a
higher CDSC schedule or (ii) having been exchanged for shares of Dean Witter
Global Short-Term Income Fund Inc. ("Global Short-Term") or an Exchange Fund
(as defined below in "Shareholder Services--Exchange Privilege") are re-
21
<PAGE>
exchanged back into the Fund. Under such circumstances, the CDSC schedule
applicable to shares of the fund with the higher CDSC schedule acquired in
the exchange will apply to redemptions of such fund's shares or, in the case
of shares of Global Short-Term or any of the Exchange Funds acquired in an
exchange and then subsequently re-exchanged back into the Fund, the CDSC
schedule set forth in the above table will apply to redemptions of any of
such shares. The CDSC schedule applicable to National Municipal was as
follows: Shares held for three years or more after purchase (calculated as
described in the paragraph above) are not subject to any CDSC upon
redemption. However, shares redeemed earlier than three years after purchase
may be subject to a CDSC (calculated as described in the paragraph above),
the percentage of which depends on how long the shares have been held, as set
forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
------------ ------------------
<S> <C>
First..................... 3.0%
Second.................... 2.0%
Third..................... 1.0%
Fourth and thereafter .... None
</TABLE>
CDSC Waivers. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years
preceding the redemption; (ii) the current net asset value of shares
purchased more than six years prior to the redemption; and (iii) the current
net asset value of shares purchased through reinvestment of dividends or
distributions and/or shares acquired in exchange for shares of FSC Funds or
of other Dean Witter Funds acquired in exchange for such shares. Moreover, in
determining whether a CDSC is applicable it will be assumed that amounts
described in (i), (ii) and (iii) above (in that order) are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held
in a qualified corporate or self-employed retirement plan, Individual
Retirement Account ("IRA") or Custodial Account under Section 403(b)(7) of
the Internal Revenue Code ("403(b) Custodial Account"), provided in either
case that the redemption is requested within one year of the death or initial
determination of disability; and
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified
corporate or self-employed retirement plan following retirement (or, in the
case of a "key employee" of a "top heavy" plan, following attainment of age
59 1/2); (B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
Conversion to Class A Shares. Class B shares will convert automatically
to Class A shares, based on the relative net asset values of the shares of
the two Classes on the conversion date, which will be approximately ten (10)
years after the date of the original purchase. The ten year period is
calculated from the last day of the month in which the shares were purchased
or, in the case of Class B shares acquired through an exchange or a series of
exchanges, from the last day of the month in which the original Class B
shares were purchased. The conversion of shares will take place in the month
following the tenth anniversary of the purchase.
22
<PAGE>
There will also be converted at that time such proportion of Class B shares
acquired through automatic reinvestment of dividends and distributions owned
by the shareholder as the total number of his or her Class B shares
converting at the time bears to the total number of outstanding Class B
shares purchased and owned by the shareholder. In the case of Class B shares
previously exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired) is excluded from the holding period for
conversion. If those shares are subsequently re-exchanged for Class B shares
of a Dean Witter Multi-Class Fund, the holding period resumes on the last day
of the month in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior
to the date for conversion. Class B shares evidenced by share certificates
that are not received by the Transfer Agent at least one week prior to any
conversion date will be converted into Class A shares on the next scheduled
conversion date after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion
will have a basis equal to the shareholder's basis in the converted Class B
shares immediately prior to the conversion, and (iii) Class A shares received
on conversion will have a holding period that includes the holding period of
the converted Class B shares. The conversion feature may be suspended if the
ruling or opinion is no longer available. In such event, Class B shares would
continue to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions
made within one year after purchase (calculated from the last day of the
month in which the shares were purchased). The CDSC will be assessed on an
amount equal to the lesser of the current market value or the cost of the
shares being redeemed. The CDSC will not be imposed in the circumstances set
forth above in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case
of Class C shares. Class C shares are subject to an annual 12b-1 fee of up to
0.70% of the average daily net assets of the Class. Unlike Class B shares,
Class C shares have no conversion feature and, accordingly, an investor that
purchases Class C shares will be subject to 12b-1 fees applicable to Class C
shares for an indefinite period subject to annual approval by the Fund's
Board of Trustees and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million and the
following categories of investors: (i) investors participating in the
InterCapital mutual fund asset allocation program pursuant to which such
persons pay an asset based fee; (ii) persons participating in a fee-based
program approved by the Distributor, pursuant to which such persons pay an
asset based fee for services in the nature of investment advisory,
administrative and/or brokerage services (subject to all of the terms and
conditions of such programs referred to in (i) and (ii) above, which may
include termination fees mandatory redemption upon termination and such other
circumstances as specified in the programs' agreements, and restrictions on
transferability of Fund shares); (iii) certain Unit Investment Trusts
sponsored by DWR; (iv) certain other open-end investment companies whose
shares are distributed by the Distributor; and (v) other categories of
investors, at the discretion of the Board, as disclosed in the then current
prospectus of the Fund. All shares of the Fund held prior to July 28, 1997
have been
23
<PAGE>
designated Class D shares. Additional investments in Class D shares by
shareholders holding such shares may only be made if those shareholders are
otherwise eligible to purchase Class D shares. However, shareholders holding
such shares will receive the benefit of the value of such shares towards
reduced sales charges on purchases of Class A shares pursuant to the Fund's
"Right of Accumulation" (see "Initial Sales Charge Alternative--Class A
Shares--Right of Accumulation"). Investors who require a $5 million minimum
initial investment to qualify to purchase Class D shares may satisfy that
requirement by investing that amount in a single transaction in Class D
shares of the Fund and other Dean Witter Multi-Class Funds, subject to the
$1,000 minimum initial investment required for that Class of the Fund. In
addition, for the purpose of meeting the $5 million minimum investment
amount, holdings of Class A shares in all Dean Witter Multi-Class Funds,
shares of FSC Funds and shares of Dean Witter Funds for which such shares
have been exchanged will be included together with the current investment
amount. If a shareholder redeems Class A shares and purchases Class D shares,
such redemption may be a taxable event.
PLAN OF DISTRIBUTION
Effective July 28, 1997, the Fund has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act with respect to the distribution of
Class A, Class B and Class C shares of the Fund. In the case of Class A and
Class C shares, the Plan provides that the Fund will reimburse the
Distributor and others for the expenses of certain activities and services
incurred by them specifically on behalf of those shares. Reimbursements for
these expenses will be made in monthly payments by the Fund to the
Distributor, which will in no event exceed amounts equal to payments at the
annual rates of 0.25% and 0.70% of the average daily net assets of Class A
and Class C, respectively. In the case of Class B shares, the Plan provides
that the Fund will pay the Distributor a fee, which is accrued daily and paid
monthly, at the annual rate of 0.60% of the average daily net assets of Class
B. The fee is treated by the Fund as an expense in the year it is accrued. In
the case of Class A shares, the entire amount of the fee currently represents
a service fee within the meaning of the NASD guidelines. In the case of Class
B and Class C shares, a portion of the fee payable pursuant to the Plan,
equal to 0.15% and 0.25% of the average daily net assets of each of these
Classes, respectively, is currently characterized as a service fee. A service
fee is a payment made for personal service and/or the maintenance of
shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses
borne by the Distributor and others in the distribution of the shares of
those Classes, including the payment of commissions for sales of the shares
of those Classes and incentive compensation to and expenses of DWR's account
executives and others who engage in or support distribution of shares or who
service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan in the case of Class B shares to compensate DWR and other Selected
Broker-Dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses. For the fiscal period July 28 through December 31, 1997, Class A,
Class B and Class C shares of the Fund accrued payments under the Plan
amounting to $2,466, $83,261 and $4,834, which amounts on an annualized basis
are equal to 0.25%, 0.60% and 0.70% of the average daily net assets of Class
A, Class B and Class C, respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i)
the payments made by the Fund pursuant to the Plan, and (ii) the proceeds of
CDSCs paid by investors
24
<PAGE>
upon the redemption of Class B shares. For example, if $1 million in expenses
in distributing Class B shares of the Fund had been incurred and $750,000 had
been received as described in (i) and (ii) above, the excess expense would
amount to $250,000. The Distributor has advised the Fund that such excess
amounts, including the carrying charge described above, totalled $2,732,178
at December 31, 1997, which was equal to 2.86% of the net assets of Class B
on such date. Of this amount, $2,455,436 represents excess distribution
expenses of National Municipal, the net assets of which were combined with
those of the Fund on November 7, 1997 pursuant to the Reorganization.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, such excess amount does not constitute a
liability of the Fund. Although there is no legal obligation for the Fund to
pay expenses incurred in excess of payments made to the Distributor under the
Plan, and the proceeds of CDSCs paid by investors upon redemption of shares,
if for any reason the Plan is terminated the Trustees will consider at that
time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or CDSCs, may or
may not be recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 0.70% of the average
daily net assets of Class A or Class C, respectively, will not be reimbursed
by the Fund through payments in any subsequent year, except that expenses
representing a gross sales commission credited to account executives at the
time of sale may be reimbursed in the subsequent calendar year. The
Distributor has advised the Fund that unreimbursed expenses representing a
gross sales commission credited to account executives at the time of sale
totalled $22,030 in the case of Class C at December 31, 1997, which amount
was equal to 0.75% of the net assets of Class C on such date, and that there
were no such expenses that may be reimbursed in the subsequent year in the
case of Class A on such date. No interest or other financing charges will be
incurred on any Class A or Class C distribution expenses incurred by the
Distributor under the Plan or on any unreimbursed expenses due to the
Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined once daily at 4:00 p.m., New
York time, on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time), by taking the net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the
Class A, Class B, Class C and Class D shares will be invested together in a
single portfolio. The net asset value of each Class, however, will be
determined separately by subtracting each Class's accrued expenses and
liabilities. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by
the New York Stock Exchange.
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 sixty 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 sixty days will
25
<PAGE>
be valued on a mark to market basis until such time as they reach a maturity
of sixty days, whereupon they will be valued at amortized cost using their
value on the 61st day unless the Trustees determine such does not reflect the
securities' market value, in which case these securities will be valued at
their fair market value as determined by the Board of Trustees. Listed
options on debt securities are valued at the latest sale price on the
exchange on which they are listed unless no sales of such options have taken
place that day, in which case, they will be valued at the mean between their
closing bid and asked prices. Unlisted options on debt securities are valued
at the mean between their latest bid and asked price. Futures are valued at
the latest sale price on the commodities exchange on which they trade unless
the Board of Trustees determines that such price does not reflect their fair
value, in which case they will be valued at their fair market value as
determined by the Board of Trustees. All other securities and other assets
are valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Board of Trustees.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Automatic Investment of Dividends and Distri-butions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the
shareholder, in shares of any other open-end Dean Witter Fund), unless the
shareholder requests that they be paid in cash. Shares so acquired are
acquired at net asset value and are not subject to the imposition of a
front-end sales charge or a CDSC (see "Redemptions and Repurchases"). Such
dividends and distributions will be paid, at the net asset value per share
(without sales charge), in shares of the applicable Class 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.
Investment of Dividends and Distributions Received in Cash. Any
shareholder who receives a cash payment representing a dividend or capital
gains distribution may invest such dividend or distribution in shares of the
applicable Class at the net asset value per share next determined after
receipt by the Transfer Agent, by returning the check or the proceeds to the
Transfer Agent within thirty days after the payment date. Shares so acquired
are acquired at net asset value and are not subject to the imposition of a
front-end sales charge or a CDSC (see "Redemptions and Repurchases").
EasyInvest (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 or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund (see "Purchase of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemption").
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The 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. Any applicable
CDSC will be imposed on shares redeemed under the Withdrawal Plan (see
"Purchase of Fund Shares"). Therefore, any shareholder participating in the
Withdrawal Plan will have sufficient shares redeemed from his or her account
so that the proceeds (net of any applicable CDSC) to the shareholder will be
the designated monthly or quarterly amount. Withdrawal plan payments should
not
26
<PAGE>
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.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any exchange
fee. Shares may also be exchanged for shares of the following funds: Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S.
Treasury Trust and five Dean Witter funds which are money market funds (the
"Exchange Funds"). Class A shares may also be exchanged for shares of Dean
Witter Multi-State Municipal Series Trust and Dean Witter Hawaii Municipal
Trust, which are Dean Witter Funds sold with a front-end sales charge ("FSC
Funds"). Class B shares may also be exchanged for shares of Dean Witter
Global Short-Term Income Fund Inc. ("Global Short-Term") which is a Dean
Witter Fund offered with a CDSC. Exchanges may be made after the shares of
the Fund acquired by purchase (not by exchange or dividend reinvestment) have
been held for thirty days. There is no holding period for exchanges of shares
acquired by exchange or dividend reinvestment.
An exchange to another Dean Witter Multi-Class Fund, any FSC Fund, Global
Short-Term or any Exchange Fund that is not a money market fund is on the
basis of the next calculated net asset value per share of each fund after the
exchange order is received. When exchanging into a money market fund from the
Fund, shares of the Fund are redeemed out of the Fund at their next
calculated net asset value and the proceeds of the redemption are used to
purchase shares of the money market fund at their net asset value determined
the following business day. Subsequent exchanges between any of the money
market funds and any of the Dean Witter Multi-Class Funds, FSC Funds, Global
Short-Term or any Exchange Fund that is not a money market fund can be
effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period
of time the shareholder remains in an Exchange Fund (calculated from the last
day of the month in which the Exchange Fund shares were acquired), the
holding period (for the purpose of determining the rate of the CDSC) is
frozen. If those shares are subsequently re-exchanged for shares of a Dean
Witter Multi-Class Fund or shares of Global Short-Term, the holding period
previously frozen when the first exchange was made resumes on the last day of
the month in which shares of a Dean Witter Multi-Class Fund or shares of
Global Short-Term are reacquired. Thus, the CDSC is based upon the time
(calculated as described above) the shareholder was invested in shares of a
Dean Witter Multi-Class Fund or in shares of Global Short-Term (see "Purchase
of Fund Shares"). In the case of exchanges of Class A shares which are
subject to a CDSC, the holding period also includes the time (calculated as
described above) the shareholder was invested in shares of a FSC Fund. In the
case of shares exchanged into an Exchange Fund on or after April 23, 1990,
upon a redemption of shares which results in a CDSC being imposed, a credit
(not to exceed the amount of the CDSC) will be given in an amount equal to
the Exchange Fund 12b-1 distribution fees incurred on or after that date
which are attributable to those shares. (Exchange Fund 12b-1 distribution
fees are described in the prospectuses for those funds.) Class B shares of
the Fund acquired in exchange for shares of Global Short-Term or Class B
shares of another Dean Witter Multi-Class Fund having a different CDSC
schedule than that of this Fund will be subject to the
27
<PAGE>
higher CDSC schedule, even if such shares are subsequently re-exchanged for
shares of the fund with the lower CDSC schedule. Class B shares of the Fund
issued in exchange for shares of National Municipal in connection with the
Reorganization that were subject to the lower CDSC schedule of National
Municipal (as described below), will continue to be subject to that lower
CDSC schedule unless (i) such shares are subsequently exchanged for shares of
a fund with a higher CDSC schedule or (ii) having been exchanged for shares
of Global Short-Term or an Exchange Fund are re-exchanged back into the Fund.
Under such circumstances, the CDSC schedule applicable to shares of the fund
with the higher CDSC schedule acquired in the exchange will apply to
redemptions of such fund's shares or, in the case of shares of Global
Short-Term or any of the Exchange Funds acquired in an exchange and then
subsequently re-exchanged back into the Fund, the Fund's CDSC schedule will
apply to redemptions of any of such shares.
Additional Information Regarding Exchanges. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Investment Manager to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Investment Manager's
discretion, may be limited by the Fund's refusal to accept additional
purchases and/or exchanges from the investor. Although the Fund does not have
any specific definition of what constitutes a pattern of frequent exchanges,
and will consider all relevant factors in determining whether a particular
situation is abusive and contrary to the best interests of the Fund and its
other shareholders, investors 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. Also, 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 objective(s)
and policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement of
each Class of shares and other conditions imposed by each fund. In the case
of a shareholder holding a share certificate or certificates, no exchanges
may be made until all applicable share certificates have been received by the
Transfer Agent and deposited in the shareholder's account. An exchange will
be treated for federal income tax purposes 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
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<PAGE>
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 each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of
any applicable CDSC in the case of Class A, Class B or Class C shares (see
"Purchase of Fund Shares"). If shares are held in a shareholder's account
without a share certificate, a written request for redemption 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, along
with any additional information required by the Transfer Agent.
Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the
net asset value next determined (see "Purchase of Fund Shares") after such
repurchase order is received by DWR or other Selected Broker-Dealer reduced
by any applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund or the
Distributor. The offer by DWR and other Selected Broker-Dealers to repurchase
shares 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 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.
29
<PAGE>
Reinstatement Privilege. A shareholder who has had his or her share
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase
in shares of the Fund in the same Class from which such shares were redeemed
or repurchased, at their net asset value next determined after a
reinstatement request, together with the proceeds, is received by the
Transfer Agent and receive a pro rata credit for any CDSC paid in connection
with such redemption or repurchase.
Involuntary Redemption. The Fund reserves the right, on sixty days'
notice, to redeem at net asset value the shares of any shareholder whose
shares due to redemptions by the shareholder have a value of less than $100,
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 sixty days to make an additional
investment in an amount which will increase the value of the account to at
least the applicable amount before the redemption is processed. No CDSC will
be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends separately for
each Class from net investment income on each day the New York Stock Exchange
is open for business to shareholders of record as of the close of business
the preceding business day. The amount of such dividends may fluctuate from
day to day. Such dividends are paid monthly. The Fund intends to distribute
all of its 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 any capital gains distributions will be paid in
additional Fund shares of the same Class and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends be paid in cash. Shares
acquired by dividend and distribution reinvestments will not be subject to
any front-end sales charge or CDSC. Class B shares acquired through dividend
and distribution reinvestments will become eligible for conversion to Class A
shares on a pro rata basis. Distributions paid on Class A and Class D shares
will be higher than for Class B and Class C shares because distribution fees
paid by Class B and Class C shares are higher. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions.") 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.
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<PAGE>
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by maintaining, as of the close of each quarter of its taxable
year, at least 50% of the value of its total assets in tax-exempt securities.
If the Fund satisfies such requirement, distributions from net investment
income to shareholders, whether taken in cash or reinvested in additional
shares, will be excludable from gross income for federal income tax purposes
to the extent net investment income is represented by interest on tax-exempt
securities. Exempt-interest dividends are included, however, in determining
what portion, if any, of a person's Social Security benefits are subject to
federal income tax. The Internal Revenue Code may subject interest received
on certain otherwise tax-exempt securities to an alternative minimum tax.
This alternative minimum tax may be incurred due to interest received on
certain "private activity bonds" (in general, bonds that benefit
non-government entities) issued after August 7, 1986 which, although
tax-exempt, are used for purposes other than those generally performed by
government units (e.g., bonds used for commercial or housing purposes).
Income received on such bonds is classified as a "tax preference item," under
the alternative minimum tax, for both individual and corporate investors. The
Fund anticipates that a portion of its investments will be made in such
"private activity bonds," with the result that a portion of the
exempt-interest dividends paid by the Fund will be an item of tax preference
to shareholders subject to the alternative minimum tax. In addition, certain
corporations which are subject to the alternative minimum tax may also have
to include exempt-interest dividends in calculating their alternative minimum
taxable income in situations where the "adjusted current earnings" of the
corporation exceeds its alternative minimum taxable income.
Under the Revenue Reconciliation Act of 1993, all or a portion of the
Fund's gain from the sale or redemption of tax-exempt obligations purchased
at a market discount after April 30, 1993 will be treated as ordinary income
rather than capital gain. This rule may increase the amount of ordinary
income dividends received by shareholders.
After the end of the calendar year, the Fund will mail to its shareholders
a statement indicating the percentage of the dividend distributions for such
year which constitutes exempt-interest dividends and the percentage, if any,
that is taxable, and to what extent the taxable portion is long-term or
short-term capital gain. Shareholders will also be notified of their
proportionate share of long-term capital gains distributions that are
eligible for a reduced rate of tax under the Taxpayer Relief Act of 1997.
Shareholders will normally be subject to federal income tax on dividends
paid from interest income derived from taxable securities and on
distributions of net short-term capital gains, if any. Distributions of
long-term capital gains, if any, are taxable as long-term capital gains,
regardless of how long the shareholder has held the Fund shares and
regardless of whether the distribution is received in additional shares or in
cash. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and proceeds of redemptions or
repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to accuracy.
Any loss on the sale or exchange of shares of the Fund which are held for
six months or less is disallowed to the extent of the amount of any
exempt-interest dividend paid with respect to such shares. Treasury
Regulations may provide for a reduction in such required holding periods. If
a shareholder receives a distribution that is taxed as a long-term capital
gain on shares held for six months or less and sells those shares at a loss,
the loss will be treated as a long-term capital loss.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of an investment company paying exempt-interest dividends, such as the
Fund, will not be deductible by the investor for federal income tax purposes.
The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any
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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. These figures are computed separately
for Class A, Class B, Class C and Class D shares. 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 each Class of the Fund
is computed by dividing the Class'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 for each Class. The Fund may also quote
tax-equivalent yield, which is calculated by determining the pre-tax yield
for each Class 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 in a Class of the Fund 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 applicable Class and all sales charges which
would be incurred by shareholders, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 or $100,000 in each Class of
shares of the Fund. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc.).
Prior to July 28, 1997, the Fund offered only one Class of shares. Because
the distribution arrangement for Class A most closely resembles the
distribution arrangement applicable prior to the implementation of multiple
classes, historical performance information may be restated to reflect the
current maximum sales charge applicable to Class A as well as the imposition
of an ongoing 12b-1 fee. In addition, because all shares of the Fund held
prior to July 28, 1997 have been designated Class D shares, the Fund's
historical performance may also be restated to reflect the absence of any
sales charge in the case of Class D shares.
32
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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 except
that each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other
matter in which the interests of one Class differ from the interests of any
other Class. In addition, Class B shareholders will have the right to vote on
any proposed material increase in Class A's expenses, if such proposal is
submitted separately to Class A shareholders. Also, as discussed herein,
Class A, Class B and Class C bear the expenses related to the distribution of
their respective shares.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for 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 sixty days of a sale or a sale
within sixty days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within thirty 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.
Master/Feeder Conversion. The Fund reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same
investment objective and policies and substantially the same investment
restrictions as those applicable to the Fund.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
33
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
Dean Witter California Tax-Free Daily Income Trust
Dean Witter Liquid Asset Fund Inc.
Dean Witter New York Municipal Money Market Trust
Dean Witter Tax-Free Daily Income Trust
Dean Witter U.S. Government Money Market Trust
EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Capital Growth Securities
Dean Witter Developing Growth Securities Trust
Dean Witter Dividend Growth Securities Inc.
Dean Witter European Growth Fund Inc.
Dean Witter Financial Services Trust
Dean Witter Fund of Funds
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter Health Sciences Trust
Dean Witter Income Builder Fund
Dean Witter Information Fund
Dean Witter International SmallCap Fund
Dean Witter Japan Fund
Dean Witter Market Leader Trust
Dean Witter Mid-Cap Growth Fund
Dean Witter Natural Resource Development
Securities Inc.
Dean Witter Pacific Growth Fund Inc.
Dean Witter Precious Metals and Minerals Trust
Dean Witter Special Value Fund
Dean Witter S&P 500 Index Fund
Dean Witter Utilities Fund
Dean Witter Value-Added Market Series
Dean Witter World Wide Investment Trust
Morgan Stanley Dean Witter Competitive Edge Fund,
"Best Ideas" Portfolio
Morgan Stanley Dean Witter Growth Fund
Morgan Stanley Dean Witter Mid-Cap Dividend
Growth Securities
ASSET ALLOCATION FUNDS
Dean Witter Global Asset Allocation Fund
Dean Witter Strategist Fund
FIXED-INCOME FUNDS
Dean Witter Balanced Income Fund
Dean Witter California Tax-Free Income Fund
Dean Witter Convertible Securities Trust
Dean Witter Diversified Income Trust
Dean Witter Federal Securities Trust
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Hawaii Municipal Trust
Dean Witter High Yield Securities Inc.
Dean Witter Intermediate Income Securities
Dean Witter Intermediate Term
U.S. Treasury Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Multi-State Municipal Series Trust
Dean Witter New York Tax-Free Income Fund
Dean Witter Short-Term Bond Fund
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter World Wide Income Trust
DEAN WITTER RETIREMENT
SERIES
American Value Series
Capital Growth Series
Dividend Growth Series
Global Equity Series
Intermediate Income Securities Series
Liquid Asset Series
Strategist Series
U.S. Government Money Market Series
U.S. Government Securities Series
Utilities Series
Value-Added Market Series
ACTIVE ASSETS ACCOUNT
PROGRAM
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
Active Assets Money Trust
Active Assets Tax-Free Trust
C66679
<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
Wayne E. Hedien
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
Morgan Stanley Dean Witter Trust FSB
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--APRIL 17, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
APRIL 17, 1998
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 April 17, 1998, 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 .... 12
Investment Restrictions............... 18
Portfolio Transactions and Brokerage . 19
The Distributor ...................... 21
Determination of Net Asset Value .... 24
Purchase of Fund Shares............... 25
Shareholder Services.................. 27
Redemptions and Repurchases........... 31
Dividends, Distributions and Taxes ... 33
Performance Information............... 34
Description of Shares of the Fund .... 37
Custodian and Transfer Agent.......... 37
Independent Accountants............... 38
Reports to Shareholders............... 38
Legal Counsel......................... 38
Experts............................... 38
Registration Statement................ 38
Financial Statements--December 31,
1997................................. 39
Report of Independent Accountants .... 59
Appendix.............................. 60
</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 Morgan Stanley Dean Witter & Co. ("MSDWD"), 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 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 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, Dean Witter S&P 500 Index Fund, Dean Witter Fund of Funds, Morgan
Stanley Dean Witter Competitive Edge Fund--"Best Ideas" Portfolio, Morgan
Stanley Dean Witter Growth Fund, Morgan
3
<PAGE>
Stanley Dean Witter Mid-Cap Dividend Growth Securities, 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 Opportunities 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 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 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) administrator of The Black Rock Strategic
Term Trust Inc., a closed-end investment company; (ii) sub-administrator of
Templeton Global Governments Income Trust, a closed-end investment company;
and (iii) investment advisor of Offshore Dividend Growth Fund and Offshore
Money Market Fund, mutual funds established under the laws of the Cayman
Islands and available only to investors who are participants in DWR's
International Active Assets Account program and are neither citizens nor
residents of the United States.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective and policies.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, bookkeeping and legal services as the Fund may
reasonably require in the conduct of its business, including the preparation
of prospectuses, proxy statements and reports required to be filed with
federal and state securities commissions (except insofar as the participation
or assistance of independent accountants and attorneys is, in the opinion of
the Investment Manager, necessary or desirable). In addition, the Investment
Manager pays the salaries of all personnel, including officers of the Fund,
who are employees of the Investment Manager. The Investment Manager also
bears the cost of telephone service, heat, light, power and other utilities
provided to the Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to
the Fund which were previously performed directly by InterCapital. 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 "The
Distributor"), will be paid by the Fund. These expenses will be allocated
among the four classes of shares of the Fund (each, a "Class") pro rata based
on the net assets of the Fund attributable to each Class, except as described
below. Such expenses include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1 (the "12b-1 fee") (see "The
Distributor"); 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
4
<PAGE>
state securities laws; the cost and expense of printing, including
typesetting, and distributing Prospectuses and Statements of Additional
Information of the Fund and supplements thereto to the Fund's shareholders;
all expenses of shareholders' and Trustees' meetings and of preparing,
printing and mailing of proxy statements and reports to shareholders; fees
and travel expenses of Trustees or members of any advisory board or committee
who are not employees of the Investment Manager or any corporate affiliate of
the Investment Manager; all expenses incident to any dividend, withdrawal or
redemption options; charges and expenses of any outside service used for
pricing of the Fund's shares; fees and expenses of legal counsel, including
counsel to the Trustees who are not interested persons of the Funds or of the
Investment Manager (not including compensation or expenses of attorneys who
are employees of the Investment Manager) and independent accountants;
membership dues of industry associations; interest on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Trustees) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification relating thereto); and all other costs of the
Fund's operation. The 12b-1 fees relating to a particular Class will be
allocated directly to that Class. In addition, other expenses associated with
a particular Class (except advisory or custodial fees) may be allocated
directly to that Class, provided that such expenses are reasonably identified
as specifically attributable to that Class and the direct allocation to that
Class is approved by the Trustees.
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. The management fee is allocated among the Classes
pro rata based on the net assets of the Fund attributable to each Class. For
the fiscal years ended December 31, 1995, 1996 and 1997, the Fund accrued to
the Investment Manager total compensation of $5,608,466, $5,320,578 and
$5,004,702, 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 Board of Trustees on February
21, 1997 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on May 21, 1997. The Agreement is substantially identical
to a prior investment management agreement which was initially approved by
the Board of Trustees on October 30, 1992 and by the shareholders of the Fund
at a Special Meeting of Shareholders held on January 12, 1993. The Agreement
took effect on May 31, 1997 upon the consummation of the merger of Dean
Witter, Discover & Co. with Morgan Stanley Group Inc. 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 has an initial term ending April 30, 1999
and 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.
5
<PAGE>
The following owned 5% or more of the outstanding shares of Class A of the
Fund on April 1, 1998: Morgan Stanley Dean Witter Trust FSB as Trustee FBO
Richard K. Allen and Dorothy B. Allen, PO Box 503, Jersey City, NJ
07311-3977--14.41%; Jack Biegger and Shirley Biegger as Trustees for the Jack
Biegger revocable Living Trust, 20 Wild Dunes Court, Las Vegas, Nevada
89113--13.08%; and Sharon R. Frank, 210 West Grant #306, Minneapolis, MN
55403-2244--13.03%. The following owned 5% or more of the outstanding shares
of Class C of the Fund on April 1, 1998: Robert P. Scurich, PO Box 502,
Glenbrook, NV 89413-0502--13.441%; Billy R. Bryant and Gail A. Bryant; JT
TEN, 1264 Fish Hook Way, Ponte Vedra Beach, FL 32082-2517--8.318%; Donald W.
Dalrymple and Marcia Bresee Dalrymple JTWROS, 2801 34th Pl NW, Washington DC
20007-1406--5.362%; Miriam M. Zakon, 51 Mignon Road, West Newton, MA
02165-2630--5.265%; and Roney Buffman and Lou Buffman JT TEN, c/o Cartier
Caesars Palace, 3570 S. Las Vegas Blvd, Las Vegas, NV 89109-8924--5.26%.
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.
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 86 Dean Witter Funds and the 11 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 (57) Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of the
c/o Levitz Furniture Corporation Dean Witter Funds; formerly President and Chief Executive Officer
7887 N. Federal Hwy. of Hills Department Stores (May, 1991-July, 1995); formerly
Boca Raton, Florida variously Chairman, Chief Executive Officer, President and Chief
Operating Officer (1987-1991) of the Sears Merchandise Group
of Sears, Roebuck and Co.; Director of Eaglemark Financial
Services, Inc. and Weirton Steel Corporation.
Charles A. Fiumefreddo* (64) 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 Morgan Stanley Dean Witter Trust FSB ("MSDW
Trust"); Director and/or officer of various MSDW subsidiaries.
Edwin J. Garn (65) Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah)(1974-1992) and Chairman, Senate Banking
c/o Huntsman Corporation Committee (1980-1986); formerly Mayor of Salt Lake City, Utah
500 Huntsman Way (1972-1974); formerly Astronaut, Space Shuttle Discovery (April
Salt Lake City, Utah 12-19, 1985); Vice Chairman, Huntsman Corporation (since January,
1993); Director of Franklin Covey (time management systems)
and John Alden Financial Corp. (health insurance), United Space
Alliance (joint venture between Lockheed Martin and the Boeing
Company) and Nuskin Asia Pacific (multilevel marketing); member
of the board of various civic and charitable organizations.
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- ----------------------------------------------------------
John R. Haire (73) Chairman of the Audit Committee and Chairman of the Committee
Trustee of the Independent Directors or Trustees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Chairman of the Audit Committee and
New York, New York Chairman of the Committee of the Independent Trustees and Trustee
of the TCW/DW Funds; formerly President, Council for Aid to
Education (1978-1989) and Chairman and Chief Executive Officer
of Anchor Corporation, an Investment Adviser (1964-1978).
Wayne E. Hedien (64) Retired; Director or Trustee of the Dean Witter Funds (commencing
Trustee on September 1, 1997); Director of The PMI Group, Inc. (private
c/o Gordon Altman Butowsky mortgage insurance); Trustee and Vice Chairman of The Field
Weitzen Shalov & Wein Museum of Natural History; formerly associated with the Allstate
Counsel to the Independent Trustees Companies (1966-1994), most recently as Chairman of The Allstate
114 West 47th Street Corporation (March, 1993-December, 1994) and Chairman and Chief
New York, New York Executive Officer of its wholly-owned subsidiary, Allstate
Insurance Company (July, 1989-December, 1994); director of
various other business and charitable organizations.
Dr. Manuel H. Johnson (49) Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Co-Chairman and a founder of the Group of Seven Council
c/o Johnson Smick International, Inc. (G7C), an international economic commission; Director or Trustee
1133 Connecticut Avenue, N.W. of the Dean Witter Funds; Trustee of the TCW/DW Funds; Director
Washington, D.C. of NASDAQ (since June, 1995); Director of Greenwich Capital
Markets Inc. (broker-dealer) and NVR, Inc. (home construction);
Chairman and Trustee of the Financial Accounting Foundation
(oversight organization for the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of Governors of
the Federal Reserve System (1986-1990) and Assistant Secretary
of the U.S. Treasury.
Michael E. Nugent (61) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Director or Trustee of the Dean Witter Funds; Trustee
c/o Triumph Capital, L.P. of the TCW/DW Funds; formerly Vice President, Bankers Trust
237 Park Avenue Company and BT Capital Corporation (1984-1988); Director of
New York, New York various business organizations.
Philip J. Purcell* (54) Chairman of the Board of Directors and Chief Executive Officer
Trustee of MSDW, DWR and Novus Credit Services Inc.; Director of
1585 Broadway InterCapital, DWSC and Distributors; Director or Trustee of
New York, New York the Dean Witter Funds; Director and/or officer of various MSDW
subsidiaries.
John L. Schroeder (67) 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
114 West 47th Street
New York, NY
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- ----------------------------------------------------------
Barry Fink (43) Senior Vice President (since March, 1997) and Secretary and
Vice President, Secretary General Counsel (since February, 1997) of InterCapital and DWSC;
and General Counsel Senior Vice President (since March, 1997) and Assistant Secretary
Two World Trade Center 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 (54) 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 (49) Vice President of InterCapital; Vice President of various Dean
Vice President Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (52) 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.
</TABLE>
New York, New York [FN]
- ---------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and MSDW
Trust and Director of MSDW Trust, Executive Vice President and Director of
DWR, and Director of SPS Transaction Services, Inc. and various other MSDW
subsidiaries, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and MSDW
Trust and a Director of MSDW Trust, Joseph J. McAlinden, Executive Vice
President and Chief Investment Officer of InterCapital and a Director of MSDW
Trust, Robert S. Giambrone, Senior Vice President of InterCapital, DWSC,
Distributors and MSDW Trust and a Director of MSDW Trust, 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. Marilyn K. Cranney, First Vice President and
Assistant General Counsel of InterCapital, and DWSC, and Lou Anne D. McInnis,
Carsten Otto and Ruth Rossi, Vice Presidents and Assistant General Counsels
of InterCapital and DWSC, and Frank Bruttomesso and Todd Lebo, 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 nine (9) 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 86 Dean Witter
Funds, comprised of 130 portfolios. As of March 31, 1998, the Dean Witter
Funds had total net assets of approximately $105.4 billion and more than six
million shareholders.
Seven Trustees (77% 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
8
<PAGE>
InterCapital's parent company, MSDWD. These are the "disinterested" or
"independent" Trustees. The other two Trustees (the "management Trustees")
are affiliated with InterCapital. Four of the seven 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, 1997, the three Committees held a combined total of seventeen 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.
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,
9
<PAGE>
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 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 $800 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 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). If a Board
meeting and a Committee meeting, or more than one Committee meeting, take
place on a single day, the Trustees are paid a single meeting fee by the
Fund. The Fund also reimburses such Trustees for travel and other
out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by
the Investment Manager or an affiliated company receive no compensation or
expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended December 31, 1997.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- ---------------
<S> <C>
Michael Bozic .............. $ 1,650
Edwin J. Garn .............. 1,850
John R. Haire .............. 3,800
Wayne E. Hedien............. 482
Dr. Manuel H. Johnson ..... 1,800
Michael E. Nugent .......... 1,850
John L. Schroeder........... 1,850
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1997 for
services to the 84 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, 1997. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the TCW/DW
10
<PAGE>
Funds are included solely because of a limited exchange privilege between
those Funds and five Dean Witter Money Market Funds. Mr. Hedien's term as
Director or Trustee of each Dean Witter Fund commenced on September 1, 1997.
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
FOR SERVICE DIRECTORS/ COMMITTEES OF TOTAL CASH
AS DIRECTOR OR FOR SERVICE AS TRUSTEES AND INDEPENDENT COMPENSATION
TRUSTEE AND TRUSTEE AND AUDIT TRUSTEES FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER COMMITTEES OF 84 AND AUDIT 84 DEAN WITTER
NAME OF OF 84 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 ........ $133,602 -- -- -- $133,602
Edwin J. Garn ........ 149,702 -- -- -- 149,702
John R. Haire ........ 149,702 $73,725 $157,463 $25,350 406,240
Wayne E. Hedien....... 39,010 -- -- -- 39,010
Dr. Manuel H.
Johnson.............. 145,702 71,125 -- -- 216,827
Michael E. Nugent ... 149,702 73,725 -- -- 223,427
John L. Schroeder .... 149,702 73,725 -- -- 223,427
</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 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.
(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.
11
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended December
31, 1997 and by the 57 Dean Witter Funds (including the Fund) for the year
ended December 31, 1997, and the estimated retirement benefits for the Fund's
Independent Trustees, to commence upon their retirement, from the Fund as of
December 31, 1997 and from the 57 Dean Witter Funds as of December 31, 1997.
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 INDEPENDENT RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- -------------------------- --------------- --------------- ---------- ------------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic ............. 10 50.0% $ 349 $ 20,499 $ 875 $ 47,025
Edwin J. Garn ............. 10 50.0 497 30,878 875 47,025
John R. Haire ............. 10 50.0 (880)(3) (19,823)(3) 2,211 127,897
Wayne E. Hedien............ 9 42.5 0 0 744 39,971
Dr. Manuel H. Johnson .... 10 50.0 210 12,832 875 47,025
Michael E. Nugent ......... 10 50.0 354 22,546 875 47,025
John L. Schroeder.......... 8 41.7 672 39,350 729 39,504
</TABLE>
- ------------
(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
Director or 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.
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
12
<PAGE>
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 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
13
<PAGE>
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 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 transac-
14
<PAGE>
tions 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
net 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, 1997 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.
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
15
<PAGE>
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.
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.
16
<PAGE>
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.
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
17
<PAGE>
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.
5. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs.
18
<PAGE>
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.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially
all of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities
and futures contracts for the Fund, the selection of brokers and dealers to
effect the transactions, and the negotiation of brokerage commissions, if
any. The Fund expects that the primary market for the securities in which it
intends to invest will generally be the over-the-counter market. Securities
are generally traded in the over-the-counter market on an "net" basis with
dealers acting as principal for their own account without charging a stated
commission, although the price of the security usually includes a profit to
the dealer. Options and futures transactions will usually be effected through
a broker and a commission will be charged. The Fund also expects that
securities will be purchased at times in underwritten offerings, where the
price includes a fixed amount of compensation, generally referred to as the
underwriter's concession or discount. On occasion, the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid. During the fiscal years ended December 31,
1995, 1996 and 1997, 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
19
<PAGE>
allocations among the Fund and other client accounts, various factors may be
considered including the respective investment objectives, the relative size
of portfolio holdings of the same or comparable securities, the availability
of cash for investment, the size of investment commitments generally held and
the opinions of the persons responsible for managing the portfolios of the
Fund and other client accounts. In the case of certain initial and secondary
public offerings, the Investment Manager 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. During the fiscal years ended December 31, 1995, 1996 and 1997, the
Fund did not effect any principal transactions with DWR.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR, Morgan Stanley & Co. Incorporated and other
affiliated brokers and dealers. In order for an affiliated broker or dealer
to effect portfolio transactions for the Fund, the commissions, fees or other
remuneration received by the affiliated broker or dealer must be reasonable
and fair compared to the commissions, fees or other remuneration paid to
other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period
of time. This standard would allow the affiliated broker or dealer to receive
no more than the remuneration which would be expected to be
20
<PAGE>
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 an affiliated broker or dealer are consistent with the
foregoing standard. The Fund did not effect any securities transactions
through any affiliated brokers or dealers during its fiscal years ended
December 31, 1995, 1996 and 1997.
THE DISTRIBUTOR
- -----------------------------------------------------------------------------
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 MSDW.
The Trustees of the Fund, including a majority of the Trustees who are not,
and were not at the time they voted, interested persons of the Fund, as
defined in the Act (the "Independent Trustees"), approved, at their meeting
held on June 30, 1997, the current Distribution Agreement appointing the
Distributor as exclusive distributor of the Fund's shares and providing for
the Distributor to bear distribution expenses not borne by the Fund. By its
terms, the Distribution Agreement has an initial term ending April 30, 1998
and will remain in effect from year to year thereafter if approved by the
Board.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
account executives. The Distributor also pays certain expenses in connection
with the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears
the costs of initial typesetting, printing and distribution of prospectuses
and supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal securities laws and pays
filing fees in accordance with state securities laws. The Fund and the
Distributor have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for losses sustained by the
Fund or its shareholders.
PLAN OF DISTRIBUTION
Effective July 28, 1997, the Fund has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act (the "Plan") pursuant to which each
Class, other than Class D, pays the Distributor compensation accrued daily
and payable monthly at the following annual rates: 0.25%, 0.60% and 0.70% of
the average daily net assets of Class A, Class B and Class C, respectively.
The Distributor also receives the proceeds of front-end sales charges and of
contingent deferred sales charges imposed on certain redemptions of shares,
which are separate and apart from payments made pursuant to the Plan (see
"Purchase of Fund Shares" in the Prospectus). The Distributor has informed
the Fund that it and/or DWR received (a) approximately $972,000, $1,050,000
and $448,316 in front-end sales charges from the Fund for the fiscal years
ended December 31, 1995 and 1996 and for the period January 1, 1997 through
July 27, 1997, respectively, (b) approximately $0, $10,314 and $530 in
contingent deferred sales charges from Class A, Class B and Class C,
respectively, for the fiscal year ended December 31, 1997, and (c)
approximately $69,207 in front-end sales charges from Class A for the fiscal
year ended December 31, 1997, none of which was retained by the Distributor.
The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.15% of the average
21
<PAGE>
daily net assets of Class B and 0.25% of the average daily net assets of
Class C are currently each characterized as a "service fee" under the Rules
of the Association of the National Association of Securities Dealers, Inc.
(of which the Distributor is a member). The "service fee" is a payment made
for personal service and/or the maintenance of shareholder accounts. The
remaining portion of the Plan fees payable by a Class, if any, is
characterized as an "asset-based sales charge" as such is defined by the
aforementioned Rules of the Association.
The Plan was adopted by a majority vote of the Board of Trustees,
including all of the Trustees of the Fund who are not "interested persons" of
the Fund (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan (the "Independent 12b-1 Trustees"),
cast in person at a meeting called for the purpose of voting on the Plan, on
June 30, 1997.
Under its terms, the Plan has an initial term ending April 30, 1998 and
will continue from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner described above.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. For the fiscal period July 28
through December 31, 1997, Class A, Class B, and Class C shares of the Fund
accrued payments under the plan amounting to $2,466, $83,261, and $4,834,
respectively, which amounts are equal to 0.25%, 0.60%, and 0.70% of the
average daily net assets of Class A, Class B, and Class C, respectively, for
such period.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes of shares, each with a different distribution arrangement as set
forth in the Prospectus.
With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross sales credit of up to 4.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.15% of the current value
of the respective accounts for which they are the account executives or
dealers of record in all cases. On orders of $1 million or more (for which no
sales charge was paid), the Investment Manager compensates DWR's account
executives by paying them, from its own funds, a gross sales credit of 1.0%
of the amount sold.
With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 4.0% of the amount sold and an annual
residual commission, currently a residual of up to 0.15% of the current value
of the respective accounts for which they are the account executives of
record.
With respect to Class C shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class C shares,
currently a gross sales credit of up to 1.0% of the amount sold and an annual
residual commission, currently a residual of up to 0.70% of the current value
of the respective accounts for which they are the account executives of
record.
With respect to Class D shares other than shares held by participants in
the InterCapital mutual fund asset allocation program, the Investment Manager
compensates DWR's account executives by paying them, from its own funds,
commissions for the sale of Class D shares, currently a gross sales credit of
up to 1.0% of the amount sold. There is a chargeback of 100% of the amount
paid if the Class D shares are redeemed in the first year and a chargeback of
50% of the amount paid if the Class D shares are redeemed in the second year
after purchase. The Investment Manager also compensates DWR's account
executives by paying them, from its own funds, an annual residual commission,
currently a residual of up to 0.10% of the current value of the respective
accounts for which they are the account executives of record (not including
accounts of participants in the InterCapital mutual fund asset allocation
program).
The gross sales credit is a charge which reflects commissions paid by DWR
to its account executives and DWR's Fund-associated distribution-related
expenses, including sales compensation,
22
<PAGE>
and overhead and other branch office distribution-related expenses including
(a) the expenses of operating DWR's branch offices in connection with the
sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs
of client sales seminars, (c) travel expenses of mutual fund sales
coordinators to promote the sale of Fund shares and (d) other expenses
relating to branch promotion of Fund sales. The distribution fee that the
Distributor receives from the Fund under the Plan, in effect, offsets
distribution expenses incurred under the Plan on behalf of the Fund and, in
the case of Class B shares, opportunity costs, such as the gross sales credit
and an assumed interest charge thereon ("carrying charge"). In the
Distributor's reporting of the distribution expenses to the Fund, in the case
of Class B shares, such assumed interest (computed at the "broker's call
rate") has been calculated on the gross credit as it is reduced by amounts
received by the Distributor under the Plan and any contingent deferred sales
charges received by the Distributor upon redemption of shares of the Fund. No
other interest charge is included as a distribution expense in the
Distributor's calculation of its distribution costs for this purpose. The
broker's call rate is the interest rate charged to securities brokers on
loans secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments
at the end of each month. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.25%, in the case
of Class A, and 0.70%, in the case of Class C, of the average net assets of
the respective Class during the month. No interest or other financing
charges, if any, incurred on any distribution expenses on behalf of Class A
and Class C will be reimbursable under the Plan. With respect to Class A, in
the case of all expenses other than expenses representing the service fee,
and, with respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to account executives, such
amounts shall be determined at the beginning of each calendar quarter by the
Trustees, including, a majority of the Independent 12b-1 Trustees. Expenses
representing the service fee (for Class A) or a gross sales credit or a
residual to account executives (for Class C) may be reimbursed without prior
determination. In the event that the Distributor proposes that monies shall
be reimbursed for other than such expenses, then in making quarterly
determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund,
together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Trustees will determine which particular
expenses, and the portions thereof, that may be borne by the Fund, and in
making such a determination shall consider the scope of the Distributor's
commitment to promoting the distribution of the Fund's Class A and Class C
shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended December 31, 1997 to the Distributor.
The Distributor and DWR estimate that they have spent, pursuant to the Plan,
$2,825,759 on behalf of Class B since the inception of the Plan. It is
estimated that this amount was spent in approximately the following ways: (i)
2.25%, ($63,695)--advertising and promotional expenses; (ii) 0%,
($29)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 97.75% ($2,762,035)--other expenses, including the
gross sales credit and the carrying charge, of which .08% ($2,328) represents
carrying charges, 4.45% ($122,925) represents commission credits to DWR
branch offices for payments of commissions to account executives and 6.57%
($181,346) represents overhead and other branch office distribution-related
expenses. The amounts accrued by Class A and Class C for distribution during
the fiscal period July 28 through December 31, 1997 were for expenses which
relate to compensation of sales personnel and associated overhead expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan and (ii) the proceeds of
contingent deferred sales charges paid by investors upon redemption of
shares. The Distributor has advised the Fund that in the case of Class B
shares the excess distribution expenses,
23
<PAGE>
including the carrying charge designed to approximate the opportunity costs
incurred by DWR which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totalled $2,732,178 as of December 31, 1997. Of this
amount, $2,455,436 represents excess distribution expenses of Dean Witter
National Municipal Trust ("National Municipal"), the net assets of which were
combined with those of the Fund on November 7, 1997 pursuant to an Agreement
and Plan of Reorganization (the "Reorganization"). Because there is no
requirement under the Plan that the Distributor be reimbursed for all
distribution expenses with respect to Class B shares or any requirement that
the Plan be continued from year to year, this excess amount does not
constitute a liability of the Fund. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the
Distributor under the Plan and the proceeds of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated, the Trustees will consider at that time the manner in
which to treat such expenses. Any cumulative expenses incurred, but not yet
recovered through distribution fees or contingent deferred sales charges, may
or may not be recovered through future distribution fees or contingent
deferred sales charges.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWR, DWSC or certain of their employees may be
deemed to have such an interest as a result of benefits derived from the
successful operation of the Plan or as a result of receiving a portion of the
amounts expended thereunder by the Fund.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of
the affected Class or Classes of the Fund, and all material amendments to the
Plan must also be approved by the Trustees in the manner described above. The
Plan may be terminated at any time, without payment of any penalty, by vote
of a majority of the Independent 12b-1 Trustees or by a vote of a majority of
the outstanding voting securities of the Fund (as defined in the Act) on not
more than thirty days' written notice to any other party to the Plan. So long
as the Plan is in effect, the election and nomination of Independent 12b-1
Trustees shall be committed to the discretion of the Independent 12b-1
Trustees.
DETERMINATION OF NET ASSET VALUE
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the net asset value per share for each
Class of shares 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, Reverend Dr. Martin Luther King, Jr. 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.
24
<PAGE>
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without
an initial sales charge are subject to a contingent deferred sales charge
("CDSC") of 1.0% if redeemed within one year of purchase, except in the
circumstances discussed in the Prospectus.
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 Class A shares of the Fund and/or other Dean Witter Funds that are
multiple class funds ("Dean Witter Multi-Class Funds") or shares of other
Dean Witter Funds sold with a front-end sales charge purchased at a price
including a front-end sales charge 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 4.0% of the offering price.
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 Morgan
Stanley Dean Witter Trust FSB (the "Transfer Agent") fails to confirm the
investor's represented holdings.
Letter of Intent. As discussed in the Prospectus, 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 Class A shares
of the Fund from the Distributor or from a single Selected Broker-Dealer.
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 of Class A shares 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 any other Dean Witter Funds held by the shareholder which were
previously purchased at a price including a front-end sales charge (including
shares of the Fund and other Dean Witter Funds acquired in exchange for those
shares, and including in each case shares acquired through reinvestment of
dividends and distributions) will be added to the cost or net asset value of
shares of the Fund owned by the investor. However, shares of "Exchange Funds"
(see "Shareholder Services--Exchange Privilege") and the purchase of shares
of other Dean Witter Funds will not be included in determining whether the
stated goal of a Letter of Intent has been reached.
25
<PAGE>
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.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to
a CDSC payable upon most redemptions within six years after purchase. As
stated in the Prospectus, a CDSC will be imposed on any redemption by an
investor if after such redemption the current value of the investor's Class B
shares of the Fund is less than the dollar amount of all payments by the
shareholder for the purchase of Class B shares during the preceding six
years. However, no CDSC will be imposed to the extent that the net asset
value of the shares redeemed does not exceed: (a) the current net asset value
of shares purchased more than six years prior to the redemption, plus (b) the
current net asset value of shares purchased through reinvestment of dividends
or distributions of the Fund or another Dean Witter Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) the current net asset value of
shares acquired in exchange for (i) shares of Dean Witter front-end sales
charge funds, or (ii) shares of other Dean Witter Funds for which shares of
front-end sales charge funds have been exchanged (see "Shareholder
Services--Exchange Privilege"), plus (d) increases in the net asset value of
the investor's shares above the total amount of payments for the purchase of
Fund shares made during the preceding six years. The CDSC will be paid to the
Distributor.
In determining the applicability of the CDSC to each redemption, the
amount which represents an increase in the net asset value of the investor's
shares above the amount of the total payments for the purchase of shares
within the last six years will be redeemed first. In the event the redemption
amount exceeds such increase in value, the next portion of the amount
redeemed will be the amount which represents the net asset value of the
investor's shares purchased more than six years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions
and/or shares acquired in exchange for shares of Dean Witter front-end sales
charge funds, or for shares of other Dean Witter funds for which shares of
front-end sales charge funds have been exchanged. A portion of the amount
redeemed which exceeds an amount which represents both such increase in value
and the value of shares purchased more than six years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions
and/or shares acquired in the above-described exchanges will be subject to a
CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number
of years from the time of any payment for the purchase of shares, all
payments made during a month will be aggregated and deemed to have been made
on the last day of the month. Except as noted below, the following table sets
forth the rates of the CDSC applicable to Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- --------------------------- ------------------------
<S> <C>
First ...................... 5.0%
Second ..................... 4.0%
Third ...................... 3.0%
Fourth ..................... 2.0%
Fifth ...................... 2.0%
Sixth ...................... 1.0%
Seventh and thereafter .... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable six-year period. This will result in any
26
<PAGE>
such CDSC being imposed at the lowest possible rate. The CDSC will be
imposed, in accordance with the table shown above, on any redemptions within
six years of purchase which are in excess of these amounts and which
redemptions do not qualify for waiver of the CDSC, as described in the
Prospectus.
Class B shares of the Fund issued in exchange for shares of National
Municipal in connection with the Reorganization that were subject to the
lower CDSC schedule of National Municipal will continue to be subject to the
lower CDSC schedule of National Municipal schedule unless (i) such shares are
subsequently exchanged for shares of a fund with a higher CDSC schedule or
(ii) having been exchanged for shares of Dean Witter Global Short-Term Income
Fund Inc. ("Global Short-Term") or an Exchange Fund (as defined below in
"Shareholder Services--Exchange Privilege") are re-exchanged back into the
Fund. Under such circumstances, the CDSC schedule applicable to shares of the
fund with the higher CDSC schedule acquired in the exchange will apply to
redemptions of such fund's shares or, in the case of shares of Global
Short-Term or any of the Exchange Funds acquired in an exchange and then
subsequently re-exchanged back into the Fund, the CDSC schedule set forth in
the above table will apply to redemptions of any of such shares.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC
of 1.0% on most redemptions made within one year after purchase, except in
the circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
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 and 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.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of
the Fund, 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, in shares of the applicable Class of the Fund (or in cash if
the shareholder so requests) as of the close of business on the monthly
payment date, as stated in the Prospectus. At any time an investor may
request the Transfer Agent, in writing, to have subsequent dividends and/or
capital gains distributions paid to him or her in cash rather than shares. To
assure sufficient time to process the change, such request should be received
by the Transfer Agent at least five business days prior to the payment date
of the dividend or the record date of the distribution. In the case of
recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to DWR or other
selected broker-dealer, and will be forwarded to the shareholder, upon the
receipt of proper instructions. It has been and remains the Fund's policy and
practice that, if checks for dividends or distributions paid in cash remain
uncashed, no interest will accrue on amounts represented by such uncashed
checks.
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 any Class of an
27
<PAGE>
open-end Dean Witter Fund other than Dean Witter Tax-Exempt Securities Trust
or in another Class of Dean Witter Tax-Exempt Securities Trust. Such
investment will be made as described above for automatic investment in shares
of the applicable Class of the Fund, at the net asset value per share 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 selected Class 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 or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the
shareholder's existing account at the net asset value calculated the same
business day the transfer of funds is effected (subject to any applicable
sales charges). Shares of the Dean Witter money market funds redeemed in
connection with EasyInvest are redeemed on the business day preceding the
transfer of funds. 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 in shares of the
applicable Class at net asset value, without the imposition of a CDSC upon
redemption, by returning the check or the proceeds to the Transfer Agent
within thirty 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 next determined after receipt of the proceeds by the Transfer
Agent.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own
or purchase shares of the Fund having a minimum value of $10,000 based upon
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. Any applicable CDSC will be imposed on shares redeemed under the
Withdrawal Plan (see "Purchase of Fund Shares"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed
from his or her account so that the proceeds (net of any applicable CDSC) to
the shareholder will be the designated monthly or quarterly amount.
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, or amounts credited to a shareholder's DWR or other selected
broker-dealer brokerage account, within five days after the date of
redemption. The Withdrawal Plan may be terminated at any time by the Fund.
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
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of sales charges which may be applicable to
purchases or redemptions of shares (see "Purchase of Fund Shares").
28
<PAGE>
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments and the address to which checks are mailed by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the 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 regular shareholder investment account. The
shareholder may also redeem all or part of the shares held in the Withdrawal
Plan account (see "Redemptions and Repurchases" in the Prospectus) at any
time.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
shareholders may make additional investments in any Class of shares of the
Fund for which they qualify at any time by sending a check in any amount, not
less than $100, payable to Dean Witter Tax-Exempt Securities Trust, and
indicating the selected Class, directly to the Fund's Transfer Agent. In the
case of Class A shares, after deduction of any applicable sales charge, the
balance will be applied to the purchase of Fund shares, and, in the case of
shares of the other Classes, the entire amount will be applied to the
purchase of Fund shares, at the net asset value per share next computed after
receipt of the check or purchase payment by the Transfer Agent. The shares so
purchased will be credited to the investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of each Class of
shares of the Fund may exchange their shares for shares of the same Class of
shares of any other Dean Witter Multi-Class Fund without the imposition of
any exchange fee. Shares may also be exchanged for shares of any of the
following funds: Dean Witter Short-Term U.S. Treasury Trust, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term BondFund, Dean Witter
Intermediate Term U.S. Treasury Trust and five Dean Witter Funds which are
money market funds (the foregoing nine funds are hereinafter referred to as
the "Exchange Funds"). Class A shares may also be exchanged for shares of
Dean Witter Multi-State Municipal Series Trust and Dean Witter Hawaii
Municipal Trust, which are Dean Witter Funds sold with a front-end sales
charge ("FSC Funds"). Class B shares may also be exchanged for shares of Dean
Witter Global Short-Term Income Fund Inc. ("Global Short-Term") which is a
Dean Witter Fund offered with a CDSC. Exchanges may be made after the shares
of the Fund acquired by purchase (not by exchange or dividend reinvestment)
have been held for thirty days. There is no waiting period for exchanges of
shares acquired by exchange or dividend reinvestment. An exchange 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.)
As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number
of factors, including the number of years from the time of purchase until the
time of redemption or exchange ("holding period"). When shares of a Dean
Witter Multi-Class Fund or Global Short-Term are exchanged for shares of an
Exchange Fund, the exchange is executed at no charge to the shareholder,
without the imposition of the CDSC at the time of the exchange. During the
period of time the shareholder remains in the Exchange Fund (calculated
29
<PAGE>
from the last day of the month in which the Exchange Fund shares were
acquired), the holding period or "year since purchase payment made" is
frozen. When shares are redeemed out of the Exchange Fund, they will be
subject to a CDSC which would be based upon the period of time the
shareholder held shares in a Dean Witter Multi-Class Fund or in Global
Short-Term. However, in the case of shares exchanged into an Exchange Fund on
or after April 23, 1990, upon a redemption of shares which results in a CDSC
being imposed, a credit (not to exceed the amount of the CDSC) will be given
in an amount equal to the Exchange Fund 12b-1 distribution fees incurred on
or after that date which are attributable to those shares. Shareholders
acquiring shares of an Exchange Fund pursuant to this exchange privilege may
exchange those shares back into a Dean Witter Multi-Class Fund or Global
Short-Term from the Exchange Fund, with no CDSC being imposed on such
exchange. The holding period previously frozen when shares were first
exchanged for shares of the Exchange Fund resumes on the last day of the
month in which shares of a Dean Witter Multi-Class Fund or of Global
Short-Term are reacquired. A CDSC is imposed only upon an ultimate
redemption, based upon the time (calculated as described above) the
shareholder was invested in a Dean Witter Multi-Class Fund or in Global
Short-Term. In the case of exchanges of Class A shares which are subject to a
CDSC, the holding period also includes the time (calculated as described
above) the shareholder was invested in a FSC Fund.
When shares initially purchased in a Dean Witter Multi-Class Fund or in
Global Short-Term are exchanged for shares of a Dean Witter Multi-Class Fund,
shares of Global Short-Term, shares of a FSC Fund, or shares of an Exchange
Fund, the date of purchase of the shares of the fund exchanged into, for
purposes of the CDSC upon redemption, will be the last day of the month in
which the shares being exchanged were originally purchased. In allocating the
purchase payments between funds for purposes of the CDSC, the amount which
represents the current net asset value of shares at the time of the exchange
which were (i) purchased more than one, three or six years (depending on the
CDSC schedule applicable to the shares) prior to the exchange, (ii)
originally acquired through reinvestment of dividends or distributions and
(iii) acquired in exchange for shares of FSC Funds, or for shares of other
Dean Witter Funds for which shares of FSC Funds have been exchanged (all such
shares called "Free Shares"), will be exchanged first. After an exchange, all
dividends earned on shares in an Exchange Fund will be considered Free
Shares. If the exchanged amount exceeds the value of such Free Shares, an
exchange is made, on a block-by-block basis, of non-Free Shares held for the
longest period of time (except that, with respect to Class B shares, if
shares held for identical periods of time but subject to different CDSC
schedules are held in the same Exchange Privilege account, the shares of that
block that are subject to a lower CDSC rate will be exchanged prior to the
shares of that block that are subject to a higher CDSC rate). Shares equal to
any appreciation in the value of non-Free Shares exchanged will be treated as
Free Shares, and the amount of the purchase payments for the non-Free Shares
of the fund exchanged into will be equal to the lesser of (a) the purchase
payments for, or (b) the current net asset value of, the exchanged non-Free
Shares. If an exchange between funds would result in exchange of only part of
a particular block of non-Free Shares, then shares equal to any appreciation
in the value of the block (up to the amount of the exchange) will be treated
as Free Shares and exchanged first, and the purchase payment for that block
will be allocated on a pro rata basis between the non-Free Shares of that
block to be retained and the non-Free Shares to be exchanged. The prorated
amount of such purchase payment attributable to the retained non-Free Shares
will remain as the purchase payment for such shares, and the amount of
purchase payment for the exchanged non-Free Shares will be equal to the
lesser of (a) the prorated amount of the purchase payment for, or (b) the
current net asset value of, those exchanged non-Free Shares. Based upon the
procedures described in the Prospectus under the caption "Purchase of Fund
Shares," any applicable CDSC will be imposed upon the ultimate redemption of
shares of any fund, regardless of the number of exchanges since those shares
were originally purchased. Class B shares of the Fund issued in exchange for
shares of National Municipal in connection with the Reorganization that were
subject to the lower CDSC schedule of National Municipal will continue to be
subject to that lower CDSC schedule unless (i) such shares are subsequently
exchanged for shares of a fund with a higher CDSC schedule or (ii) having
been exchanged for shares of Global Short-Term or an Exchange Fund are
re-exchanged back into the Fund. Under such circumstances, the CDSC schedule
applicable to shares of the fund with the higher CDSC schedule acquired in
the exchange will apply to redemptions of such fund's shares or, in the case
of shares of Global Short-Term or any of the Exchange Funds acquired in an
exchange and then subsequently re-exchanged back into the Fund, the Fund's
CDSC schedule will apply to redemptions of any of such shares.
30
<PAGE>
With respect to the redemption or 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 for the
Exchange Privilege account of each Class 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 the
Exchange Privilege account of each Class is $10,000 for Dean Witter
Short-Term U.S. Treasury Trust, although that fund may, at its discretion,
accept initial investments of as low as $5,000. The minimum initial
investment for the Exchange Privilege account of each Class is $5,000 for
Dean Witter Special Value Fund. The minimum initial investment for the
Exchange Privilege account of each Class of 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 those funds, including the check
writing feature, will not be available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required
by applicable regulatory agencies (presently sixty days' prior written notice
for termination or material revision), provided that six months' prior
written notice of termination will be given to the shareholders who hold
shares of Exchange Funds, pursuant to the Exchange Privilege and provided
further that the Exchange Privilege may be terminated or materially revised
without notice at times (a) when the New York Stock Exchange is closed for
other than customary weekends and holidays, (b) when trading on that Exchange
is restricted, (c) when an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist), or (e) if the Fund
would be unable to invest amounts effectively in accordance with its
investment objective(s), policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. As stated in the Prospectus, shares of each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount
of any applicable CDSC. 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
31
<PAGE>
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 new prospectus.
Repurchase. As stated in the Prospectus, DWR and other selected
broker-dealers are authorized to repurchase shares represented by a share
certificate which is delivered to any of their offices. Shares held in a
shareholder's account without a share certificate may also be repurchased by
DWR and other selected broker-dealers upon the telephonic request of the
shareholder. The repurchase price is the net asset value next computed after
such purchase order is received by DWR or other selected broker-dealer
reduced by any applicable CDSC.
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares of any Class 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 (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. 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 hasbeen honored (not more than fifteen days
from the time of receipt of the check by the Transfer Agent). It has been and
remains the Fund's policy and practice that, if checks for redemption
proceeds remain uncashed, no interest will accrue on amounts represented by
such uncashed checks. 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.
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the
length of time shares subject to the charge have been held), any transfer
involving less than all the shares in an account will be made on a pro rata
basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior
to the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.
32
<PAGE>
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 35 days after the date of
the redemption or repurchase, reinstate any portion or all of the proceeds of
such redemption or repurchase in shares of the Fund in the same Class at the
net asset value 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.
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. The Taxpayer Relief Act of 1997 reduced the maximum tax
on long-term capital gains from 28% to 20%; however, it also lengthened the
required holding period to obtain this lower rate from more than 12 months to
more than 18 months. These lower rates do not apply to collectibles and
certain other assets. Additionally, the maximum capital gain rate for assets
that are held more than five years and that are acquired after December 31,
2000 is 18%. Gains or losses on the sale of securities held for twelve months
or less will be short-term capital gains or losses.
The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code. If so
qualified, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, realized during any fiscal year
to the extent that it distributes such income and capital gains to its
shareholders.
With respect to the Fund's investments in zero coupon bonds, the Fund
accrues income prior to any actual cash payments by their issuers. In order
to continue to comply with Subchapter M of the Internal Revenue Code and
remain able to forego payment of federal income tax on its income and capital
gains, the Fund must distribute all of its net investment income, including
income accrued from zero coupon bonds. As such, the Fund may be required to
dispose of some of its portfolio securities under disadvantageous
circumstances to generate the cash required for distribution.
As discussed in the Prospectus, the Fund intends to qualify to pay
"exempt-interest dividends" to its shareholders by maintaining, as of the
close of each of its taxable years, at least 50% of the value of its assets
in tax-exempt securities. An exempt-interest dividend is that part of the
dividend distributions made by the Fund which consists of interest received
by the Fund on tax-exempt securities upon which the shareholder incurs no
federal income taxes. Exempt-interest dividends are included however, in
determining what portion, if any, of a person's Social Security benefits are
subject to federal income tax.
As also discussed in the Prospectus, the Fund intends to invest a portion
of its assets in certain "private activity bonds" issued after August 7,
1986. As a result, a portion of the exempt-interest dividends paid by the
Fund will be an item of tax preference to shareholders subject to the
alternative minimum tax. Certain corporations which are subject to the
alternative minimum tax may also have to include exempt-interest dividends in
calculating their alternative minimum taxable income in situations where the
"adjusted current earnings" of the corporation exceeds its alternative
minimum taxable income.
33
<PAGE>
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 also be notified of their proportionate
share of long-term capital gains distributions that are eligible for a
reduced rate of tax under the Taxpayer Relief Act of 1997.
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.
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.
These figures are computed separately for Class A, Class B, Class C and Class
D shares.
Prior to July 28, 1997, the Fund offered only one Class of shares subject
to a maximum sales charge of 4.0% and no 12b-1 fee. Because the distribution
arrangement for Class A most closely resembles the distribution arrangement
applicable prior to the implementation of multiple classes (i.e., Class A is
sold with a front-end sales charge), historical performance information has
been restated to reflect (i) the actual maximum sales charges applicable to
Class A (i.e., 4.25%) and (ii) the ongoing 12b-1 fee applicable to Class A
Shares. Furthermore, because all shares of the Fund held prior to July 28,
1997 have been designated Class D shares, the Fund's historical performance
has also been restated to
34
<PAGE>
reflect the absence of any sales charge in the class of Class D shares.
Following the restated performance information for Class A and Class D is the
actual performance of the Fund based on its original, single class sales
charge structure as of its last fiscal year. Also set forth below is the
actual performance of Class B and Class C as of their last fiscal year.
Yield is calculated for any 30-day period as follows: the amount of
interest and/or dividend income for each security in the Fund's portfolio is
determined in accordance with regulatory requirements; 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"
of each Class. The resulting amount is divided by the product of the maximum
offering price per share on the last day of the period multiplied by the
average number of shares of the applicable Class 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. For the 30-day period
ended December 31, 1997, the Fund's yield for the Class A, Class B, Class C
and Class D shares, calculated pursuant to this formula was 4.18%, 4.01%,
3.90% and 4.62%, respectively.
The Fund may also quote a "tax-equivalent yield" for each Class 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 yield for Class A, Class B, Class C and Class D shares, 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, 1997
were 6.92%, 6.64%, 6.46% and 7.65%, respectively, 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. The ending
redeemable value for Class A reflects the imposition of the maximum front-end
sales charge for Class A. The ending redeemable value for Class B and Class C
is reduced by any CDSC at the end of the one, five or ten year or other
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing the average
annual total return involves a percentage obtained by dividing the ending
redeemable value by the amount of the initial investment, taking a root of
the quotient (where root is equivalent to the number of years in the period)
and subtracting 1 from the result. The restated average annual total returns
of the Class A and Class D shares of the Fund for the year ended December 31,
1997 were 3.86% and 8.73%, respectively; for the five years ended December
31, 1997 were 5.61% and 6.79%, respectively; and for the ten years ended
December, 1997 were 7.76% and 8.50%, respectively.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
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 for
Class A or the deduction of the CDSC for each of Class B and Class C which,
if reflected, would reduce the performance quoted. For example, the average
annual total return of the Fund may be calculated in the manner described in
the preceding paragraph, but without the deduction for any applicable sales
charge. Based on the foregoing calculation, the Fund's restated average
annual total return for Class A shares for the year ended December 31, 1997
was 8.47%, the average annual total return for the five years ended December
31, 1997 was 6.53% and the average annual total return for the ten years
ended December 31, 1997 was 8.23%. Because the Class D shares are not subject
to any sales charge, the Fund would only advertise average annual total
returns as calculated in the previous paragraph.
For periods of less than one year, the Fund quotes its total return on a
non-annualized basis. Accordingly, the Fund may compute its aggregate total
return for each of Class B and Class C 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 by the
initial $1,000 investment
35
<PAGE>
and subtracting 1 from the result. The ending redeemable value for Class B
and Class C is reduced by any CDSC at the end of the period. Based on the
foregoing calculations, the total returns for the period July 28, 1997
through December 31, 1997 were -1.43% and 2.28% for Class B and Class C,
respectively.
In addition, the Fund may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate
which will result in the ending value of a hypothetical $1,000 investment
made at the beginning of the period. For the purpose of this calculation, it
is assumed that all dividends and distributions are reinvested. The formula
for computing aggregate total return involves a percentage obtained by
dividing the ending value (without reduction for any applicable sales charge)
by the initial $1,000 investment and subtracting 1 from the result. Based on
the foregoing calculation, the Fund's restated total return for both Class A
and Class D shares for the year ended December 31, 1997 was 8.47% and 8.73%,
respectively; the restated total return for the five years ended December 31,
1997 was 37.20% and 38.91%, respectively; and the restated total return for
the ten years ended December 31, 1997 was 120.48% and 126.0%, respectively.
Based on the foregoing calculation, the total returns for Class B and Class C
for the period July 28, 1997 through December 31, 1997 were 3.57% and 3.28%,
respectively.
The Fund may advertise the growth of hypothetical investments of $10,000,
$50,000 and $100,000 in each Class of shares of the Fund by adding 1 to the
Fund's aggregate total return to date (expressed as a decimal and without
taking into account the effect of any applicable CDSC) and multiplying by
$9,575, $48,250 and $97,250 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as
the case may be. Investments of $10,000, $50,000 and $100,000 in each Class
at inception of the Class would have grown to the following amounts at
December 31, 1997:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION -------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- --------- ----------- --------- --------- --------
<S> <C> <C> <C> <C>
Class A... 3/27/80 $46,839 $236,029 $475,728
Class B... 7/28/97 10,357 51,785 103,570
Class C... 7/28/97 10,328 51,640 103,280
Class D... 3/27/80 51,118 255,590 511,180
</TABLE>
For purposes of restating the performance of Class A, the inception date
set forth in the above table is the inception date of the Fund. However,
Class A did not actually commence operation until July 28, 1997.
The actual average annual total returns of the Fund, calculated pursuant
to the formula described above, for the year ended December 31, 1997, for the
five years ended December 31, 1997, and for the ten years ended December 31,
1997, were 4.38%, 5.93% and 8.05%, respectively. The actual average annual
total returns of the Fund calculated without the deduction for any applicable
sales charge for the year ended December 31, 1997, for the five years ended
December 31, 1997, and for the ten years ended December 31, 1997, were 8.73%,
6.79% and 8.50%, respectively. The Fund's actual aggregate total return,
calculated pursuant to the formula described above, for the year ended
December 31, 1997 was 8.73%, the actual total return for the five years ended
December 31, 1997 was 38.91% and the actual total return for the ten years
ended December 31, 1997 was 126.00%. Investments of $10,000, $50,000 and
$100,000, adjusted for the sales charges in effect at such time (4.0%, 3.25%
or 2.75%, respectively), in the Fund at inception would have grown to
$49,074, $247,283 and $497,123, respectively, at December 31, 1997. All
shares of the Fund held prior to July 28, 1997 were designated Class D shares
and accordingly, the actual performance numbers set forth above represent the
actual performance of the continuing Class D.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes complied by independent
organizations.
36
<PAGE>
DESCRIPTION OF SHARES OF THE FUND
- -----------------------------------------------------------------------------
The Shareholders of the Fund are entitled to a full vote for each full
share held. All of the Trustees have been elected by the shareholders of the
Fund, most recently at a Special Meeting of Shareholders held on May 21,
1997. 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 other
than as set forth in the Prospectus.
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 is authorized to issue an unlimited number of shares of
beneficial interest. 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.
Morgan Stanley Dean Witter Trust FSB ("MSDW Trust"), 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. MSDW Trust 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, MSDW Trust's responsibilities include maintaining
shareholder accounts, disbursing cash dividends and reinvesting dividends,
processing account registration changes, handling purchase and redemption
transactions, mailing prospectuses and reports, mailing and tabulating
proxies, processing share certificate transactions, and maintaining
shareholder records and lists. For these services MSDW Trust receives a per
shareholder account fee from the Fund.
37
<PAGE>
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, 1997, 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.
38
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.5%)
General Obligation (13.4%)
North Slope Borough, Alaska,
$ 5,000 Ser 1992 A Conv (MBIA) ......................................... 5.90 % 06/30/03 $ 5,403,400
18,000 Ser 1994 B (FSA) .............................................. 0.00 06/30/05 12,741,660
18,500 Ser 1995 A (MBIA) .............................................. 0.00 06/30/06 12,506,000
10,000 Ser 1996 B (MBIA) .............................................. 0.00 06/30/07 6,396,100
13,925 Ser 1996 B (MBIA) .............................................. 0.00 06/30/06 9,374,310
1,000 Santa Margarita/Dana Point Authority, California,
Impr Dists #3, 3A, 4 & 4A 1994 Ser B Refg (MBIA) ............... 5.75 08/01/20 1,047,510
4,000 Connecticut, College Savings 1989 Ser A ......................... 0.00 07/01/08 2,458,440
1,000 Atlanta, Georgia, Public Impr Ser 1994 A ........................ 6.125 12/01/23 1,090,940
2,000 Chicago, Illinois, Refg Ser 1995 B (FGIC) ....................... 5.125 01/01/25 1,966,960
1,000 Chicago Park District, Illinois, Ser 1995 ...................... 6.60 11/15/14 1,122,030
1,000 Chelsea, Massachusetts, School Act of 1948 (AMBAC) .............. 6.50 06/15/12 1,105,760
Massachusetts,
20,000 Refg 1996 Ser A (AMBAC) ........................................ 6.00 11/01/10 22,689,800
8,000 Refg 1993 Ser A ................................................ 5.50 02/01/11 8,259,840
4,000 Clark County, Nevada, Transportation Ser 1992 A (AMBAC) ......... 6.50 06/01/17 4,745,920
New York City, New York,
1,500 1995 Ser D (MBIA) .............................................. 6.20 02/01/07 1,679,910
10,000 1990 Ser D ..................................................... 6.00 08/01/08 10,204,800
15,000 North Carolina, 1997 Ser A ..................................... 5.20 03/01/16 15,486,750
1,000 Delaware City School District, Ohio, Constr & Impr (FGIC) ...... 5.75 12/01/20 1,049,710
10,000 Pennsylvania, First Ser 1995 (FGIC) ............................. 5.50 05/01/12 10,544,500
7,000 Shelby County, Tennessee, Refg 1995 Ser A ....................... 5.625 04/01/14 7,383,180
20,000 King County, Washington, Ltd Tax 1995 (MBIA) ................... 6.00 01/01/23 21,500,600
2,000 Washington, 1995 Ser A ......................................... 5.80 09/01/08 2,148,660
- ------------ --------------
173,925 160,906,780
- ------------ --------------
Educational Facilities Revenue (6.1%)
1,000 California Educational Facilities Authority, Claremont Colleges
Ser 1992 ....................................................... 6.375 05/01/22 1,065,410
500 Atlanta Urban Residential Finance Authority, Georgia, Morehouse
College Refg Ser 1995 (MBIA) .................................. 5.75 12/01/14 537,560
10,000 Indiana University, Student Fee Ser K (MBIA) .................... 5.875 08/01/20 10,659,300
6,000 Maryland Health & Higher Educational Facilities Authority, The
John Hopkins University Refg Ser 1998 (WI) ..................... 5.125 07/01/20 5,959,920
7,000 Massachusetts Health & Educational Facilities Authority, Boston
University Ser 1991 (MBIA) .................................... 6.66 10/01/31 7,653,240
15,000 New Hampshire Higher Educational & Health Facilities Authority,
Dartmouth College Ser 1993 .................................... 5.375 06/01/23 15,094,950
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 2,000 New Jersey Development Authority, The Seeing Eye Inc 1991 ....... 7.30 % 04/01/11 $ 2,135,960
2,000 New Jersey Economic Development Authority, Educational Testing
Service Ser B 1995 (MBIA) ...................................... 6.125 05/15/15 2,200,560
New York State Dormitory Authority,
500 City University 1994 3rd Resolution Ser 1 (AMBAC) .............. 6.30 07/01/24 556,225
500 Cooper Union Ser 1996 (AMBAC) .................................. 5.375 07/01/20 506,610
5,000 State University Ser 1989 B .................................... 0.00 05/15/02 4,137,150
20,000 State University Ser 1990 B .................................... 7.00 05/15/16 21,551,600
1,000 Virginia Polytechnic Institute & State University, Ser 1996 A ... 5.50 06/01/16 1,038,110
- ------------ --------------
70,500 73,096,595
- ------------ --------------
Electric Revenue (11.0%)
25,000 Salt River Project Agricultural Improvement & Power District,
Arizona, Refg 1993 Ser C (Secondary MBIA)** .................... 5.50 01/01/10 27,129,500
10,000 Sacramento Municipal Utility District, California, Refg 1994 Ser
I (MBIA) ....................................................... 5.75 01/01/15 10,625,000
10,000 Municipal Electric Authority of Georgia, Ser Y (Secondary MBIA) 6.50 01/01/17 11,846,600
5,000 New York State Power Authority, General Purpose Ser CC .......... 5.25 01/01/18 4,993,850
Eugene, Oregon, Electric Utility
1,195 Ser 1996 (FSA) ................................................. 5.375 08/01/11 1,244,867
1,260 Ser 1996 (FSA) ................................................. 5.375 08/01/12 1,305,398
1,000 Ser 1996 (FSA) ................................................. 5.375 08/01/13 1,031,780
Puerto Rico Electric Power Authority,
15,000 Power Ser O ................................................... 0.00 07/01/17 5,523,000
1,500 Power Ser X ................................................... 6.00 07/01/15 1,615,875
15,000 South Carolina Public Service Authority, 1995 Refg Ser A
(AMBAC) ........................................................ 6.25 01/01/22 16,593,900
1,000 Austin, Texas, Combined Utilities Refg Ser 1994 (FGIC) .......... 6.25 05/15/16 1,103,360
20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C .............. 4.70 02/01/06 19,946,200
Intermountain Power Agency, Utah,
2,000 Refg 1996 Ser D (Secondary FSA) ............................... 5.00 07/01/21 1,956,720
10,000 Refg 1997 Ser B (MBIA) ........................................ 5.75 07/01/19 10,605,000
15,000 Washington Public Power Systems, Proj #2 Refg Ser 1994 A
(Secondary MBIA) .............................................. 6.00 07/01/07 16,644,300
- ------------ --------------
132,955 132,165,350
- ------------ --------------
Hospital Revenue (8.0%)
11,465 Birmingham -Carraway Special Care Facilities Financing
Authority, Alabama, Carraway Methodist Ser 1995 A (Connie Lee) . 6.25 08/15/09 13,041,667
3,000 Baxter County, Arkansas, Baxter County Regional Hospital Impr &
Refg Ser 1992 .................................................. 7.50 09/01/21 3,319,020
5,270 Antelope Valley Healthcare District, California, Ser 1997 B
(FSA) ......................................................... 5.20 01/01/17 5,275,586
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 2,000 Orange County Health Facilities Authority, Florida, Adventist
Health/Sunbelt Ser 1995 (AMBAC) ................................ 5.25 % 11/15/20 $ 1,999,880
8,545 Illinois Health Facilities Authority, Rockford Memorial Hospital
1991 Ser B (AMBAC) ............................................ 6.75 08/15/18 9,434,876
Maryland Health & Higher Educational Facilities Authority,
6,000 Helix Health Ser 1997 (AMBAC) ................................. 5.00 07/01/27 5,873,160
1,000 Kernan Hospital Ser 1994 (Connie Lee) .......................... 6.10 07/01/24 1,087,140
5,000 Massachusetts Health & Educational Facilities Authority,
Hallmark Health System 1997 Ser A (FSA)(WI) ................... 5.00 07/01/27 4,850,000
Rochester, Minnesota,
5,000 Mayo Foundation/Medical Center Ser 1992 I ...................... 5.75 11/15/21 5,151,050
3,700 Mayo Foundation/Medical Center Ser 1992 F ...................... 6.25 11/15/21 4,012,687
10,000 Missouri Health & Educational Facilities Authority,
Barnes-Jewish Inc/ Christian Health Services Ser 1993 A ....... 5.25 05/15/14 10,299,200
1,300 New Hampshire Higher Educational & Health Facilities Authority,
St Joseph Hospital Ser 1994 (Connie Lee) ....................... 6.35 01/01/07 1,454,492
6,000 New York State Medical Care Facilities Finance Agency,
Presbyterian Hospital -FHA Insured Mtge 1984 Ser A Refg ....... 5.25 08/15/14 6,084,360
University of North Carolina,
2,000 Hospitals at Chapel Hill Ser 1996 .............................. 5.25 02/15/19 2,004,540
5,000 Hospitals at Chapel Hill Ser 1996 .............................. 5.00 02/15/29 4,809,050
2,000 Jackson, Tennessee, Jackson-Madison County General Hospital
Refg & Impr Ser 1995 (AMBAC) .................................. 5.625 04/01/15 2,088,180
5,000 North Central Texas Health Facilities Development Corporation,
University Medical Center Inc Ser 1997 (FSA) ................... 5.45 04/01/15 5,141,950
10,000 Fredericksburg Industrial Development Authority, Virginia,
Medicorp Health Refg Ser 1996 (AMBAC) ......................... 5.25 06/15/16 10,060,500
- ------------ --------------
92,280 95,987,338
- ------------ --------------
Industrial Development/Pollution Control Revenue (6.7%)
1,500 Hawaii Department of Budget & Finance, Hawaiian Electric Co
Ser 1995 A (AMT)(MBIA) ......................................... 6.60 01/01/25 1,656,510
1,425 Maryland Industrial Development Financing Authority, Medical
Waste Assocs LP 1989 Ser (AMT) ................................. 8.75 11/15/10 1,452,645
19,500 Claiborne County, Mississippi, Middle South Energy Inc Ser C ... 9.875 12/01/14 21,019,830
10,000 Clark County, Nevada, Nevada Power Co Ser 1992 A (AMT) (FGIC) ... 6.70 06/01/22 10,998,100
5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987 (AMBAC) . 6.30 12/01/14 5,448,850
5,000 New York City Industrial Development Agency, New York, Brooklyn
Navy Yard Cogeneration Partners, LP Proj Ser 1997 (AMT) ....... 5.75 10/01/36 5,060,850
5,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT) ...... 7.50 12/01/29 5,466,650
10,000 Dallas-Fort Worth International Airport Facility Improvement
Corporation, Texas, American Airlines Inc Ser 1995 ............ 6.00 11/01/14 10,557,700
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, 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 $ 7,612,360
10,000 Weston, Wisconsin, Wisconsin Public Service Corp Refg Ser 1993 A 6.90 02/01/13 11,272,900
- ------------ --------------
74,425 80,546,395
- ------------ --------------
Mortgage Revenue -Multi-Family (2.3%)
500 Honolulu, Hawaii, Waipahu Towers GNMA Collateralized 1995 Ser A
(AMT) .......................................................... 6.90 06/20/35 538,120
1,000 Massachusetts Housing Finance Agency, Rental 1994 Ser A
(AMT)(AMBAC) ................................................... 6.65 07/01/19 1,063,090
6,435 Michigan Housing Development Authority, Rental Ser A (Bifurcated
FSA) ........................................................... 6.50 04/01/23 6,793,108
9,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A (AMBAC) 6.05 11/01/20 9,470,880
New York City Housing Development Corporation, New York,
4,436 Rupper Proj -FHA Ins Sec 223F .................................. 6.50 11/15/18 4,658,933
4,293 Stevenson Commons Proj -FHA Ins Sec 223F ....................... 6.50 05/15/18 4,508,119
- ------------ --------------
25,664 27,032,250
- ------------ --------------
Mortgage Revenue -Single Family (6.9%)
7,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA) ......................................................... 5.875 12/01/24 7,241,500
2,440 California Housing Finance Agency, Home Cap Apprec 1983 Ser B .. 0.00 08/01/15 408,310
2,500 Colorado Housing Finance Authority, Ser 1997 Ser C-2 (AMT) ..... 6.875 11/01/28 2,766,425
12,100 Illinois Housing Development Authority, Residential 1991 Ser C
(AMT) .......................................................... 6.875 02/01/18 12,897,632
Missouri Housing Development Commission, Homeownership
3,975 GNMA -FNMA 1996 Ser C (AMT) ................................... 7.45 09/01/27 4,508,207
4,000 1997 Ser C-1 .................................................. 6.55 09/01/28 4,408,440
5,600 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser
(AMT) .......................................................... 7.631 09/10/30 5,960,696
3,775 North Carolina Housing Finance Agency, Ser Q (AMT) .............. 8.00 03/01/18 4,106,219
6,150 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser A (AMT) ....... 6.903 03/01/31 6,536,712
10,000 Pennsylvania Housing Finance Agency, Ser 1991-31 (AMT) ......... 7.00 10/01/23 10,750,800
Tennessee Housing Development Agency,
11,000 Mortgage Finance 1993 Ser A .................................... 5.95 07/01/28 11,355,409
4,000 Mortgage Finance 1993 Ser A .................................... 5.90 07/01/18 4,141,960
1,000 Mortgage Finance 1994 Ser B (AMT) .............................. 6.55 07/01/19 1,058,020
670 Utah Housing Finance Agency, Federally Insured/Guaranteed Loans
1994 Issue E (AMT) ............................................. 6.50 07/01/26 702,039
5,800 Wisconsin Housing & Economic Development Authority, Home
Ownership 1991 Ser (AMT) ....................................... 7.097 10/25/22 6,172,824
- ------------ --------------
80,010 83,015,193
- ------------ --------------
Public Facilities Revenue (1.6%)
2,000 North City West School Facilities Authority, California,
Community Dist #1 Special Tax Ser 1995 B (FSA) ................. 6.00 09/01/19 2,178,500
3,500 Denver, Colorado, Excise Tax Ser 1985 A ......................... 5.00 11/01/08 3,500,000
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 6,000 Saint Louis Industrial Development Authority, Missouri, Kiel
Center Refg Ser 1992 (AMT) ..................................... 7.75 % 12/01/13 $ 6,555,600
5,000 Ohio Building Authority, Correctional 1985 Ser C ................ 9.75 10/01/05 6,720,400
- ------------ --------------
16,500 18,954,500
- ------------ --------------
Resource Recovery Revenue (3.6%)
Connecticut Resources Recovery Authority,
7,000 American REF-FUEL Co of Southeastern Connecticut 1988 Ser A
(AMT) ......................................................... 8.00 11/15/15 7,411,250
4,950 Bridgeport RESCO Ser A ......................................... 7.625 01/01/09 5,139,090
7,000 Savannah Resource Recovery Development Authority, Georgia,
Savannah Energy Systems Co Ser 1992 ........................... 6.30 12/01/06 7,527,730
10,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) .............................................. 6.30 07/01/16 10,686,000
5,000 Onondaga County Resource Recovery Agency, New York, 1992 Ser
(AMT) ......................................................... 6.875 05/01/06 5,346,050
1,750 Charleston County Resource Recovery, South Carolina, Foster
Wheeler 1997 Ser (AMT)(AMBAC) .................................. 5.25 01/01/10 1,797,075
5,000 Fairfax County Economic Development Authority, Virginia, Ogden
Martin Systems of Fairfax Inc Ser 1988 A (AMT) ................ 7.75 02/01/11 5,320,050
- ------------ --------------
40,700 43,227,245
- ------------ --------------
Transportation Facilities Revenue (15.3%)
1,000 Lee County, Florida, Ser 1995 (MBIA) ........................... 5.75 10/01/22 1,053,290
Mid-Bay Bridge Authority, Florida,
8,965 Ser 1993 A (AMBAC) ............................................ 5.85 10/01/13 9,811,117
1,500 Ser 1997 A (AMBAC) ............................................ 0.00 10/01/20 459,510
3,000 Ser 1997 A (AMBAC) ............................................ 0.00 10/01/21 870,930
10,000 Atlanta, Georgia, Airport Ser 1990 (AMT) ....................... 6.25 01/01/21 10,519,600
8,100 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax
Refg Ser K ..................................................... 7.25 07/01/10 8,390,709
5,000 Hawaii, Airports Second Ser 1991 (AMT) .......................... 7.00 07/01/18 5,447,100
850 Regional Transportation Authority, Illinois, Ser 1994 A ......... 6.25 06/01/15 924,945
Kentucky Turnpike Authority,
9,000 Economic Development Road Refg Ser 1995 (AMBAC) ................ 6.50 07/01/08 10,542,510
1,000 Economic Development Road Refg Ser 1995 (AMBAC) ................ 5.625 07/01/15 1,054,160
30,000 Resource Recovery Road 1987 Ser A .............................. 5.00 07/01/08 30,003,600
2,500 Maine Turnpike Authority, Ser 1994 (MBIA) ....................... 6.00 07/01/18 2,704,025
Massachusetts Turnpike Authority,
25,000 Metropolitan Highway 1997 Ser A (MBIA) ......................... 5.00 01/01/37 24,168,250
15,000 Western 1997 Ser A (MBIA) ...................................... 5.55 01/01/17 15,221,250
11,000 New Jersey Highway Authority, Sr Parkway Refg 1992 Ser ......... 6.25 01/01/14 11,932,250
6,595 Albuquerque, New Mexico, Airport Refg Ser 1997 (AMT) (AMBAC) ... 6.375 07/01/15 7,351,315
1,000 New York State Thruway Authority, General 1995 Ser C (FGIC) .... 6.00 01/01/25 1,082,490
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 1,500 Port Authority of New York & New Jersey, Cons One Hundredth Ser
Second Installment++ ........................................... 5.75 % 12/15/20 $ 1,568,205
20,000 Ohio Turnpike Commission, 1996 Ser A (MBIA) ..................... 5.50 02/15/26 20,593,200
5,000 Pennsylvania Turnpike Commission, Ser L of 1991 (MBIA) ......... 6.00 06/01/15 5,328,950
10,000 Puerto Rico Highway & Transportation Authority, Refg Ser X ...... 5.50 07/01/15 10,506,900
4,000 Virginia Transportation Board, US Route 58 Corridor Ser 1993 B . 5.625 05/15/13 4,137,360
- ------------ --------------
180,010 183,671,666
- ------------ --------------
Water & Sewer Revenue (10.8%)
Birmingham Water Works & Sewer Board, Alabama,
10,000 Ser 1994 ....................................................... 5.50 01/01/20 10,181,200
1,000 Ser 1993-A .................................................... 6.00 01/01/20 1,061,480
2,000 Jefferson County, Alabama, Sewer Refg Ser 1997-A (FGIC) ......... 5.375 02/01/27 2,016,340
10,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water
Ser 1994 ....................................................... 5.45 07/01/19 10,245,900
10,000 California Department of Water Resources, Central Valley Ser L .. 5.50 12/01/23 10,108,300
1,000 Castaic Lake Water Agency, California, Refg Ser 1994 A COPs
(MBIA) ......................................................... 6.00 08/01/18 1,082,230
10,000 East Bay Municipal Utility District, California, Water Refg Ser
1993 (MBIA) ................................................... 5.00 06/01/21 9,717,400
10,000 Los Angeles, California, Wastewater Ser 1994-A (MBIA) .......... 5.875 06/01/24 10,630,000
1,000 Dade County, Florida, Water & Sewer Ser 1995 (FGIC) ............ 5.50 10/01/15 1,042,290
5,000 Upper Oconee Basin Water Authority, Georgia, Ser 1997 (FGIC) .... 5.25 07/01/27 5,004,550
1,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA) ................... 6.375 01/01/24 1,110,340
Massachusetts Water Resources Authority,
2,000 1992 Ser A .................................................... 6.50 07/15/07 2,292,360
10,000 Refg 1992 Ser B ................................................ 5.50 11/01/15 10,164,200
10,000 1993 Ser C ..................................................... 5.25 12/01/15 10,245,400
10,000 1996 Ser A (FGIC) .............................................. 5.50 11/01/21 10,303,799
Detroit, Michigan,
4,000 Sewage Refg 1993-A (FGIC) ..................................... 5.70 07/01/13 4,206,000
10,000 Water Supply 1997 Ser A ........................................ 5.00 07/01/21 9,770,300
2,000 Bayonne Municipal Utilities Authority, New Jersey, Water System
Ser 1997 (MBIA) ................................................ 5.00 01/01/28 1,957,400
2,000 Asheville, North Carolina, Water Ser 1996 (FGIC) ................ 5.70 08/01/25 2,107,160
Philadelphia, Pennsylvania,
1,250 Water & Wastewater Ser 1995 (MBIA) ............................ 6.25 08/01/11 1,433,338
5,000 Water & Wastewater Ser 1993 (FSA) ............................. 5.50 06/15/15 5,127,300
7,500 Water & Wastewater Ser 1997 A (AMBAC) ......................... 5.00 08/01/22 7,323,375
2,075 Prince William County Authority, Virginia, Water & Sewer Ser
1997 (FGIC) .................................................... 4.75 07/01/29 1,949,380
- ------------ --------------
126,825 129,080,042
- ------------ --------------
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
Other Revenue (1.2%)
$ 1,005 Mashantucket (Western) Pequot Tribe, Connecticut, Special 1996
Ser A (a) ..................................................... 6.50 % 09/01/05 $ 1,119,560
1,000 New Jersey Economic Development Authority, Market Transition Sr
Lien Ser 1994 A (MBIA) ......................................... 5.875 07/01/11 1,081,120
New York Local Government Assistance Corporation,
5,000 Ser 1994 A .................................................... 5.50 04/01/17 5,331,950
5,000 Ser 1997 B (MBIA)(WI) .......................................... 4.875 04/01/20 4,825,150
3,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA) . 5.50 07/01/11 3,137,700
- ------------ --------------
15,005 15,495,480
- ------------ --------------
Refunded (10.6%)
9,000 Los Angeles Convention and Exhibition Center Authority,
California, Ser 1985 COPs ...................................... 9.00 12/01/05++ 11,848,590
995 Mashantucket (Western) Pequot Tribe, Connecticut, Special 1996
Ser A (ETM)(a) ................................................ 6.50 09/01/05 1,127,095
2,500 Mid-Bay Bridge Authority, Florida, Ser 1991 A (ETM) ............ 6.875 10/01/22 3,028,050
1,500 Hawaii, 1995 Ser CJ ............................................ 6.25 01/01/05+ 1,671,360
1,500 Massachusetts Health & Educational Facilities Authority,
Malden Hospital -FHA Ins Mtge Ser A (ETM) ..................... 5.00 08/01/16 1,510,800
9,000 Massachusetts, 1994 Ser C (FGIC) ................................ 6.75 11/01/04+ 10,361,340
1,000 Essex County Improvement Authority, New Jersey, County Jail &
Youth House Projects Ser 1994 (AMBAC) .......................... 6.90 12/01/04+ 1,169,050
14,000 New York State Dormitory Authority, Suffolk County Judicial Ser
1986 (ETM) .................................................... 7.375 07/01/16 17,683,540
6,000 New York State Environmental Facilities Corporation, Huntington
1989 Ser A (AMT) .............................................. 7.50 10/01/99++ 6,393,780
9,740 New York City, New York, 1990 Ser D ............................ 6.00 08/01/99+ 9,946,975
25,000 Intermountain Power Agency, Utah, Refg 1985 Ser H GAINS ........ 0.00# 07/01/03+ 25,878,000
5,000 Salt Lake City, Utah, IHC Hospital Inc Ser 1983 (ETM) .......... 5.00 06/01/15 4,999,800
28,000 Fairfax County Industrial Development Authority, Virginia,
Fairfax Hospital Inova Health Ser 1991 ......................... 6.801 08/15/01+ 30,946,720
- ------------ --------------
113,235 126,565,100
- ------------ --------------
1,142,034 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $1,065,267,642) .................. 1,169,743,934
- ------------ --------------
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.9%)
$ 12,700 Escambia County, Florida, Gulf Power Co Ser 1997 (Demand
01/02/98) ..................................................... 5.05*% 07/01/22 $ 12,700,000
6,000 Missouri Health & Educational Facilities Authority Washington
University Ser 1996 D (Demand 01/02/98) ........................ 5.00* 02/01/30 6,000,000
4,000 Harris County Health Facilities Development Corporation, Texas,
Methodist Hospital Ser 1994 (Demand 01/02/98) ................. 4.90* 12/01/25 4,000,000
- ------------ --------------
22,700 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost $22,700,000) ..... 22,700,000
- ------------ --------------
$1,164,734 TOTAL INVESTMENTS (Identified Cost $1,087,967,642) (b) .................. 99.4% 1,192,443,934
============
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .......................... 0.6 6,936,765
----- --------------
NET ASSETS .............................................................. 100.0% $1,199,380,699
===== ==============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
GAINS Growth and Income Security.
WI Security was purchased on a when issued basis.
++ Joint exemption in New York and New Jersey.
+ Prerefunded to call date shown.
++ Refunded to call date shown by forward delivery contract.
** This security was segregated in connection with the purchase of
when issued securities.
# Currently a zero coupon bond; will convert to 10.0% coupon on
July 1, 2000.
* Current coupon of variable rate demand obligation.
(a) Resale is restricted to qualified institutional investors.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$105,197,572 and the aggregate gross unrealized depreciation is
$721,280, resulting in net unrealized appreciation of
$104,476,292.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Alabama 2.2%
Alaska 4.5
Arizona 3.1
Arkansas 0.3
California 5.3
Colorado 0.5
Connecticut 1.4
Florida 2.6
Georgia 3.7
Hawaii 0.8
Illinois 2.3
Indiana 0.9
Kentucky 3.5
Maine 0.2
Maryland 2.1%
Massachusetts 10.8
Michigan 1.7
Minnesota 0.8
Mississippi 1.7
Missouri 2.6
Nebraska 0.5
Nevada 1.8
New Hampshire 1.4
New Jersey 2.6
New Mexico 0.6
New York 9.7
North Carolina 2.4
Ohio 2.9
Oregon 0.3%
Pennsylvania 3.4
Puerto Rico 1.5
South Carolina 1.5
Tennessee 2.2
Texas 4.7
Utah 3.7
Virginia 4.5
Washington 3.4
Wisconsin 1.4
Joint Exemptions* (0.1)
-------
Total 99.4%
=======
</TABLE>
* Joint exemptions have been included in more than one geographic location.
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,087,967,642)........................ $1,192,443,934
Cash..................................................... 8,731,624
Receivable for:
Interest............................................... 17,554,911
Shares of beneficial interest sold..................... 853,318
Investments sold....................................... 404,700
Prepaid expenses and other assets........................ 42,097
--------------
TOTAL ASSETS........................................... 1,220,030,584
--------------
LIABILITIES:
Payable for:
Investments purchased.................................. 15,332,934
Dividends and distributions to shareholders .......... 4,457,299
Investment management fee.............................. 469,410
Shares of beneficial interest repurchased.............. 190,025
Plan of distribution fee............................... 53,409
Accrued expenses and other payables...................... 146,808
--------------
TOTAL LIABILITIES...................................... 20,649,885
--------------
NET ASSETS............................................... $1,199,380,699
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital.......................................... $1,090,477,778
Net unrealized appreciation.............................. 104,476,292
Accumulated undistributed net investment income ......... 34,517
Accumulated undistributed net realized gain.............. 4,392,112
--------------
NET ASSETS............................................. $1,199,380,699
==============
CLASS A SHARES:
Net Assets............................................... $3,857,465
Shares Outstanding (unlimited authorized, $.01 par
value).................................................. 319,033
NET ASSET VALUE PER SHARE................................ $12.09
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 4.44% of net asset value) ....... $12.63
======
CLASS B SHARES:
Net Assets............................................... $95,572,595
Shares Outstanding (unlimited authorized, $.01 par
value).................................................. 7,872,615
NET ASSET VALUE PER SHARE.............................. $12.14
======
CLASS C SHARES:
Net Assets............................................... $2,953,120
Shares Outstanding (unlimited authorized, $.01 par
value).................................................. 243,831
NET ASSET VALUE PER SHARE.............................. $12.11
======
CLASS D SHARES:
Net Assets............................................... $1,096,997,519
Shares Outstanding (unlimited authorized, $.01 par
value).................................................. 90,784,537
NET ASSET VALUE PER SHARE.............................. $12.08
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended December 31, 1997*
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME........................... $66,655,912
-------------
EXPENSES
Investment management fee................. 5,004,702
Transfer agent fees and expenses.......... 359,253
Plan of distribution fee (Class A
shares).................................. 2,466
Plan of distribution fee (Class B
shares).................................. 83,261
Plan of distribution fee (Class C
shares).................................. 4,834
Registration fees......................... 77,286
Professional fees......................... 61,455
Shareholder reports and notices........... 59,993
Custodian fees............................ 48,638
Trustees' fees and expenses............... 16,542
Other..................................... 31,602
-------------
TOTAL EXPENSES.......................... 5,750,032
Less: expense offset...................... (48,464)
-------------
NET EXPENSES............................ 5,701,568
-------------
NET INVESTMENT INCOME................... 60,954,344
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain......................... 9,545,783
Net change in unrealized appreciation .... 25,338,447
-------------
NET GAIN................................ 34,884,230
-------------
NET INCREASE.............................. $95,838,574
=============
</TABLE>
- ------------
* Class A, Class B and Class C shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
49
<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, 1997* DECEMBER 31, 1996
- ------------------------------------------------------ ------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 60,954,344 $ 68,165,561
Net realized gain...................................... 9,545,783 2,959,135
Net change in unrealized appreciation ................. 25,338,447 (29,830,436)
------------------ -----------------
NET INCREASE......................................... 95,838,574 41,294,260
------------------ -----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares........................................ (48,774) --
Class B shares........................................ (673,417) --
Class C shares........................................ (30,406) --
Class D shares........................................ (60,167,993) (68,543,874)
Net realized gain
Class A shares........................................ (16,080) --
Class B shares........................................ (395,740) --
Class C shares........................................ (12,228) --
Class D shares........................................ (4,910,430) (8,374,759)
------------------ -----------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................... (66,255,068) (76,918,633)
------------------ -----------------
Net decrease from transactions in shares of beneficial
interest.............................................. (20,236,797) (99,650,138)
------------------ -----------------
NET INCREASE (DECREASE).............................. 9,346,709 (135,274,511)
NET ASSETS:
Beginning of period.................................... 1,190,033,990 1,325,308,501
------------------ -----------------
END OF PERIOD
(Including undistributed net investment income of
$34,517 and $0, respectively)........................ $1,199,380,699 $1,190,033,990
================== =================
</TABLE>
- ------------
* Class A, Class B and Class C shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1997
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. On July 28, 1997, the Fund
commenced offering three additional classes of shares, with the then current
shares designated as Class D shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a
sales charge. Additionally, Class A shares, Class B shares and Class C shares
incur distribution expenses.
The preparation of financial statements in accordance with generally accepted
account 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.
51
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are
allocated to each class of shares based upon the relative net asset value on
the date such items are recognized. Distribution fees are charged directly to
the respective class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
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.
52
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
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. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted
a Plan of Distribution (the "Plan"), pursuant to Rule 12b-1 under the Act.
The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -up
to 0.25% of the average daily net assets of Class A; (ii) Class B -0.60% of
the average daily net assets of Class B; and (iii) Class C -up to 0.70% of
the average daily net assets of Class C. In the case of Class A shares,
amounts paid under the Plan are paid to the Distributor for services
provided. In the case of Class B and Class C shares, amounts paid under the
Plan are paid to the Distributor for services provided and the expenses borne
by it and others in the distribution of the shares of these Classes,
including the payment of commissions for sales of these Classes and incentive
compensation to, and expenses of, the account executives of Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and others who engage in or support distribution of the shares
or who service shareholder accounts, including overhead and telephone
expenses; printing and distribution of prospectuses and reports used in
connection with the offering of these shares to other than current
shareholders; and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan, in the case of Class B shares, to compensate DWR and
other selected broker-dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect,
any cumulative expenses incurred by the Distributor but not yet recovered may
be recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the
Distributor under the Plan and the proceeds of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated, the
53
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
Trustees will consider at that time the manner in which to treat such
expenses. The Distributor has advised the Fund that such excess amounts,
including carrying charges, totaled $2,732,178 at
December 31, 1997.
In the case of Class A shares and Class C shares, expenses incurred pursuant
to the Plan in any calendar year in excess of 0.25% or 0.70% of the average
daily net assets of Class A or Class C, respectively, will not be reimbursed
by the Fund through payments in any subsequent year, except that expenses
representing a gross sales credit to account executives may be reimbursed in
the subsequent calendar year. For the period ended December 31, 1997, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.25% and 0.70%, respectively.
The Distributor has informed the Fund that for the period July 28, 1997 to
December 31, 1997, it received contingent deferred sales charges from certain
redemptions of the Fund's Class B and Class C shares of $10,314 and $530,
respectively. For the period January 1, 1997 to July 27, 1997 it received
$448,316 in front-end sales charges from sales of the Fund's shares and for
the period July 28, 1997 to December 31, 1997 received $69,207 in front-end
sales charges from sales of the Fund's Class A shares. The respective
shareholders pay such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended December 31, 1997
aggregated $170,043,446 and $253,694,468, respectively.
Dean Witter Trust FSB, an affiliate of the Investment Manager, is the Fund's
transfer agent. At
December 31, 1997, the Fund had transfer agent fees and expenses payable of
approximately $10,400.
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 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, 1997 included in Trustees' fees and expenses in the
Statement of Operations amounted to $2,739. At December 31, 1997, the Fund
had an accrued pension liability of $48,294 which is included in accrued
expenses in the Statement of Assets and Liabilities.
54
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold 338,676 $ 4,050,692 -- --
Reinvestment of dividends and distributions 2,037 24,532 -- --
Redeemed (21,680) (260,983) -- --
-------------- --------------- -------------- ---------------
Net increase -Class A 319,033 3,814,241 -- --
-------------- --------------- -------------- ---------------
CLASS B SHARES*
Sold 966,475 10,102,415 -- --
Reinvestment of dividends and distributions 50,270 609,389 -- --
Shares issued in connection with the acquisition of
Dean Witter National Municipal Trust 7,189,021 86,346,821 -- --
Redeemed (333,151) (2,490,026) -- --
-------------- --------------- -------------- ---------------
Net increase -Class B 7,872,615 94,568,599 -- --
-------------- --------------- -------------- ---------------
CLASS C SHARES*
Sold 246,149 2,956,204 -- --
Reinvestment of dividends and distributions 2,294 27,678 -- --
Redeemed (4,612) (55,937) -- --
-------------- --------------- -------------- ---------------
Net increase -Class C 243,831 2,927,945 -- --
-------------- --------------- -------------- ---------------
CLASS D SHARES
Sold 1,386,806 16,302,673 3,179,464 $ 37,259,996
Reinvestment of dividends and distributions 3,036,080 35,979,041 3,684,669 43,078,883
Redeemed (14,721,910) (173,829,296) (15,389,992) (179,989,017)
-------------- --------------- -------------- ---------------
Net decrease -Class D (10,299,024) (121,547,582) (8,525,859) (99,650,138)
-------------- --------------- -------------- ---------------
Net decrease in Fund (1,863,545) $ (20,236,797) (8,525,859) $ (99,650,138)
============== =============== ============== ===============
</TABLE>
- ------------
* For the period July 28, 1997 (issue date) through December 31, 1997.
6. ACQUISITION OF DEAN WITTER NATIONAL MUNICIPAL TRUST
As of the close of business on November 7, 1997, the Fund acquired all the
net assets of Dean Witter National Municipal Trust ("National Municipal")
pursuant to a plan of reorganization approved by the shareholders of National
Municipal on October 24, 1997. The acquisition was accomplished by a tax-free
exchange of 7,189,021 Class B shares of the Fund at a net asset value of
$12.01 per share for 7,972,312 shares of National Municipal. The net assets
of the Fund and National Municipal immediately before the acquisition were
$1,108,511,637 and $86,346,821, respectively, including unrealized appreciation
of $5,153,021. Immediately after the acquisition, the combined net assets of
the Fund amounted to $1,194,858,458.
55
<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,
-----------------------------------------------------------------------------------------------
1997* 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -------------------------------- -------- -------- -------- --------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.......................... $11.77 $12.09 $11.01 $12.41 $11.88 $11.65 $11.09 $11.28 $10.96 $10.45
-------- -------- -------- --------- -------- -------- -------- -------- -------- --------
Net investment income ........... 0.63 0.65 0.67 0.70 0.77 0.79 0.80 0.80 0.81 0.81
Net realized and unrealized gain
(loss).......................... 0.36 (0.24) 1.19 (1.37) 0.54 0.23 0.56 (0.18) 0.32 0.51
-------- -------- -------- --------- -------- -------- -------- -------- -------- --------
Total from investment
operations...................... 0.99 0.41 1.86 (0.67) 1.31 1.02 1.36 0.62 1.13 1.32
-------- -------- -------- --------- -------- -------- -------- -------- -------- --------
Less dividends and distributions
from:
Net investment income........... (0.63) (0.65) (0.67) (0.70) (0.77) (0.79) (0.80) (0.81) (0.81) (0.81)
Net realized gain............... (0.05) (0.08) (0.11) (0.03) (0.01) -- -- -- -- --
-------- -------- -------- --------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions................... (0.68) (0.73) (0.78) (0.73) (0.78) (0.79) (0.80) (0.81) (0.81) (0.81)
-------- -------- -------- --------- -------- -------- -------- -------- -------- --------
Net asset value, end of period .. $12.08 $11.77 $12.09 $11.01 $12.41 $11.88 $11.65 $11.09 $11.28 $10.96
======== ======== ======== ========= ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN +........ 8.73% 3.61% 17.37% (5.55)% 11.23% 9.09% 12.71% 5.86% 10.61% 13.02%
RATIOS TO AVERAGE NET ASSETS:
Expenses......................... 0.49% 0.48% 0.48% 0.47% 0.47% 0.49% 0.51% 0.51% 0.51% 0.54%
Net investment income............ 5.34% 5.52% 5.76% 6.02% 6.23% 6.74% 7.05% 7.25% 7.31% 7.51%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions........................ $1,097 $1,190 $1,325 $1,295 $1,582 $1,323 $1,145 $1,010 $1,033 $ 908
Portfolio turnover rate.......... 16% 18% 21% 16% 13% 4% 10% 19% 13% 17%
</TABLE>
- ------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class D shares.
+ Calculated based on the net asset value as of the last business day of
the period.
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31, 1997
- ---------------------------------------- -----------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 12.00
-----------------
Net investment income ................... 0.25
Net realized and unrealized gain ........ 0.14
-----------------
Total from investment operations ....... 0.39
-----------------
Less dividends and distributions from:
Net investment income .................. (0.25)
Net realized gain ...................... (0.05)
-----------------
Total dividends and distributions ...... (0.30)
-----------------
Net asset value, end of period .......... $ 12.09
=================
TOTAL INVESTMENT RETURN +................ 3.31%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 0.76%(2)(3)
Net investment income ................... 4.96%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 3,857
Portfolio turnover rate.................. 16%
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 12.00
-----------------
Net investment income ................... 0.23
Net realized and unrealized gain ........ 0.19
-----------------
Total from investment operations ....... 0.42
-----------------
Less dividends and distributions from:
Net investment income .................. (0.23)
Net realized gain ...................... (0.05)
-----------------
Total dividends and distributions ...... (0.28)
-----------------
Net asset value, end of period .......... $ 12.14
=================
TOTAL INVESTMENT RETURN +................ 3.57%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.14%(2)(3)
Net investment income ................... 4.87%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $95,573
Portfolio turnover rate ................. 16%
</TABLE>
- ------------
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on
the net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31, 1997
- ---------------------------------------- -----------------
<S> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $12.00
-----------------
Net investment income ................... 0.23
Net realized and unrealized gain ........ 0.16
-----------------
Total from investment operations ....... 0.39
-----------------
Less dividends and distributions from:
Net investment income .................. (0.23)
Net realized gain ...................... (0.05)
-----------------
Total dividends and distributions ...... (0.28)
-----------------
Net asset value, end of period .......... $12.11
=================
TOTAL INVESTMENT RETURN+ ................ 3.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................. 1.20%(2)(3)
Net investment income ................... 4.41%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $2,953
Portfolio turnover rate ................. 16%
</TABLE>
- ------------
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on
the net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
SEE NOTES TO FINANCIAL STATEMENTS
58
<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, 1997, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights
for each of the periods presented, 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, 1997 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, 1998
1997 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended December 31, 1997, the Fund paid to shareholders
the following per share amounts from net investment income: Class A,
$0.25; Class B, $0.23; Class C, $0.23; and Class D, $0.63 per share.
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, 1997, the Fund paid to Class
A, B, C and D shareholders $0.05 per share from long-term capital
gains. Of this $0.05 distribution, $0.04 is taxable as 28% rate gain
and $0.01 is taxable as 20% rate gain.
<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.
60
<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.
61
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
62
<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.
63
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
<TABLE>
<CAPTION>
(a) Financial Statements
--------------------
<S> <C> <C>
(1) Financial statements and schedules, included in Prospectus (Part A):
Page in
Prospectus
----------
Financial highlights for the years ended December 31, 1988, 1989,
1990, 1991, 1992, 1993, 1994, 1995, 1996, and 1997
(Class D).......................................................................6
Financial Highlights for the period July 28, 1997 through
December 31, 1997 (Class A, B and C)............................................7
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Portfolio of Investments at December 31, 1997..................................39
Statement of Assets and Liabilities at December 31,1997........................48
Statement of Operations for the year ended December 31, 1997.................. 49
Statement of Changes in Net Assets for the years ended
December 31, 1996 and December 31, 1997........................................50
Notes to Financial Statements..................................................51
Financial Highlights for the years ended December 31, 1988, 1989,
1990, 1991, 1992, 1993, 1994, 1995, 1996, and 1997
(Class D)......................................................................56
Financial Highlights for the period July 28, 1997 through
December 31, 1997 (Class A, B and C)...........................................57
</TABLE>
(3) Financial statements included in Part C:
None
(b) Exhibits:
---------
2.- Amended and Restated By-Laws of the Registrant dated as of October
23, 1997
8.- Form of Transfer Agency Agreement between the Registrant and Morgan
Stanley Dean Witter Trust FSB
11.- Consent of Independent Accountants
16.- Schedules for Computation of Performance Quotations
<PAGE>
27.- Financial Data Schedules
Other.- Power of Attorney
- ------------------------------
All other exhibits were previously filed via EDGAR 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, 1998
-------------- -----------------------
Class A 266
Class B 2,641
Class C 106
Class D 23,061
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 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
<PAGE>
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 Morgan Stanley Dean Witter & 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) Dean Witter Government Income Trust
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) InterCapital California Insured Municipal Income Trust
(6) InterCapital California Quality Municipal Securities
(7) InterCapital Income Securities Inc.
(8) InterCapital Insured California Municipal Securities
(9) InterCapital Insured Municipal Bond Trust
(10) InterCapital Insured Municipal Income Trust
(11) InterCapital Insured Municipal Securities
(12) InterCapital Insured Municipal Trust
(13) InterCapital New York Quality Municipal Securities
(14) InterCapital Quality Municipal Income Trust
(15) InterCapital Quality Municipal Investment Trust
(16) InterCapital Quality Municipal Securities
(17) Municipal Income Opportunities Trust
(18) Municipal Income Opportunities Trust II
(19) Municipal Income Opportunities Trust III
(20) Municipal Income Trust
(21) Municipal Income Trust II
(22) Municipal Income Trust III
(23) Municipal Premium Income Trust
(24) Prime Income Trust
<PAGE>
Open-end Investment Companies:
- ------------------------------
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Dean Witter American Value Fund
(6) Dean Witter Balanced Growth Fund
(7) Dean Witter Balanced Income Fund
(8) Dean Witter California Tax-Free Daily Income Trust
(9) Dean Witter California Tax-Free Income Fund
(10) Dean Witter Capital Appreciation Fund
(11) Dean Witter Capital Growth Securities
(12) Dean Witter Convertible Securities Trust
(13) Dean Witter Developing Growth Securities Trust
(14) Dean Witter Diversified Income Trust
(15) Dean Witter Dividend Growth Securities Inc.
(16) Dean Witter European Growth Fund Inc.
(17) Dean Witter Federal Securities Trust
(18) Dean Witter Financial Services Trust
(19) Dean Witter Fund of Funds
(20) Dean Witter Global Asset Allocation Fund
(21) Dean Witter Global Dividend Growth Securities
(22) Dean Witter Global Short-Term Income Fund Inc.
(23) Dean Witter Global Utilities Fund
(24) Dean Witter Hawaii Municipal Trust
(25) Dean Witter Health Sciences Trust
(26) Dean Witter High Yield Securities Inc.
(27) Dean Witter Income Builder Fund
(28) Dean Witter Information Fund
(29) Dean Witter Intermediate Income Securities
(30) Dean Witter Intermediate Term U.S. Treasury Trust
(31) Dean Witter International SmallCap Fund
(32) Dean Witter Japan Fund
(33) Dean Witter Limited Term Municipal Trust
(34) Dean Witter Liquid Asset Fund Inc.
(35) Dean Witter Market Leader Trust
(36) Dean Witter Mid-Cap Growth Fund
(37) Dean Witter Multi-State Municipal Series Trust
(38) Dean Witter Natural Resource Development Securities Inc.
(39) Dean Witter New York Municipal Money Market Trust
(40) Dean Witter New York Tax-Free Income Fund
(41) Dean Witter Pacific Growth Fund Inc.
(42) Dean Witter Precious Metals and Minerals Trust
(43) Dean Witter Retirement Series
(44) Dean Witter S&P 500 Index Fund
(45) Dean Witter Select Dimensions Investment Series
(46) Dean Witter Select Municipal Reinvestment Fund
(47) Dean Witter Short-Term Bond Fund
(48) Dean Witter Short-Term U.S. Treasury Trust
(49) Dean Witter Special Value Fund
(50) Dean Witter Strategist Fund
<PAGE>
(51) Dean Witter Tax-Exempt Securities Trust
(52) Dean Witter Tax-Free Daily Income Trust
(53) Dean Witter U.S. Government Money Market Trust
(54) Dean Witter U.S. Government Securities Trust
(55) Dean Witter Utilities Fund
(56) Dean Witter Value-Added Market Series
(57) Dean Witter Variable Investment Series
(58) Dean Witter World Wide Income Trust
(59) Dean Witter World Wide Investment Trust
(60) Morgan Stanley Dean Witter Competitive Edge Fund
(61) Morgan Stanley Dean Witter Growth Fund
(62) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
The term "TCW/DW Funds" refers to the following registered investment companies:
Open-End Investment Companies
- -----------------------------
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
Closed-End Investment Companies
- -------------------------------
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
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
Chairman, Chief Executive Dean Witter Reynolds Inc.("DWR"); Chairman,
Officer and Director Chief Executive Officer and Director of Dean
Witter Distributors Inc. ("Distributors")
and Dean Witter Services Company Inc.
("DWSC"); Chairman and Director of Morgan
Stanley Dean Witter Trust FSB ("MSDW
Trust"); 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; Director and/or officer of various
Morgan Stanley Dean Witter & Co. ("MSDW")
subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and
Director Director of MSDW and DWR; Director of DWSC
and Distributors; Director or Trustee of the
Dean Witter Funds; Director and/or officer
of various MSDW subsidiaries.
Richard M. DeMartini President and Chief Operating Officer of Dean
Director Witter Capital, a division of DWR; Director of
DWR, DWSC, Distributors and MSDW Trust; Trustee
of the TCW/DW Funds.
<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 F. Higgins President and Chief Operating Officer of Dean
Director Witter Financial; Director of DWR, DWSC,
Distributors and MSDW Trust.
Thomas C. Schneider Executive Vice President and Chief Strategic and
Executive Vice President, Administrative Officer of MSDW; Executive Vice
Director President and Chief Financial Chief Financial
Officer and Officer of DWSC and Distributors;
Director of DWR, DWSC, Distributors and MSDW.
Christine A. Edwards Executive Vice President, Chief Legal Officer
Director and Secretary of MSDW; Executive Vice President,
Secretary and Chief Legal Officer of
Distributors; Director of DWR, DWSC and
Distributors.
Mitchell M. Merin President and Chief Strategic Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Strategic Officer Executive Vice President and Director of MSDW
Trust; Executive Vice President and Director of
DWR; Director of SPS Transaction Services, Inc.
and various other MSDW subsidiaries.
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 MSDW
Trust; Vice President of the Dean Witter
Funds and the TCW/DW Funds.
John B. Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of MSDW Trust.
President
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of MSDW Trust.
and Chief Investment
Officer
Edward C. Oelsner III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice
Senior Vice President, President, Secretary and General Counsel of
Secretary and General DWSC; Senior Vice President, Assistant
Counsel Secretary and Assistant General Counsel of
Distributors; Vice President, Secretary and
General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar Vice President of various Dean Witter Funds.
Senior Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ------------------ -------------------------------------------------
Mark Bavoso Vice President of various Dean Witter Funds.
Senior Vice President
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Dean Witter Funds.
Senior Vice President
Robert S. Giambrone Senior Vice President of DWSC, Distributors and
Senior Vice President MSDW Trust and Director of MSDW Trust; 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. Hinchliffe Vice President of various Dean Witter Funds.
Senior Vice President
Kevin Hurley Vice President of various Dean Witter Funds.
Senior Vice President
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
John B. Kemp, III President of Distributors.
Senior Vice President
Anita H. 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
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Rochelle G. Siegel Vice President of various Dean Witter Funds.
Senior Vice President
Jayne M. Stevlingson Vice President of various Dean Witter Funds.
Senior Vice President
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
Douglas Brown
First 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.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
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.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Dean Witter Funds.
Vice President
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and Assistant
Controller
Joseph Cardwell
Vice President
Philip Casparius
Vice President
B. Catherine Connelly
Vice President
Salvatore DeSteno Vice President of DWSC.
Vice President
Bruce Dunn
Vice President
Michael Durbin
Vice President
Jeffrey D. Geffen
Vice President
Michael Geringer
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Stephen Greenhut
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of Dean Witter Variable Investment
Vice President Series.
Peter Hermann Vice President of various Dean Witter Funds.
Vice President
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
Kevin Jung
Vice President
James P. Kastberg
Vice President
Michelle Kaufman 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 J. Lian Vice President of various Dean Witter Funds.
Vice President
Catherine Maniscalco Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
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.
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural Resource
Vice President Development Securities Inc.
Richard Norris
Vice President
Carsten Otto Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
George Paoletti
Vice President
Anne Pickrell Vice President of various Dean Witter Funds.
Vice President
Michael Roan
Vice President
John Roscoe
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metals and
Vice President Minerals Trust.
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
the Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Peter J. Seeley Vice President of various Dean Witter Funds.
Vice President
Naomi Stein
Vice President
Kathleen H. Stromberg Vice President of various Dean Witter Funds.
Vice President
Marybeth Swisher
Vice President
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss Vice President of various Dean Witter Funds.
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) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Dean Witter American Value Fund
(6) Dean Witter Balanced Growth Fund
(7) Dean Witter Balanced Income Fund
(8) Dean Witter California Tax-Free Daily Income Trust
(9) Dean Witter California Tax-Free Income Fund
(10) Dean Witter Capital Appreciation Fund
(11) Dean Witter Capital Growth Securities
(12) Dean Witter Convertible Securities Trust
(13) Dean Witter Developing Growth Securities Trust
(14) Dean Witter Diversified Income Trust
(15) Dean Witter Dividend Growth Securities Inc.
(16) Dean Witter European Growth Fund Inc.
(17) Dean Witter Federal Securities Trust
(18) Dean Witter Financial Services Trust
(19) Dean Witter Fund of Funds
(20) Dean Witter Global Asset Allocation
(21) Dean Witter Global Dividend Growth Securities
(22) Dean Witter Global Short-Term Income Fund Inc.
<PAGE>
(23) Dean Witter Global Utilities Fund
(24) Dean Witter Hawaii Municipal Trust
(25) Dean Witter Health Sciences Trust
(26) Dean Witter High Yield Securities Inc.
(27) Dean Witter Income Builder Fund
(28) Dean Witter Information Fund
(29) Dean Witter Intermediate Income Securities
(30) Dean Witter Intermediate Term U.S. Treasury Trust
(31) Dean Witter International SmallCap Fund
(32) Dean Witter Japan Fund
(33) Dean Witter Limited Term Municipal Trust
(34) Dean Witter Liquid Asset Fund Inc.
(35) Dean Witter Market Leader Trust
(36) Dean Witter Mid-Cap Growth Fund
(37) Dean Witter Multi-State Municipal Series Trust
(38) Dean Witter Natural Resource Development Securities Inc.
(39) Dean Witter New York Municipal Money Market Trust
(40) Dean Witter New York Tax-Free Income Fund
(41) Dean Witter Pacific Growth Fund Inc.
(42) Dean Witter Precious Metals and Minerals Trust
(43) Dean Witter Retirement Series
(44) Dean Witter S&P 500 Index Fund
(45) Dean Witter Short-Term Bond Fund
(46) Dean Witter Short-Term U.S. Treasury Trust
(47) Dean Witter Special Value Fund
(48) Dean Witter Strategist Fund
(49) Dean Witter Tax-Exempt Securities Trust
(50) Dean Witter Tax-Free Daily Income Trust
(51) Dean Witter U.S. Government Money Market Trust
(52) Dean Witter U.S. Government Securities Trust
(53) Dean Witter Utilities Fund
(54) Dean Witter Value-Added Market Series
(55) Dean Witter Variable Investment Series
(56) Dean Witter World Wide Income Trust
(57) Dean Witter World Wide Investment Trust Morgan Stanley
(58) Dean Witter Competitive Edge Fund Morgan Stanley
(59) Dean Witter Growth Fund Morgan Stanley
(60) Dean Witter Mid-Cap Dividend Growth Securities
(61) Prime Income Trust
(1) TCW/DW North American Government Income Trust
(2) TCW/DW Latin American Growth Fund
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Total Return Trust
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW Global Telecom Trust
(7) TCW/DW Emerging Markets Opportunities Trust
(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.
<PAGE>
Name Positions and Office with 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.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 17th day of April, 1998.
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
Post-Effective Amendment No. 21 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo
------------------------------ 4/17/98
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 4/17/98
------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 4/17/98
-----------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien
By /s/ David M. Butowsky 4/17/98
------------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
---------------------------------------
EXHIBIT INDEX
2. Amended and Restated By-Laws of the Registrant dated October 23, 1997.
8. Form of Transfer Agency and Service Agreement between the Registrant
and Dean Witter FSB.
11. Consent of Independent Accountants.
16. Schedules for Computation of Performance Quotations.
27. Financial Data Schedules.
Other. Power of Attorney.
<PAGE>
BY-LAWS
OF
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
AMENDED AND RESTATED AS OF OCTOBER 23, 1997
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
1
<PAGE>
Shareholders present or represented by proxy and entitled to vote thereat
shall have the power to adjourn the meeting from time to time. The
Shareholders present in person or represented by proxy at any meeting and
entitled to vote thereat also shall have the power to adjourn the meeting
from time to time if the vote required to approve or reject any proposal
described in the original notice of such meeting is not obtained (with
proxies being voted for or against adjournment consistent with the votes for
and against the proposal for which the required vote has not been obtained).
The affirmative vote of the holders of a majority of the Shares then present
in person or represented by proxy shall be required to adjourn any meeting.
Any adjourned meeting may be reconvened without further notice or change in
record date. At any reconvened meeting at which a quorum shall be present,
any business may be transacted that might have been transacted at the meeting
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.
2
<PAGE>
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.
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
3
<PAGE>
(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.
(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--
4
<PAGE>
(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
(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.
5
<PAGE>
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.
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.
6
<PAGE>
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.
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.
7
<PAGE>
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 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;
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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.
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 the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii)
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. The
record date, in any case, shall not be more than one hundred eighty (180)
days, and in the case of a meeting of Shareholders not less than ten (10)
days, prior to the date on which such meeting is to be held or the date on
which such other particular action requiring determination of Shareholders is
to be taken, as the case may be. In the case of a meeting of Shareholders,
the meeting date set forth in the notice to Shareholders accompanying the
proxy statement shall be the date used for purposes of calculating the 180
day or 10 day period, and any adjourned meeting may be reconvened without a
change in record date. 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 the 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.
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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.
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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AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
DEAN WITTER TRUST FSB
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
Article 1 Terms of Appointment............................... 1
Article 2 Fees and Expenses.................................. 2
Article 3 Representations and Warranties of DWTFSB .......... 3
Article 4 Representations and Warranties of the Fund ........ 3
Article 5 Duty of Care and Indemnification................... 3
Article 6 Documents and Covenants of the Fund and DWTFSB .... 4
Article 7 Duration and Termination of Agreement.............. 5
Article 8 Assignment ........................................ 5
Article 9 Affiliations....................................... 6
Article 10 Amendment.......................................... 6
Article 11 Applicable Law..................................... 6
Article 12 Miscellaneous...................................... 6
Article 13 Merger of Agreement................................ 7
Article 14 Personal Liability................................. 7
</TABLE>
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AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 23rd day of October, 1997 by
and between each of the Funds listed on the signature pages hereof, each of
such Funds acting severally on its own behalf and not jointly with any of
such other Funds (each such Fund hereinafter referred to as the "Fund"), each
such Fund having its principal office and place of business at Two World
Trade Center, New York, New York, 10048, and DEAN WITTER TRUST FSB
("DWTFSB"), a federally chartered savings bank, having its principal office
and place of business at Harborside Financial Center, Plaza Two, Jersey City,
New Jersey 07311.
WHEREAS, the Fund desires to appoint DWTFSB as its transfer agent,
dividend disbursing agent and shareholder servicing agent and DWTFSB desires
to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of DWTFSB
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints DWTFSB to act as, and DWTFSB agrees to act
as, the transfer agent for each series and class of shares of the Fund,
whether now or hereafter authorized or issued ("Shares"), dividend disbursing
agent and shareholder servicing agent in connection with any accumulation,
open-account or similar plans provided to the holders of such Shares
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund, including
without limitation any periodic investment plan or periodic withdrawal
program.
1.2 DWTFSB agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and DWTFSB, DWTFSB shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in book
form in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause
to be paid over in the appropriate manner such monies as instructed by
the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may
be reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are
authorized, based upon data provided to it by the Fund, and issued and
outstanding. DWTFSB shall also provide to the Fund on a regular basis
the total number of Shares that are authorized, issued and outstanding
and shall notify the Fund in case any proposed issue of Shares by the
Fund would result in an overissue. In case any issue of Shares
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would result in an overissue, DWTFSB shall refuse to issue such Shares
and shall not countersign and issue any certificates requested for
such Shares. When recording the issuance of Shares, DWTFSB shall have
no obligation to take cognizance of any Blue Sky laws relating to the
issue of sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), DWTFSB shall:
(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing
agent in connection with dividend reinvestment, accumulation,
open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including
but not limited to, maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating
proxies, mailing shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident
alien accounts, preparing and filing appropriate forms required with
respect to dividends and distributions by federal tax authorities for
all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders and providing Shareholder account information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the total
number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to DWTFSB in writing those transactions and assets to be
treated as exempt from Blue Sky reporting for each State; and
(ii) verify the inclusion on the system prior to activation of each
State in which Fund shares may be sold and thereafter monitor the
daily purchases and sales for shareholders in each State. The
responsibility of DWTFSB for the Fund's status under the securities
laws of any State or other jurisdiction is limited to the inclusion on
the system of each State as to which the Fund has informed DWTFSB that
shares may be sold in compliance with state securities laws and the
reporting of purchases and sales in each such State to the Fund as
provided above and as agreed from time to time by the Fund and DWTFSB.
(d) DWTFSB shall provide such additional services and functions not
specifically described herein as may be mutually agreed between DWTFSB and
the Fund. Procedures applicable to such services may be established from
time to time by agreement between the Fund and DWTFSB.
Article 2 Fees and Expenses
2.1 For performance by DWTFSB pursuant to this Agreement, each Fund agrees
to pay DWTFSB an annual maintenance fee for each Shareholder account and
certain transactional fees, if applicable, as set out in the respective fee
schedule attached hereto as Schedule A. Such fees and out-of-pocket expenses
and advances identified under Section 2.2 below may be changed from time to
time subject to mutual written agreement between the Fund and DWTFSB.
2.2 In addition to the fees paid under Section 2.1 above, the Fund agrees
to reimburse DWTFSB for out of pocket expenses in connection with the
services rendered by DWTFSB hereunder. In addition, any other expenses
incurred by DWTFSB at the request or with the consent of the Fund will be
reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within a
reasonable period of time following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to DWTFSB by the Fund
upon request prior to the mailing date of such materials.
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Article 3 Representations and Warranties of DWTFSB
DWTFSB represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal office is in
New Jersey.
3.2 It is and will remain registered with the U.S. Securities and Exchange
Commission ("SEC") as a Transfer Agent pursuant to the requirements of
Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and By-Laws
to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to DWTFSB that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of Delaware or Maryland or a trust duly organized and existing
and in good standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter into and
perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the
Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the "1933
Act") is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
Article 5 Duty of Care and Indemnification
5.1 DWTFSB shall not be responsible for, and the Fund shall indemnify and
hold DWTFSB harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTFSB or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation
or warranty of the Fund hereunder.
(c) The reliance on or use by DWTFSB or its agents or subcontractors of
information, records and documents which (i) are received by DWTFSB or its
agents or subcontractors and furnished to it by or on behalf of the Fund,
and (ii) have been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTFSB or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities or Blue Sky laws
of any State or other jurisdiction that notice of
3
<PAGE>
offering of such Shares in such State or other jurisdiction or in
violation of any stop order or other determination or ruling by any
federal agency or any State or other jurisdiction with respect to the
offer or sale of such Shares in such State or other jurisdiction.
5.2 DWTFSB shall indemnify and hold the Fund harmless from or against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission
to act by DWTFSB as a result of the lack of good faith, negligence or willful
misconduct of DWTFSB, its officers, employees or agents.
5.3 At any time, DWTFSB may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTFSB
under this Agreement, and DWTFSB and its agents or subcontractors shall not
be liable and shall be indemnified by the Fund for any action taken or
omitted by it in reliance upon such instructions or upon the opinion of such
counsel. DWTFSB, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records
or documents provided to DWTFSB or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. DWTFSB,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signature of the officers of the Fund, and the
proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.4 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to
the other for any damages resulting from such failure to perform or otherwise
from such causes.
5.5 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.6 In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify
it except with the other party's prior written consent.
Article 6 Documents and Covenants of the Fund and DWTFSB
6.1 The Fund shall promptly furnish to DWTFSB the following, unless
previously furnished to Dean Witter Trust Company, the prior transfer agent
of the Fund:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the
Fund and signature cards bearing the signature of any officer of the
Fund or any other person authorized to sign written instructions on
behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the
Secretary of the Fund as to such approval;
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(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the
Fund and signature cards bearing the signature of any officer of the
Fund or any other person authorized to sign written instructions on
behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary
of the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service
offered or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTFSB deems to be
appropriate or necessary for the proper performance of its duties.
6.2 DWTFSB hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.3 DWTFSB shall prepare and keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as
required by applicable laws and regulations. To the extent required by
Section 31 of the 1940 Act, and the rules and regulations thereunder, DWTFSB
agrees that all such records prepared or maintained by DWTFSB relating to the
services performed by DWTFSB hereunder are the property of the Fund and will
be preserved, maintained and made available in accordance with such Section
31 of the 1940 Act, and the rules and regulations thereunder, and will be
surrendered promptly to the Fund on and in accordance with its request.
6.4 DWTFSB and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential and shall not be voluntarily disclosed to any other
person except as may be required by law or with the prior consent of DWTFSB
and the Fund.
6.5 In case of any request or demands for the inspection of the
Shareholder records of the Fund, DWTFSB will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. DWTFSB reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records to such
person.
Article 7 Duration and Termination of Agreement
7.1 This Agreement shall remain in full force and effect until August 1,
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days written
notice, and by DWTFSB on 90 days written notice, to the other party without
payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and other materials will be
borne by the Fund. Additionally, DWTFSB reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 Assignment
8.1 Except as provided in Section 8.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
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8.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.3 DWTFSB may, in its sole discretion and without further consent by the
Fund, subcontract, in whole or in part, for the performance of its
obligations and duties hereunder with any person or entity including but not
limited to companies which are affiliated with DWTFSB; provided, however,
that such person or entity has and maintains the qualifications, if any,
required to perform such obligations and duties, and that DWTFSB shall be as
fully responsible to the Fund for the acts and omissions of any agent or
subcontractor as it is for its own acts or omissions under this Agreement.
Article 9 Affiliations
9.1 DWTFSB may now or hereafter, without the consent of or notice to the
Fund, function as transfer agent and/or shareholder servicing agent for any
other investment company registered with the SEC under the 1940 Act and for
any other issuer, including without limitation any investment company whose
adviser, administrator, sponsor or principal underwriter is or may become
affiliated with Morgan Stanley, Dean Witter, Discover & Co. or any of its
direct or indirect subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as the
case may be), officers, employees, agents and shareholders of the Fund, and
the directors, officers, employees, agents and shareholders of the Fund's
investment adviser and/or distributor, are or may be interested in DWTFSB as
directors, officers, employees, agents and shareholders or otherwise, and
that the directors, officers, employees, agents and shareholders of DWTFSB
may be interested in the Fund as Directors or Trustees (as the case may be),
officers, employees, agents and shareholders or otherwise, or in the
investment adviser and/or distributor as directors, officers, employees,
agents, shareholders or otherwise.
Article 10 Amendment
10.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Board of Directors or the Board of Trustees (as the case may be) of the Fund.
Article 11 Applicable Law
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
Article 12 Miscellaneous
12.1 In the event that one or more additional investment companies managed
or administered by Dean Witter InterCapital Inc. or any of its affiliates
("Additional Funds") desires to retain DWTFSB to act as transfer agent,
dividend disbursing agent and/or shareholder servicing agent, and DWTFSB
desires to render such services, such services shall be provided pursuant to
a letter agreement, substantially in the form of Exhibit A hereto, between
DWTFSB and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTFSB an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to DWTFSB and the
Fund issued by a surety company satisfactory to DWTFSB, except that DWTFSB
may accept an affidavit of loss and indemnity agreement executed by the
registered holder (or legal representative) without surety in such form as
DWTFSB deems appropriate indemnifying DWTFSB and the Fund for the issuance of
a replacement certificate, in cases where the alleged loss is in the amount
of $1,000 or less.
12.3 In the event that any check or other order for payment of money on
the account of any Shareholder or new investor is returned unpaid for any
reason, DWTFSB will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of
such non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTFSB may, in its sole discretion,
deem appropriate or as the Fund and, if applicable, the Distributor may
instruct DWTFSB.
6
<PAGE>
12.4 Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or to DWTFSB shall be
sufficiently given if addressed to that party and received by it at its
office set forth below or at such other place as it may from time to time
designate in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTFSB:
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 Merger of Agreement
13.1 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
Article 14 Personal Liability
14.1 In the case of a Fund organized as a Massachusetts business trust, a
copy of the Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however,
that the Declaration of Trust of the Fund provides that the assets of a
particular Series of the Fund shall under no circumstances be charged with
liabilities attributable to any other Series of the Fund and that all persons
extending credit to, or contracting with or having any claim against, a
particular Series of the Fund shall look only to the assets of that
particular Series for payment of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.
DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Dean Witter California Tax-Free Daily Income Trust
8. Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Mid-Cap Growth Fund
7
<PAGE>
12. Dean Witter Dividend Growth Securities Inc.
13. Dean Witter Capital Growth Securities
14. Dean Witter Global Dividend Growth Securities
15. Dean Witter Income Builder Fund
16. Dean Witter Natural Resource Development Securities Inc.
17. Dean Witter Precious Metals and Minerals Trust
18. Dean Witter Developing Growth Securities Trust
19. Dean Witter Health Sciences Trust
20. Dean Witter Capital Appreciation Fund
21. Dean Witter Information Fund
22. Dean Witter Value-Added Market Series
23. Dean Witter World Wide Investment Trust
24. Dean Witter European Growth Fund Inc.
25. Dean Witter Pacific Growth Fund Inc.
26. Dean Witter International SmallCap Fund
27. Dean Witter Japan Fund
28. Dean Witter Utilities Fund
29. Dean Witter Global Utilities Fund
30. Dean Witter Special Value Fund
31. Dean Witter Financial Services Trust
32. Dean Witter Market Leader Trust
33. Dean Witter Managers' Select Fund
34. Dean Witter Fund of Funds
35. Dean Witter S&P 500 Index Fund
BALANCED FUNDS
36. Dean Witter Balanced Growth Fund
37. Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
38. Dean Witter Strategist Fund
39. Dean Witter Global Asset Allocation Fund
FIXED INCOME FUNDS
40. Dean Witter High Yield Securities Inc.
41. Dean Witter High Income Securities
42. Dean Witter Convertible Securities Trust
43. Dean Witter Intermediate Income Securities
44. Dean Witter Short-Term Bond Fund
45. Dean Witter World Wide Income Trust
46. Dean Witter Global Short-Term Income Fund Inc.
47. Dean Witter Diversified Income Trust
48. Dean Witter U.S. Government Securities Trust
49. Dean Witter Federal Securities Trust
50. Dean Witter Short-Term U.S. Treasury Trust
51. Dean Witter Intermediate Term U.S. Treasury Trust
52. Dean Witter Tax-Exempt Securities Trust
53. Dean Witter National Municipal Trust
55. Dean Witter Limited Term Municipal Trust
55. Dean Witter California Tax-Free Income Fund
56. Dean Witter New York Tax-Free Income Fund
57. Dean Witter Hawaii Municipal Trust
58. Dean Witter Multi-State Municipal Series Trust
59. Dean Witter Select Municipal Reinvestment Fund
8
<PAGE>
SPECIAL PURPOSE FUNDS
60. Dean Witter Retirement Series
61. Dean Witter Variable Investment Series
62. Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
63. TCW/DW Core Equity Trust
64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
68. TCW/DW Balanced Fund
69. TCW/DW Total Return Trust
70. TCW/DW Global Telecom Trust
71. TCW/DW Strategic Income Trust
72. TCW/DW Mid-Cap Equity Trust
By:
--------------------------
Barry Fink
Vice President and
General Counsel
ATTEST:
- --------------------------------
Assistant Secretary
DEAN WITTER TRUST FSB
By:
--------------------------
John Van Heuvelen
President
ATTEST:
- --------------------------------
Executive Vice President
9
<PAGE>
EXHIBIT A
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (insert name of investment company) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to employ and
appoint Dean Witter Trust FSB ("DWTFSB") to act as transfer agent for each
series and class of shares of the Fund, whether now or hereafter authorized
or issued ("Shares"), dividend disbursing agent and shareholder servicing
agent, registrar and agent in connection with any accumulation, open-account
or similar plan provided to the holders of Shares, including without
limitation any periodic investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the Fund
to DWTFSB of fees as set out in the fee schedule attached hereto as Schedule
A, DWTFSB shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
Please indicate DWTFSB's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
(name of fund)
By:
-------------------------------
Barry Fink
Vice President and General
Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST FSB
By:
-------------------------------------------------------------------------
Its:
-----------------------------------------------------------------------
Date:
-----------------------------------------------------------------------
10
<PAGE>
SCHEDULE A
Fund: Dean Witter Tax-Exempt Securities Trust
Fees: (1) Annual maintenance fee of $13.20 per shareholder account, payable
monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
11
<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. 21 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 10, 1998, relating to the financial statements and financial
highlights of Dean Witter Tax-Exempt Securities Trust, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings
"Independent Accountants" and "Experts" in such Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
in such Prospectus.
/s/ Price Waterhouse LLP
- ----------------------------
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 16, 1998
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER TAX EXEMPT SECURITIES TRUST
CLASS A
FOR THE 30 DAY PERIOD ENDED DECEMBER 31, 1997
6
(A) YIELD = 2{ [ ((a-b)/c d) + 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{ [((15,374.02 - 2,231.56)/301,542.858 *12.63)+1] -1}
= 4.18%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.18% / (1-.3960)
= 6.92.%
(A) 15,374.02 - 2,231.56 = 13,142.46
301,542.858 * 12.63 = 3,808,486.30
13,142.46/3,808,486.30 = 0.0034508
1+.0034508 = 1.0034508
1.0034508 ^ 6 = 1.02088424428350447
.02088424428350447 * 2 = 4.18%
(B) 1 - .3960= 0.604
4.18%/0.604= 6.92%
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER TAX EXEMPT SECURITIES TRUST
CLASS B
FOR THE 30 DAY PERIOD ENDED DECEMBER 31, 1997
6
(A) YIELD = 2{ [ ((a-b)/c d) + 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{ [((396,388.65 - 84,467.12)/7,744,367.152 *12.14)+1] -1}
= 4.01%
(B) TAX EQUIVALENT YIELD = SEC Yield -(1- stated tax rate)
= 4.01% / (1-.3960)
= 6.64%
(A) 396,388.65 - 84,467.12 = 311,921.53
7,744,367.152 * 12.14 = 94,016,617.23
311,921.53/94,016,617.23 = 0.0033177
1 + .0033177 = 1.0033177
1.0033177 ^ 6 = 1.02007203918644018
.02007203918644*2= 4.01%
(B) 1-.3960= 0.604
4.01%/0.604= 6.64%
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER TAX EXEMPT SECURITIES TRUST
CLASS C
FOR THE 30 DAY PERIOD ENDED DECEMBER 31, 1997
6
(A) YIELD = 2{ [ ((a-b)/c d) + 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{ [((9,999.90 - 2,364.27)/195,758.967 *12.11)+1] -1}
= 3.90%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 3.90% / (1-.3960)
= 6.46%
(A) 9,999.90 -2,364.27 = 7,635.63
195,758.967 * 12.11 = 2,370,641.09
7,635.63/2,370,641.09 = 0.0032209
1 + .0032209 = 1.0032209
1.0032209 ^ 6 = 1.01948168285360049
.0194816828536 * 2= 3.90%
(B) 1-.3960= 0.604
3.90%/0.604= 6.46%
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER TAX EXEMPT SECURITIES TRUST
CLASS D
FOR THE 30 DAY PERIOD ENDED DECEMBER 31, 1997
6
(A) YIELD = 2{ [ ((a-b)/c d) + 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{[((4,622,094.62 - 443,041.07)/90,723,964.119 *12.08)+1]-1}
= 4.62%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1-stated tax rate)
= 4.62% / (1-.3960)
= 7.65%
(A) 4,622,094.62 - 443,041.07 = 4,179,053.55
90,723,964.119 * 12.08 = 1,095,945,486.56
4,179,053.55/1,095,945,486.56 = 0.0038132
1 + .0038132 = 1.0038132
1.0038132 ^ 6 = 1.02309841950608264
.02309841950608264 * 2 = 4.62%
(B) 1-.3960= 0.604
4.62%/0.604= 7.65%
<PAGE>
SCHEDULE FOR RESTATED COMPUTATIONS OF PERFORMANCE QUOTATIONS RESTATED FOR
12B-1 FEE DEAN WITTER TAX-EXEMPT SECURITIES - CLASS A
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
-
|
|
| ----------------------
| | | |
FORMULA: | | ERV |
| | -------- | - 1
T = | n | P |
| /\ | |
| \ | |
| \| |
| |
- -
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-97 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ ---------- ------------ ---------- -------------------
31-Dec-96 $ 1,038.60 3.86% 1 3.86%
31-Dec-92 $ 1,313.70 31.37% 5 5.61%
31-Dec-87 $ 2,111.10 111.11% 10 7.76%
(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: | | EV |
| | -------- | - 1
t = | n | P |
| /\ | |
| \ | |
| \| |
| |
- -
EV
TR = ----------
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-97 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- ---------- -------------------
31-Dec-96 $ 1,084.70 8.47% 1 8.47%
31-Dec-92 $ 1,372.00 37.20% 5 6.53%
31-Dec-87 $ 2,204.80 120.48% 10 8.23%
(E) GROWTH OF $10,000*
(F) GROWTH OF $50,000*
(G) GROWTH OF $100,000*
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - E $50,000 INVESTMENT - F $100,000 INVESTMENT - G
- ------------- ------------ ----------------------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
27-Mar-80 389.18 $ 46,839 $236,029 $475,728
</TABLE>
*SINCE INCEPTION : ORIGINAL VALUE $9,575,$48,250 & $97,250 ADJUSTED FOR
4.25%,3.50% AND 2.75% SALES CHARGES, RESPECTIVELY.
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER TAX-EXEMPT SECURITIES - Class B
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
-
|
|
| ----------------------
| | | |
FORMULA: | | ERV |
| | -------- | - 1
T = | n | P |
| /\ | |
| \ | |
| \| |
| |
- -
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-97 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ ----------- ------------- ---------- -------------------
28-Jul-97 $985.70 -1.43% 0.43 NA
(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: | | EV |
| | -------- | - 1
t = | n | 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-97 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ---------- ----------- ---------- -------------------
28-Jul-97 $1,035.70 3.57% 0.43 NA
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------- ------------ ----------------------- ----------------------- -------------------------
<S> <C> <C> <C> <C>
28-Jul-97 3.57 $10,357 $51,785 $103,570
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER TAX-EXEMPT SECURITIES - Class C
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
-
|
|
| ----------------------
| | | |
FORMULA: | | ERV |
| | -------- | - 1
T = | n | P |
| /\ | |
| \ | |
| \| |
| |
- -
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-97 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ ---------- ------------- ---------- -------------------
28-Jul-97 $1,022.80 2.28% 0.43 NA
(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: | | EV |
| | -------- | - 1
t = | n | 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-97 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ------------ ----------- -------------------
28-Jul-97 $1,032.80 3.28% 0.43 NA
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000INVESTMENT - G
- -------------- --------------- ---------------------- -------------------------- ------------------------
<S> <C> <C> <C> <C>
28-Jul-97 3.28 $10,328 $51,640 $103,280
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER TAX-EXEMPT SECURITIES - Class D
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN(NO LOAD FUND
-
|
|
| ----------------------
| | | |
FORMULA: | | ERV |
| | -------- | - 1
T = | n | P |
| /\ | |
| \ | |
| \| |
| |
- -
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(B) (A)
$1,000 ERV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-97 RETURN - TR YEARS - n COMPOUND RETURN - T
- ------------ --------- ------------- ----------- --------------------
31-Dec-96 $1,087.30 8.73% 1 8.73%
31-Dec-92 $1,389.10 38.91% 5 6.79%
31-Dec-87 $2,260.00 126.00% 10 8.50%
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) GROWTH OF $100,000
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (C) GROWTH OF (D) GROWTH OF (E) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT -G $50,000 INVESTMENT -G $100,000 INVESTMENT -G
- ------------- ------------ ------------------------ ----------------------- --------------------------
<S> <C> <C> <C> <C>
27-Mar-80 411.18 $51,118 $255,590 $511,180
</TABLE>
<PAGE>
These calculations use the old 4.0% FESC and will be included in theSAI only.
Legal want this in the SAI so that old Tax-Exempt shareholders can get an
accurate measure of thier performance. See HYLAX adjusted.
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER TAX-EXEMPT SECURITIES - Class D
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
-
|
|
| ----------------------
| | | |
FORMULA: | | ERV |
| | -------- | - 1
T = | n | P |
| /\ | |
| \ | |
| \| |
| |
- -
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-97 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ----------- ----------- ------------- ------------- ------------------
31-Dec-96 $1,043.80 4.38% 1 4.38%
31-Dec-92 $1,333.50 33.35% 5.00 5.93%
31-Dec-87 $2,169.60 116.96% 10.00 8.05%
(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: | | EV |
| | -------- | - 1
t = | n | 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-97 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ------------- ------------ ------------------
31-Dec-96 $1,087.30 8.73% 1 8.73%
31-Dec-92 $1,389.10 38.91% 5.00 6.79%
31-Dec-87 $2,260.00 126.00% 10.00 8.50%
(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
<PAGE>
<TABLE>
<CAPTION>
(D) (E) (F)
$10,000 TOTAL
GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000INVESTMENT - G
- ------------ ----------- ----------------------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
27-Mar-80 411.18 $49,074 $247,283 $497,123
</TABLE>
* INITIAL INVESTMENT $9600,$48,375 & $97,250 RESPECTIVELY REFLECTS A 4%,
3.25% & 2.75% SALES CHARGE
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> SERIES A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,087,967,642
<INVESTMENTS-AT-VALUE> 1,192,443,934
<RECEIVABLES> 18,812,929
<ASSETS-OTHER> 8,773,721
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,220,030,584
<PAYABLE-FOR-SECURITIES> 15,332,934
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,316,951
<TOTAL-LIABILITIES> 20,649,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,090,477,778
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 34,517
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,392,112
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104,476,292
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 66,655,912
<OTHER-INCOME> 0
<EXPENSES-NET> 5,701,568
<NET-INVESTMENT-INCOME> 60,954,344
<REALIZED-GAINS-CURRENT> 9,545,783
<APPREC-INCREASE-CURRENT> 25,338,447
<NET-CHANGE-FROM-OPS> 95,838,574
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,346,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 162,708
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,004,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,750,032
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> SERIES B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,087,967,642
<INVESTMENTS-AT-VALUE> 1,192,443,934
<RECEIVABLES> 18,812,929
<ASSETS-OTHER> 8,773,721
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,220,030,584
<PAYABLE-FOR-SECURITIES> 15,332,934
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,316,951
<TOTAL-LIABILITIES> 20,649,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,090,477,778
<SHARES-COMMON-STOCK> 319,033
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 34,517
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,392,112
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104,476,292
<NET-ASSETS> 3,857,465
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 66,655,912
<OTHER-INCOME> 0
<EXPENSES-NET> 5,701,568
<NET-INVESTMENT-INCOME> 60,954,344
<REALIZED-GAINS-CURRENT> 9,545,783
<APPREC-INCREASE-CURRENT> 25,338,447
<NET-CHANGE-FROM-OPS> 95,838,574
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (48,774)
<DISTRIBUTIONS-OF-GAINS> (16,080)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 338,676
<NUMBER-OF-SHARES-REDEEMED> 21,680
<SHARES-REINVESTED> 2,037
<NET-CHANGE-IN-ASSETS> 9,346,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 162,708
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,004,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,750,032
<AVERAGE-NET-ASSETS> 2,322,415
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.09
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> SERIES C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,087,967,642
<INVESTMENTS-AT-VALUE> 1,192,443,934
<RECEIVABLES> 18,812,929
<ASSETS-OTHER> 8,773,721
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,220,030,584
<PAYABLE-FOR-SECURITIES> 15,332,934
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,316,951
<TOTAL-LIABILITIES> 20,649,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,090,477,778
<SHARES-COMMON-STOCK> 7,872,615
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 34,517
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,392,112
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104,476,292
<NET-ASSETS> 95,572,595
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 66,655,912
<OTHER-INCOME> 0
<EXPENSES-NET> 5,701,568
<NET-INVESTMENT-INCOME> 60,954,344
<REALIZED-GAINS-CURRENT> 9,545,783
<APPREC-INCREASE-CURRENT> 25,338,447
<NET-CHANGE-FROM-OPS> 95,838,574
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (673,417)
<DISTRIBUTIONS-OF-GAINS> (395,740)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,155,496
<NUMBER-OF-SHARES-REDEEMED> 333,151
<SHARES-REINVESTED> 50,270
<NET-CHANGE-IN-ASSETS> 9,346,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 162,708
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,004,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,750,032
<AVERAGE-NET-ASSETS> 32,677,718
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 0.19
<PER-SHARE-DIVIDEND> (0.23)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.14
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> SERIES D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,087,967,642
<INVESTMENTS-AT-VALUE> 1,192,443,934
<RECEIVABLES> 18,812,929
<ASSETS-OTHER> 8,773,721
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,220,030,584
<PAYABLE-FOR-SECURITIES> 15,332,934
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,316,951
<TOTAL-LIABILITIES> 20,649,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,090,477,778
<SHARES-COMMON-STOCK> 243,831
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 34,517
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,392,112
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104,476,292
<NET-ASSETS> 2,953,120
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 66,655,912
<OTHER-INCOME> 0
<EXPENSES-NET> 5,701,568
<NET-INVESTMENT-INCOME> 60,954,344
<REALIZED-GAINS-CURRENT> 9,545,783
<APPREC-INCREASE-CURRENT> 25,338,447
<NET-CHANGE-FROM-OPS> 95,838,574
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (30,406)
<DISTRIBUTIONS-OF-GAINS> (12,228)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 246,149
<NUMBER-OF-SHARES-REDEEMED> 4,612
<SHARES-REINVESTED> 2,294
<NET-CHANGE-IN-ASSETS> 9,346,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 162,708
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,004,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,750,032
<AVERAGE-NET-ASSETS> 1,626,134
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> (0.23)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.11
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> SERIES E
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,087,967,642
<INVESTMENTS-AT-VALUE> 1,192,443,934
<RECEIVABLES> 18,812,929
<ASSETS-OTHER> 8,773,721
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,220,030,584
<PAYABLE-FOR-SECURITIES> 15,332,934
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,316,951
<TOTAL-LIABILITIES> 20,649,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,090,477,778
<SHARES-COMMON-STOCK> 90,784,537
<SHARES-COMMON-PRIOR> 101,083,561
<ACCUMULATED-NII-CURRENT> 34,517
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,392,112
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104,476,292
<NET-ASSETS> 1,096,997,519
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 66,655,912
<OTHER-INCOME> 0
<EXPENSES-NET> 5,701,568
<NET-INVESTMENT-INCOME> 60,954,344
<REALIZED-GAINS-CURRENT> 9,545,783
<APPREC-INCREASE-CURRENT> 25,338,447
<NET-CHANGE-FROM-OPS> 95,838,574
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (60,167,993)
<DISTRIBUTIONS-OF-GAINS> (4,910,430)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,386,806
<NUMBER-OF-SHARES-REDEEMED> 14,721,910
<SHARES-REINVESTED> 3,036,080
<NET-CHANGE-IN-ASSETS> 9,346,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 162,708
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,004,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,750,032
<AVERAGE-NET-ASSETS> 1,127,937,505
<PER-SHARE-NAV-BEGIN> 11.77
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.36
<PER-SHARE-DIVIDEND> (0.63)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.08
<EXPENSE-RATIO> 0.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that WAYNE E. HEDIEN, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of ANY OF THE
DEAN WITTER FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Dated: September 1, 1997
/s/ Wayne E. Hedien
-----------------------------
Wayne E. Hedien
<PAGE>
Schedule A
1. Active Assets Money Trust
2. Active Assets Tax-Free Trust
3. Active Assets Government Securities Trust
4. Active Assets California Tax-Free Trust
5. Dean Witter New York Municipal Money Market Trust
6. Dean Witter American Value Fund
7. Dean Witter Tax-Exempt Securities Trust
8. Dean Witter Tax-Free Daily Income Trust
9. Dean Witter Capital Growth Securities
10. Dean Witter U.S. Government Money Market Trust
11. Dean Witter Precious Metals and Minerals Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter World Wide Investment Trust
14. Dean Witter Value-Added Market Series
15. Dean Witter Utilities Fund
16. Dean Witter Strategist Fund
17. Dean Witter California Tax-Free Daily Income Trust
18. Dean Witter Convertible Securities Trust
19. Dean Witter Intermediate Income Securities
20. Dean Witter World Wide Income Trust
21. Dean Witter S&P 500 Index Fund
22. Dean Witter U.S. Government Securities Trust
23. Dean Witter Federal Securities Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter California Tax-Free Income Fund
26. Dean Witter New York Tax-Free Income Fund
27. Dean Witter Select Municipal Reinvestment Fund
28. Dean Witter Variable Investment Series
29. High Income Advantage Trust
30. High Income Advantage Trust II
31. High Income Advantage Trust III
32. InterCapital Insured Municipal Bond Trust
33. InterCapital Insured Municipal Trust
34. InterCapital Insured Municipal Income Trust
35. InterCapital Quality Municipal Investment Trust
36. InterCapital Quality Municipal Income Trust
37. Dean Witter Government Income Trust
38. Municipal Income Trust
39. Municipal Income Trust II
40. Municipal Income Trust III
41. Municipal Income Opportunities Trust
42. Municipal Income Opportunities Trust II
43. Municipal Income Opportunities Trust III
44. Municipal Premium Income Trust
45. Prime Income Trust
46. Dean Witter Short-Term U.S. Treasury Trust
47. Dean Witter Diversified Income Trust
<PAGE>
48. InterCapital California Insured Municipal Income Trust
49. Dean Witter Health Sciences Trust
50. Dean Witter Global Dividend Growth Securities
51. InterCapital Quality Municipal Securities
52. InterCapital California Quality Municipal Securities
53. InterCapital New York Quality Municipal Securities
54. Dean Witter Retirement Series
55. Dean Witter Limited Term Municipal Trust
56. Dean Witter Short-Term Bond Fund
57. Dean Witter Global Utilities Fund
58. InterCapital Insured Municipal Securities
59. InterCapital Insured California Municipal Securities
60. Dean Witter High Income Securities
61. Dean Witter National Municipal Trust
62. Dean Witter International SmallCap Fund
63. Dean Witter Mid-Cap Growth Fund
64. Dean Witter Select Dimensions Investment Series
65. Dean Witter Global Asset Allocation Fund
66. Dean Witter Balanced Growth Fund
67. Dean Witter Balanced Income Fund
68. Dean Witter Intermediate Term U.S. Treasury Trust
69. Dean Witter Hawaii Municipal Trust
70. Dean Witter Japan Fund
71. Dean Witter Capital Appreciation Fund
72. Dean Witter Information Fund
73. Dean Witter Fund of Funds
74. Dean Witter Special Value Fund
75. Dean Witter Income Builder Fund
76. Dean Witter Financial Services Trust
77. Dean Witter Market Leader Trust
78. Dean Witter Managers' Select Fund
79. Dean Witter Liquid Asset Fund Inc.
80. Dean Witter Natural Resource Development Securities Inc.
81. Dean Witter Dividend Growth Securities Inc.
82. Dean Witter European Growth Fund Inc.
83. Dean Witter Pacific Growth Fund Inc.
84. Dean Witter High Yield Securities Inc.
85. Dean Witter Global Short-Term Income Fund Inc.
86. InterCapital Income Securities Inc.
87. Morgan Stanley Dean Witter "Competitive Edge" Fund
88. Morgan Stanley Dean Witter Growth Fund
89. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
