<PAGE>
==============================================================================
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1998
REGISTRATION NOS.: 811-3031,
2-67087
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM N-1A
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REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 22 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 23 [X]
------------
DEAN WITTER TAX-FREE DAILY INCOME TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
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(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-FREE DAILY INCOME TRUST
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
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<S> <C>
PART A PROSPECTUS
1. ..... Cover Page
2. ..... Prospectus Summary; Summary of Fund Expenses
3. ..... Financial Highlights; Financial Statements; Performance Information
4. ..... Investment Objective and Policies; Risk Considerations; The Fund
and its Management; Cover Page; Investment Restrictions; Financial
Highlights; Prospectus Summary
5. ..... The Fund and Its Management; Back Cover; Investment
Objective and Policies
6. ..... Dividends, Distributions and Taxes; Additional Information
7. ..... Purchase of Fund Shares; Shareholder Services
8. ..... Redemption of Fund Shares; Shareholder Services
9. ..... Not applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. ..... Cover Page
11. ..... Table of Contents
12. ..... The Fund and Its Management
13. ..... Investment Practices and Policies; Investment Restrictions;
Portfolio Transactions and Brokerage
14. ..... The Fund and Its Management; Trustees and Officers
15. ..... Trustees and Officers
16. ..... The Fund and Its Management; Purchase of Fund Shares;
Shareholder Services; Custodian and Transfer Agent;
Independent Accountants
17. ..... Portfolio Transactions and Brokerage
18. ..... Description of Shares
19. ..... How Net Asset Value is Determined; Purchase of Fund Shares;
Redemption of Fund Shares; Financial Statements;
Shareholder Services
20. ..... Dividends, Distributions and Taxes; Performance Information
21. ..... Purchase of Fund shares
22. ..... Performance Information
23. ..... Experts
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
FEBRUARY 27, 1998
- -----------------------------------------------------------------------------
Dean Witter Tax-Free Daily Income Trust (the "Fund") is a no-load, open-end,
diversified management investment company whose investment objective is to
provide as high a level of daily income exempt from federal income tax as is
consistent with stability of principal and liquidity. The Fund has a Rule
12b-1 Plan of Distribution (see below). The Fund seeks to achieve its
objective by investing primarily in high quality tax-exempt securities with
short-term maturities, including Municipal Bonds, Municipal Notes and
Municipal Commercial Paper. (See "Investment Objective and Policies.")
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
In accordance with a Plan of Distribution with Dean Witter Distributors Inc.
pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund is
authorized to reimburse specific expenses incurred in promoting the
distribution of the Fund's shares. Reimbursement may in no event exceed an
amount equal to payments at the annual rate of 0.15 of 1% of the average
daily net assets of the Fund.
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated February 27, 1998, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at its address or at one of its telephone numbers
listed on this cover page. The Statement of Additional Information is
incorporated herein by reference.
<TABLE>
<CAPTION>
<S> <C>
Minimum initial investment ... $5,000
Minimum additional
investment.................... $ 100
</TABLE>
Dean Witter Tax-Free Daily Income Trust
Two World Trade Center
New York, New York 10048
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 4
Investment Objective and Policies ..................................... 5
Investment Restrictions ............................................... 8
Purchase of Fund Shares ............................................... 9
Shareholder Services .................................................. 11
Redemption of Fund Shares ............................................. 14
Dividends, Distributions and Taxes .................................... 16
Additional Information ................................................ 18
Financial Statements--December 31, 1997 ............................... 20
Report of Independent Accountants ..................................... 32
For information about the Fund, including
information on opening an account, registration
of shares, and other information relating to a
specific account, call:
O 800-869-NEWS (toll-free)
o 212-392-2550
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 De-posit Insurance Corporation, 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 FUND The Fund is organized as a Trust, commonly known as a
Massachusetts business trust, and is an open-end, diversified
management investment company investing principally in short-term
securities which are exempt from federal income tax.
- ------------------- ------------------------------------------------------------------
SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page 18).
- ------------------- ------------------------------------------------------------------
PURCHASE OF SHARES Investment may be made:
o By wire
o By mail
o Through Dean Witter Reynolds Inc. account executives or other
Selected Broker-Dealers. Purchases are at net asset value, without
a sales charge. Minimum initial investment: $5,000. Subsequent
investments: $100 or more (by wire or by mail); $1,000 or more
(through account executives) or $100 to $5,000 (by EasyInvestSM).
Orders for purchase of shares are effective on day of receipt of
payment in Federal funds if payment is received by the Fund's
transfer agent before 12:00 noon New York time (see page 9).
- ------------------- ------------------------------------------------------------------
INVESTMENT To provide as high a level of daily income exempt from federal
OBJECTIVE income tax as is consistent with stability of principal and
liquidity (see page 5).
- ------------------- ------------------------------------------------------------------
INVESTMENT POLICY A diversified portfolio of tax-exempt fixed-income securities with
short-term maturities (see page 5).
- ------------------- ------------------------------------------------------------------
INVESTMENT MANAGER Dean Witter InterCapital Inc., the Investment Manager of the Fund,
and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management
and administrative capacities to 103 investment companies and
other portfolios with assets of approximately $105 billion at
January 31, 1998 (see page 4).
- ------------------- ------------------------------------------------------------------
DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor") sells shares of
the Fund through Dean Witter Reynolds Inc. and other Selected
Broker-Dealers pursuant to selected dealer agreements. Other than
the reimbursement to the Distributor pursuant to the Rule 12b-1
Distribution Plan, the Distributor receives no distribution fees
(see page 9).
- ------------------- ------------------------------------------------------------------
PLAN OF The Fund is authorized to reimburse specific expenses incurred in
DISTRIBUTION promoting the distribution of the Fund's shares pursuant to a Plan
of Distribution with the Distributor pursuant to Rule 12b-1 under
the Investment Company Act of 1940. Reimbursement may in no event
exceed an amount equal to payments at the annual rate of 0.15 of
1% of average daily net assets of the Fund (see page 10).
- ------------------- ------------------------------------------------------------------
MANAGEMENT FEE The monthly fee is at an annual rate of 0.50 of 1% of average
daily net assets, scaled down on assets over $500 million (see
page 4).
- ------------------- ------------------------------------------------------------------
DIVIDENDS Declared and automatically reinvested daily in additional shares;
cash payments of dividends available monthly (see page 16).
- ------------------- ------------------------------------------------------------------
REPORTS Individual periodic account statements; annual and semi-annual
Fund financial statements.
- ------------------- ------------------------------------------------------------------
REDEMPTION OF Shares are redeemable by the shareholder at net asset value
SHARES without any charge (see page 14):
o By check
o By telephone or wire instructions, with proceeds wired or mailed
to a predesignated bank account
o By mail
A shareholder's account is subject to possible involuntary
redemption if its value falls below $1,000 (see page 15).
- ------------------- ------------------------------------------------------------------
RISKS The Fund invests principally in high quality, short-term fixed
income securities issued or guaranteed by state and local
governments which are subject to minimal risk of loss of income
and principal. However, the investor is directed to the
discussions concerning "variable rate obligations" and
"when-issued and delayed delivery securities" (see page 7 of the
Prospectus and page 13 of the Statement of Additional Information)
and the discussions concerning "repurchase agreements" and "puts"
(see pages 14 and 15 of the Statement of Additional Information)
concerning any risks associated with such portfolio securities and
management techniques.
- ------------------- ------------------------------------------------------------------
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in the Prospectus and in the Statement of Additional Information.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are for
the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases................................. None
Maximum Sales Charge Imposed on Reinvested Dividends...................... None
Deferred Sales Charge..................................................... None
Redemption Fees........................................................... None
Exchange Fee.............................................................. None
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
- ---------------------------------------------------------------------
Management Fees........................................................... 0.49%
12b-1 Fee*................................................................ 0.10%
Other Expenses............................................................ 0.13%
Total Fund Operating Expenses............................................. 0.72%
</TABLE>
- ------------
* The 12b-1 fee is characterized as a service fee within the meaning of
National Association of Securities Dealers, Inc. ("NASD") guidelines
(see "Purchase of Fund Shares").
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period ... $7 $23 $40 $89
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and Its Management," and "Purchase of Fund Shares--Plan of
Distribution" in this Prospectus.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of the independent accountants which are contained in this Prospectus
commencing on page 20.
<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>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- --------- -------- -------- ------- -------- -------- -------- -------- -------
Net investment income ..... 0.029 0.028 0.032 0.022 0.018 0.024 0.039 0.053 0.058 0.048
Less dividends from net
investment income......... (0.029) (0.028) (0.032) (0.022) (0.018) (0.024) (0.039) (0.053) (0.058) (0.048)
---------- --------- -------- -------- ------- -------- -------- -------- -------- -------
Net asset value,
end of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ======== ======== ======= ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ 2.98% 2.83% 3.22% 2.25% 1.85% 2.39% 4.02% 5.48% 5.96% 4.88%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................. 0.72%(1) 0.71% 0.72% 0.71% 0.71% 0.68% 0.68% 0.64% 0.61% 0.62%
Net investment income ..... 2.93% 2.76% 3.16% 2.22% 1.83% 2.37% 3.95% 5.30% 5.82% 4.78%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions .............. $517 $522 $522 $544 $568 $670 $823 $897 $873 $946
</TABLE>
- ----------
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
Dean Witter Tax-Free Daily Income Trust (the "Fund") is an open-end,
diversified management investment company incorporated in Maryland on March
24, 1980. The Fund was reorganized as a trust of the type commonly known as a
"Massachusetts business trust" on April 30, 1987. Prior to February 19, 1993,
the Fund's name was Dean Witter/Sears Tax-Free Daily Income Trust.
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 is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover & 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 103 investment companies, 29 of which
are listed on the New York Stock Exchange, with combined total
4
<PAGE>
assets including this Fund of approximately $101 billion as of January 31,
1998. The Investment Manager also manages portfolios of pension plans, other
institutions and individuals which aggregated approximately $4 billion at
such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. InterCapital has retained Dean Witter Services Company
Inc. to perform the aforementioned administrative services for the Fund. The
Fund's Board of Trustees reviews 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 the annual
rate of 0.50% of the daily net assets of the Fund up to $500 million, scaled
down at various asset levels to 0.25% on assets over $3 billion. For the
fiscal year ended December 31, 1997, the Fund accrued total compensation to
the Investment Manager amounting to 0.49% of the Fund's average daily net
assets and the Fund's total expenses amounted to 0.72% of the Fund's average
daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
The investment objective of the Fund is to provide as high a level of
daily income exempt from federal income tax as is consistent with stability
of principal and liquidity. It is a fundamental policy of the Fund that at
least 80% of its total assets will be invested in securities the interest on
which is exempt from federal income tax. This policy and the Fund's
investment objective may not be changed without a vote of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company
Act of 1940, as amended (the "Act"). There is no assurance that the objective
will be achieved.
The Fund seeks to achieve its investment objective by investing primarily
in high quality tax-exempt securities with short-term maturities as follows:
(i) Municipal Bonds, Municipal Notes and Municipal Commercial Paper with
remaining maturities of thirteen months or less which are rated at the time
of purchase in one of the two highest rating categories for debt obligations
by at least two nationally recognized statistical rating organizations
("NRSROs") primarily Moody's Investors Service, Inc. ("Moody's") or Standard
and Poor's Corporation ("S&P"), or one NRSRO if the obligation is rated by
only one NRSRO. Unrated obligations may be purchased if they are determined
to be of comparable quality by the Fund's Board of Trustees.
Up to 20% of the Fund's total assets may be invested in tax-exempt
securities subject to the alternative minimum tax ("AMT") (tax-exempt
securities which are subject to the AMT will not be included in the 80% total
referred to above).
Inclusive of the 20% total referred to above, up to 20% of the Fund's
total assets may be invested in taxable securities. 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 AMT 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 or 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.
5
<PAGE>
Municipal Bonds and Municipal Notes are debt obligations of a state, its
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 which may be issued at a discount
and are sometimes referred to as Short-Term Discount Notes. Any Municipal
Bond or Municipal Note which depends directly or indirectly on the credit of
the Federal Government, its agencies or instrumentalities shall be considered
to have a Moody's rating of Aaa.
The foregoing percentage and rating limitations 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 will not
require elimination of any security from the Fund's portfolio. However, in
accordance with procedures adopted by the Fund's Trustees pursuant to federal
securities regulations governing money market funds, if the Investment
Manager becomes aware that a portfolio security has received a new rating
from an NRSRO that is below the second highest rating, then unless the
security is disposed of within five days, the Investment Manager will perform
a creditworthiness analysis of any such downgraded securities, which analysis
will be reported to the Trustees who will, in turn, determine whether the
securities continue to present minimal credit risks to the Fund.
The ratings assigned by NRSROs 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.
The two principal classifications of Municipal Bonds, Notes and Commercial
Paper are "general obligation" and "revenue" bonds, notes 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
governmental 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 bonds 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
6
<PAGE>
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.
Certain lease obligations have not yet developed the depth of
marketability associated with more conventional municipal obligations, and,
as a result, certain of such lease obligations may be considered illiquid
securities. To determine whether or not the Fund will consider such
securities to be illiquid (the Fund may not invest more than ten percent of
its net assets in illiquid securities), the Trustees of the Fund have
established guidelines to be utilized by the Fund in determining the
liquidity of a lease obligation. The factors to be considered in making the
determination include: 1) the frequency of trades and quoted prices for the
obligation; 2) the number of dealers willing to purchase or sell the security
and the number of other potential purchasers; 3) the willingness of dealers
to undertake to make a market in the security; and 4) the nature of the
marketplace trades, including, the time needed to dispose of the security,
the method of soliciting offers, and the mechanics of the transfer.
The Fund does not generally intend to invest more than 25% of its total
assets in securities of governmental units located in any one state,
territory or possession of the United States. 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) whether or not the users of
facilities financed by such bonds are in the same industry. In cases where
such users are in the same industry, there may be additional risk to the Fund
in the event of an economic downturn in such industry, which may result
generally in a lowered need for such facilities and a lowered ability of such
users to pay for the use of such facilities.
The high quality, short-term fixed-income securities in which the Fund
principally invests are guaranteed by state and local governments and are
subject to minimal risk of loss of income and principal.
PORTFOLIO MANAGEMENT
Although the Fund will generally acquire securities for investment with
the intent of holding them to maturity and will not seek profits through
short-term trading, the Fund may dispose of any security prior to its
maturity to meet redemption requests. Securities may also be sold when the
Fund's Investment Manager believes such dispositon to be advisable on the
basis of a revised evaluation of the issuer or based upon relevant market
considerations. There may be occasions when, as a result of maturities of
portfolio securities or sales of Fund shares, or in order to meet anticipated
redemption requests, the Fund may hold cash which is not earning income.
The Fund anticipates that the average weighted maturity of the portfolio
will be 90 days or less. The relatively short-term nature of the Fund's
portfolio is expected to result in a lower yield than portfolios comprised of
longer-term tax-exempt securities.
Variable Rate and Floating Rate Obligations. The interest rates payable on
certain Municipal Bonds and Municipal Notes are not fixed and may fluctuate
based upon changes in market rates. Municipal obligations of this type are
called "variable rate" or "floating rate" obligations. The interest rate
payable on a variable rate obligation is adjusted either at predesignated
periodic intervals or whenever there is a change in the market rate of
interest on which the interest rate payable is based.
When-Issued and Delayed Delivery Securities. The Fund may purchase
tax-exempt securities on a when-issued or delayed delivery basis; i.e.,
delivery and payment can take place a month or more after the date of the
transaction. These securities are subject to market fluctuation and no
interest accrues to the purchaser prior to settlement. At the time the Fund
makes the commitment to purchase such
7
<PAGE>
securities, it will record the transaction and thereafter reflect the value,
each day, of such securities in determining its net asset value.
Brokerage Allocation. Brokerage commissions are not normally charged on
purchases and sales of short-term municipal obligations, but such
transactions may involve transaction costs in the form of spreads between bid
and asked prices. Pursuant to an order of the Securities and Exchange
Commission, the Fund may effect principal transactions in certain money
market instruments with Dean Witter Reynolds Inc. ("DWR"), a broker-dealer
affiliate of InterCapital. In addition, the Fund may incur brokerage
commissions on transactions conducted through DWR, Morgan Stanley & Co.
Incorporated and other broker-dealer affiliates of InterCapital.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act.
For purposes of the following 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 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 of
any one issuer (other than debt securities 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 taxable
securities of issuers in any one industry (industrial development and
pollution control bonds are grouped into industries based upon the business
in which the issuers of such obligations are engaged). This restriction does
not apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities or to cash equivalents.
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 Unites States Government, its agencies or
instrumentalities.
Notwithstanding any other investment policy or restriction, the Trust 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 Trust.
8
<PAGE>
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers its own shares for sale to the public on a continuous
basis, without a sales charge. 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 offering price will be the net asset value next
determined (see "Determination of Net Asset Value" below) after receipt of a
purchase order and acceptance by the Fund's transfer agent, Dean Witter Trust
FSB (the "Transfer Agent" or "DWT") in proper form and accompanied by payment
in Federal Funds (i.e., monies of member banks within the Federal Reserve
System held on deposit at a Federal Reserve Bank) available to the Fund for
investment. Shares commence earning income on the day following the date of
purchase. Share certificates will not be issued unless requested in writing
by the shareholder.
To initiate purchase by mail or wire, a completed Investment Application
(contained in the Prospectus) must be sent to Dean Witter Trust FSB at P.O.
Box 1040, Jersey City, N.J. 07303. Checks should be made payable to the Dean
Witter Tax-Free Daily Income Trust and sent to Dean Witter Trust FSB at the
same address. Purchases by wire must be preceded by a call to the Transfer
Agent advising it of the purchase (see Investment Application or the front
cover of this Prospectus for instructions and telephone numbers) and must be
wired to The Bank of New York, for credit to the Account of Dean Witter Trust
FSB, Harborside Financial Center, Plaza Two, Jersey City, New Jersey, Account
No. 8900188413. Wire purchase instructions must include the name of the Fund
and the Shareholder's account number. Purchases made by check are normally
effective within two business days for checks drawn on Federal Reserve System
member banks, and longer for most other checks. Wire purchases received by
the Transfer Agent prior to 12:00 noon New York time are normally effective
that day and wire purchases received after 12:00 noon New York time are
normally effective the next business day. Initial investments must be at
least $5,000, although the Fund, at its discretion, may accept initial
investments of smaller amounts, not less than $1,000. Subsequent investments
must be $100 or more and may be made through the Transfer Agent.
In the case of investments pursuant to (i) Systematic Payroll Deduction
Plans (including Individual Retirement Plans), (ii) the InterCapital mutual
fund asset allocation program and (iii) fee-based programs approved by the
Distributor, pursuant to which participants pay an asset based fee for
services in the nature of investment advisory or administrative services, the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required, provided, in the case of
Systematic Payroll Deduction Plans, that the Distributor has reason to
believe that additional investments will increase the investment in all
accounts under such Plans to at least $5,000. The Fund and the Distributor
reserve the right to reject any purchase order.
Sales personnel are compensated for selling shares of the Fund at the time
of their sale by the Distributor 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.
Orders for the purchase of Fund shares placed by customers through DWR or
another Selected Broker-Dealer with payment in clearing house funds will be
transmitted to the Fund with payment in Federal Funds on the business day
following the day the order is placed by the customer with DWR or another
Selected Broker-Dealer. Investors desir-
9
<PAGE>
ing same day effectiveness should wire Federal Funds directly to the Transfer
Agent. An order procedure exists pursuant to which customers can, upon
request: (a) have the proceeds from the sale of listed securities invested in
shares of the Fund on the day following the day the customer receives such
proceeds in his or her DWR or other Selected Broker-Dealer brokerage account;
and (b) pay for the purchase of certain listed securities by automatic
liquidation of Fund shares owned by the customer. In addition, there is an
automatic purchase procedure whereby consenting DWR or other Selected
Broker-Dealer customers who are shareholders of the Fund will have free cash
credit balances in their DWR or other Selected Broker-Dealer brokerage
accounts as of the close of business (4:00 p.m., New York time) on the last
business day of each week (where such balances do not exceed $5,000)
automatically invested in shares of the Fund the next following business day.
Investors with free cash credit balances (i.e., immediately available funds)
in brokerage accounts at DWR or another Selected Broker-Dealer will not have
any of such funds invested in the Fund until the business day after the
customer places an order with DWR or another Selected Broker-Dealer to
purchase shares of the Fund and will not receive the daily dividend which
would have been received had such funds been invested in the Fund on the day
the order was placed with DWR or other Selected Broker-Dealers. Accordingly,
DWR or other Selected Broker-Dealers may have the use of such free credit
balances during such period.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution with the Distributor
pursuant to Rule 12b-1 under the Act whereby the expenses of certain
activities in connection with the distribution of Fund shares are reimbursed.
The principal activities and services which may be provided by the
Distributor, DWR, its affiliates or any other Selected Broker-Dealers under
the Plan include: (1) compensation to and expenses of, DWR's and other
Selected Broker-Dealers' account executives and other employees including
overhead and telephone expenses; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales
of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements. Reimbursements for these services will be made in monthly
payments by the Fund, which will in no event exceed an amount equal to a
payment at the annual rate of 0.15 of 1% of the Fund's average daily net
assets. For the fiscal year ended December 31, 1997, the fee accrued was
equal to payment at an annual rate of 0.10 of 1% of the Fund's average daily
net assets. Expenses incurred pursuant to the Plan in any fiscal year will
not be reimbursed by the Fund through payments accrued in any subsequent
fiscal year.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close of
trading (presently 4:00 p.m. New York time) on each day that the New York
Stock Exchange is open (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time) by taking the value of all assets
of the Fund, subtracting its liabilities and dividing by the number of shares
outstanding. 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.
The Fund utilizes the amortized cost method in valuing its portfolio
securities, which method involves valuing a security at its cost adjusted by
a constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the
instrument. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share of $1.00. However, there
can be no assurance that the $1.00 net asset value will be maintained.
10
<PAGE>
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Systematic Withdrawal Plan. A systematic withdrawal plan is available for
shareholders who own or purchase shares of the Fund having a minimum value of
at least $5,000. 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. The
shares will be redeemed at their net asset value, determined at the
shareholder's option, on the tenth or twenty-fifth day (or next 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. A shareholder wishing to make this election should do so
on the Investment Application. The withdrawal plan may be terminated at any
time by the Fund.
EasyInvest (Service Mark) . Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund. Shares purchased through EasyInvest will be
added to the shareholder's existing account at the net asset value calculated
the same business day the transfer of funds is effected.
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.
Targeted Dividends. In states where it is legally permissible,
shareholders may elect to have all shares of the Fund earned as a result of
dividends paid in any given month redeemed as of the end of the month and
invested in shares of any other open-end investment company for which
InterCapital serves as investment manager (collectively, with the Fund, the
"Dean Witter Funds"), other than Dean Witter Tax-Free Daily Income Trust, at
the net asset value per share of the selected Dean Witter Fund determined as
of the last business day of the month, without the imposition of any
applicable front-end sales charge or without the imposition of any applicable
contingent deferred sales charge upon ultimate redemption. All such shares
invested will begin to earn dividends, if any, in the selected Dean Witter
Fund on the first business day of the succeeding month. 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.
EXCHANGE PRIVILEGE
An "Exchange Privilege," that is, the privilege of exchanging shares of
certain Dean Witter Funds for shares of the Fund, exists whereby shares of
Dean Witter Funds that are multiple class funds ("Dean Witter Multi-Class
Funds"), 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"), and shares of Dean Witter Global
Short-Term Income Fund Inc. ("Global Short-Term"), which is a Dean Witter
Fund offered with a contingent deferred sales charge ("CDSC"), may be
exchanged for shares of the Fund, Dean Witter U.S. Government Money Market
Trust, Dean Witter California Tax-Free Daily Income Trust, Dean Witter New
York Municipal Money Market and Dean Witter Liquid Asset Fund Inc. (which
five Funds are called "money market funds"), and for shares of Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund and Dean Witter Intermediate Term U.S.
Treasury Trust (which nine Funds, including the Fund, are referred to herein
as the "Exchange Funds"). Shares of the Exchange Funds received in an
exchange for shares of a Dean Witter Multi-Class Fund may be redeemed and
exchanged only for shares of the corresponding Class of a Dean Witter
Multi-Class Fund or for shares of one of the other
11
<PAGE>
Exchange Funds, provided that shares of the Exchange Funds received in an
exchange for Class A shares of a Dean Witter Multi-Class Fund may also be
redeemed and exchanged for shares of a FSC Fund, and shares of the Exchange
Funds received in an exchange for Class B shares of a Dean Witter Multi-Class
Fund may also be redeemed and exchanged for shares of Global Short-Term. In
addition, shares of the Exchange Funds received in an exchange for shares of
a FSC Fund may be redeemed and exchanged for Class A shares of a Dean Witter
Multi-Class Fund or for shares of one of the other Exchange Funds, and shares
of the Exchange Funds received in an exchange for shares of Global Short-Term
may be redeemed and exchanged for Class B shares of a Dean Witter Multi-Class
Fund or for shares of one of the other Exchange Funds.
When exchanging into a money market fund, shares of the Multi-Class Fund,
the FSC Fund, Global Short-Term or the Exchange Fund are redeemed at their
next calculated net asset value and exchanged for shares of the money market
fund at their net asset value determined the following business day. An
exchange to an 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. Ultimately, any applicable CDSC will have to be
paid upon redemption of shares originally purchased from Global Short-Term or
a Class of a Dean Witter Multi-Class Fund that imposes a CDSC. (If shares of
an Exchange Fund received in exchange for shares originally purchased from
Global Short-Term or Class B of a Dean Witter Multi-Class Fund are exchanged
for shares of Global Short-Term or another Dean Witter Multi-Class Fund
having a different CDSC schedule from that of Global Short-Term or the Dean
Witter Multi-Class Fund from which the Exchange Fund shares were acquired,
the shares will be subject to the higher CDSC schedule). During the period of
time the shares originally purchased from Global Short-Term or from a Class
of a Dean Witter Multi-Class Fund that imposes a CDSC remain in the 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 reexchanged for
shares of a Dean Witter Multi-Class Fund or 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. In the case
of exchanges of Class A shares of a Dean Witter Multi-Class Fund that 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, if any, incurred on or after that
date which are attributable to those shares (see "Purchase of Fund (Trust)
Shares--Plan of Distribution" in the respective Exchange Fund Prospectus for
a description of Exchange Fund distribution fees). 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.
Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of
various TCW/DW Funds, a group of funds distributed by the Distributor for
which TCW Funds Management, Inc. serves as Adviser, under the terms and
conditions described in the Prospectus and Statement of Additional
Information of each TCW/DW Fund.
Additional Information Regarding Exchanges. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent
12
<PAGE>
exchanges may be deemed by the Investment Manager to be abusive and contrary
to the best interests of the Fund's other shareholders and, at the Investment
Manager's discretion, may be limited by the Fund's refusal to accept
additional purchases and/or exchanges from the investor. Although the Fund
does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests
of the Fund and its other shareholders, investors should be aware that the
Fund and each of the other Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective
basis only, upon notice to the shareholder not later than ten days following
such shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Dean Witter Funds for which shares of the Fund may be
exchanged, upon such notice as may be required by applicable regulatory
agencies (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 or TCW/DW North American Government Income Trust pursuant to the
Exchange Privilege, and provided further that the Exchange Privilege may be
terminated or materially revised without notice under certain unusual
circumstances described in the Statement of Additional Information.
Shareholders maintaining margin accounts with DWR or other Selected
Broker-Dealers are referred to their account executive regarding restrictions
on exchanges 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 any other conditions imposed by each fund. In the
case of any shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares on which the shareholder has realized a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the above
Funds pursuant to this Exchange Privilege by contacting their DWR or another
Selected Broker-Dealer account executive (no Exchange Privilege Authorization
Form is required). Other shareholders (and those shareholders who are clients
of DWR or another Selected Broker-Dealer but who wish to make exchanges
directly by writing or telephoning the Transfer Agent) must complete and
forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Transfer Agent, to initiate an
exchange. If the Authorization Form is used, exchanges may be made in writing
or by contacting the Transfer Agent at (800) 869-NEWS (toll free). The Fund
will employ reasonable procedures to confirm that exchange instructions
communicated over the telephone are genuine. Such procedures may include
requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may
also be recorded. If such procedures are not employed, the Fund may be liable
for any losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between
13
<PAGE>
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.
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 experience of this
Fund and the other Dean Witter Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent, for further information about the
Exchange Privilege.
REDEMPTION OF FUND SHARES
- -----------------------------------------------------------------------------
A shareholder may withdraw all or any of his or her investments at any
time, without penalty or charge, by redeeming shares through the Transfer
Agent at the net asset value per share next determined (see "Purchase of Fund
Shares--Determination of Net Asset Value") after the receipt of a redemption
request meeting the applicable requirements as follows (all of which are
subject to the General Redemption Requirements set forth below):
1. BY CHECK
The Transfer Agent will supply blank checks to any shareholder who has
requested them on an Investment Application. The shareholder may make checks
payable to the order of anyone in any amount not less than $500 (checks
written in amounts under $500 will not be honored by the Transfer Agent).
Shareholders must sign checks exactly as their shares are registered. If the
account is a joint account, the check may contain one signature unless the
joint owners have specified on an Investment Application that all owners are
required to sign checks. Only shareholders having accounts in which no share
certificates have been issued will be permitted to redeem shares by check.
Shares will be redeemed at their net asset value next determined (see
"Purchase of Fund Shares--Determination of Net Asset Value") after receipt by
the Transfer Agent of a check which does not exceed the value of the account.
Payment of the proceeds of a check will normally be made on the next business
day after receipt by the Transfer Agent of the check in proper form. Shares
purchased by check (including a certified or bank cashier's check) are not
normally available to cover redemption checks until fifteen days after
receipt of the check used for investment by the Transfer Agent. The Transfer
Agent will not honor a check in an amount exceeding the value of the account
at the time the check is presented for payment.
2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH
PAYMENT TO PREDESIGNATED BANK ACCOUNT
A shareholder may redeem shares by telephoning or sending wire
instructions to the Transfer Agent. Payment will be made by the Transfer
Agent to the shareholder's bank account at any commercial bank designated by
the shareholder in an Investment Application, by wire if the amount is $1,000
or more and the shareholder so requests, and otherwise by mail. Normally, the
Transfer Agent will transmit payment the next business day following receipt
of a request for redemption in proper form. Only shareholders having accounts
in which no share certificates have been issued will be permitted to redeem
shares by telephone or wire instructions.
DWR and other participating Selected Broker-Dealers have informed the
Distributor and the Fund that, on behalf of and as agent for their customers
who are shareholders of the Fund, they will transmit to the Fund requests for
redemption of shares owned by their customers. In such cases, the Trans-
14
<PAGE>
fer Agent will wire proceeds of redemptions to DWR's or another Selected
Broker-Dealer's bank account for credit to the shareholders' accounts the
following business day. DWR and other participating Selected Broker-Dealers
have also informed the Distributor and the Fund that they do not charge for
this service.
Redemption instructions must include the share-holder's name and account
number and be wired or called to the Transfer Agent:
--800-869-NEWS (Toll-Free)
--Telex No. 125076
3. BY MAIL
A shareholder may redeem shares by sending a letter to Dean Witter Trust
FSB, P.O. Box 983, Jersey City, NJ 07303, requesting redemption and
surrendering share certificates if any have been issued.
Redemption proceeds will be mailed to the shareholder at his or her
registered address or mailed or wired to his or her predesignated bank
account, as he or she may request. Proceeds of redemption may also be sent to
some other person, as requested by the shareholder.
GENERAL REDEMPTION REQUIREMENTS
Written requests for redemption must be signed by the registered
shareholder(s). If the proceeds are to be paid to anyone other than the
registered shareholder(s) or sent to any address other than the shareholder's
registered address or predesignated bank account, 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 an eligible guarantor), except in the
case of redemption by check. Additional documentation may be required where
shares are held by a corporation, partnership, trustee or executor. With
regard to shares of the Fund acquired pursuant to the Exchange Privilege, any
applicable CDSC will be imposed upon the redemption of such shares (see
"Purchase of Fund Shares--Exchange Privilege").
If shares to be redeemed are represented by a share certificate, the
request for redemption must be accompanied by the share certificate and a
share assignment form signed by the registered share-holder(s) exactly as the
account is registered. Shareholders are advised, for their own protection, to
send the share certificate and assignment form in separate envelopes (if they
are being mailed and not hand delivered) to the Transfer Agent. Signatures
must be guaranteed by an eligible guarantor acceptable to the Transfer Agent
(see above). Additional documentation may be required where shares are held
by a corporation, partnership, trustee or executor.
All requests for redemption, all share certificates and all share
assignments should be sent to Dean Witter Trust FSB, P.O. Box 983, Jersey
City, NJ 07303.
Generally, the Fund will attempt to make payment for all redemptions
within one business day, but in no event later than seven days after receipt
of such redemption request in proper form. However, if the shares being
redeemed were purchased by check (including a certified or bank cashier's
check), payment may be delayed for the minimum time needed to verify that the
check used for investment has been honored (not more than fifteen days from
the time of investment of the check by the Transfer Agent). In addition, the
Fund may postpone redemptions at certain times when normal trading is not
taking place on the New York Stock Exchange.
The Fund reserves the right, on sixty days notice, to redeem at net asset
value the shares of any shareholder (other than shares held in an Individual
Retirement Account or custodial account under Section 403(b)(7) of the
Internal Revenue Code) whose shares due to redemptions by the shareholder
have a value of less than $1,000, or such lesser amount as may be fixed by
the Board of Trustees.
AUTOMATIC REDEMPTION PROCEDURE
The Distributor has instituted an automatic redemption procedure which it
may utilize to satisfy amounts due by a shareholder maintaining a bro-
15
<PAGE>
kerage account with DWR or another Selected Broker-Dealer, as a result of
purchases of securities or other transactions in the shareholder's brokerage
account. Under this procedure, if the shareholder elects to participate by so
notifying DWR or other Selected Broker-Dealer, the shareholder's DWR or other
Selected Broker-Dealer brokerage account will be scanned each business day
prior to the close of business (4:00 p.m., New York time). After application
of any cash balances in the account, a sufficient number of Fund shares may
be redeemed at the close of business to satisfy any amounts for which the
shareholder is obligated to make payment to DWR or another Selected
Broker-Dealer. Redemptions will be effected on the business day preceding the
date the shareholder is obligated to make such payment, and DWR or another
Selected Broker-Dealer will receive the redemption proceeds on the day
following the redemption date. Shareholders will receive all dividends
declared and reinvested through the date of redemption.
EASYINVEST (SERVICE MARK) -- AUTOMATIC REDEMPTION
Shareholders may invest in shares of certain other Dean Witter Funds by
subscribing to Easy- Invest, an automatic purchase plan which provides for
the automatic investment of any amount from $100 to $5,000 in shares of the
specified fund. Under EasyInvest, a shareholder may direct that a sufficient
number of shares of the Fund be automatically redeemed and the proceeds
transferred automatically to the Dean Witter Funds' Transfer Agent, on a
semi-monthly, monthly or quarterly basis, for investment in shares of the
specified fund. Redemptions will be effected on the business day preceding
the investment date and the Transfer Agent will receive the proceeds for
investment on the day following the redemption date.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends, payable on each
day the New York Stock Exchange is open for business, of all of its daily net
investment income to shareholders of record as of the close of business the
preceding business day. Dividends from net short-term capital gains, if any,
will be paid periodically. Dividends from net long-term capital gains, if
any, will be paid annually. The amount of dividend may fluctuate from day to
day and may be omitted on some days if net realized losses on portfolio
securities exceed the Fund's net investment income. Dividends are declared
and automatically reinvested daily in additional full and fractional shares
of the Fund (rounded to the last 1/100 of a share) at the net asset value per
share at the close of business on that day. 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.
Shareholders may instruct the Transfer Agent (in writing) to have their
dividends paid out monthly in cash. For such shareholders, the shares
reinvested and credited to their account during the month will be redeemed as
of the close of business on the monthly payment date (which will be no later
than the last business day of the month) and the proceeds will be paid to
them by check. 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 check during the first ten
days of the following month.
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.
Taxes. Because the Fund intends to distribute substantially all of its net
investment income and net short-term capital gains, if any, to shareholders,
and intends to otherwise comply with all the provisions of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), to qualify as a
regulated investment company, it is not expected that the Fund will be
required to pay any federal income tax.
The Fund intends to qualify to pay "exempt-in-terest dividends" to its
shareholders by maintaining,
16
<PAGE>
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 Fund shares, will be
excludable from gross income for federal income tax purposes to the extent
net interest 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 Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. This alternative minimum tax
applies to interest received on "private activity bonds" (in general, bonds
that benefit non-governmental entities) issued after August 7, 1986 which,
although tax-exempt, are used for purposes other than those generally
performed by governmental 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. A portion of the Fund's investments may be made in such "private
activity bonds," with the result that a portion of the exempt-interest
dividends paid by the Fund may 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 have to include a
portion of exempt-interest dividends in calculating their alternative minimum
taxable income in situations where the "adjusted current earnings" of the
corporation exceeds its alternative minimum tax able income.
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, if any. Such dividends and distributions are
taxable to the shareholder as ordinary income. Distributions of net long-term
capital gains, if any, are taxable as net long-term capital gains, regardless
of how long the shareholder has held the Fund's shares and regardless of
whether the distribution is received in additional shares or in cash. No
portion of such dividends or distributions will be eligible for the federal
dividends received deduction for corporations.
After the end of its calendar year, the shareholders will be sent a
statement indicating the percentage of the dividend distributions for such
taxable year which constitutes exempt-interest dividends and the percentage,
if any, that is taxable and the percentage, if any, of the exempt-interest
dividends which constitute an item of tax preference. This percentage should
be applied uniformly to any distributions made during the taxable 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.
The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any
state or local taxing authority. Thus, shareholders of the Fund may be
subject to state and local taxes on exempt-interest dividends.
The Fund advises its shareholders annually as to the federal income tax
status of distributions paid during each calendar year. To avoid being
subject to a 31% federal withholding tax on taxable dividends, capital gains
distributions and proceeds of redemptions, shareholders' taxpayer
identification numbers must be furnished and certified as to accuracy.
Shareholders should consult their tax advisers as to the applicability of
the above to their own tax situation.
CURRENT AND EFFECTIVE YIELD
From time to time the Fund advertises its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to the income
generated by an investment in the Fund over a given seven-day period (which
period will be
17
<PAGE>
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by investment during that seven-day period is
assumed to be generated each seven-day period within a 365-day period and is
shown as a percentage of the investment. The "effective yield" for a
seven-day period is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested each week
within a 365-day period. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment.
The Fund may also quote tax-equivalent yield which is calculated by
determining the pre-tax yield which, after being taxed at a stated rate,
would be equivalent to the yield determined as described above.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund.
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by
the shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Fund, requires that
notice of such disclaimer be given in each instrument entered into or
executed by the Fund and provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability
and the nature of the Fund's assets and operations, the possibility of the
Fund being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders 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 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
18
<PAGE>
objectives by investing all of its investable assets in a diversified,
open-end management investment company having the same investment objectives
and policies and substantially the same investment restrictions as those
applicable to the Fund.
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.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund or the Transfer Agent at one of the telephone numbers or at the
address set forth on the front cover of this Prospectus.
19
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (63.6%)
ALABAMA
$5,000 Birmingham Medical Clinic Board, University of Alabama Health
Services Foundation Ser 1991 .................................. 3.65% 01/08/98 $5,000,000
CALIFORNIA
5,000 California Health Facilities Financing Authority, Catholic
Healthcare West 1997 Ser B (MBIA) ............................. 3.35 01/08/98 5,000,000
California Pollution Control Financing Authority,
3,400 Pacific Gas & Electric Co 1996 Ser F ........................... 4.75 01/02/98 3,400,000
3,000 Southern California Edison Co 1986 Ser A ...................... 4.20 01/02/98 3,000,000
8,000 California Public Capital Improvements Financing Authority,
Pooled Ser 1988 C ............................................. 3.75 03/15/98 8,000,000
5,500 California Statewide Communities Development Authority, John
Muir/Mt Diablo
Health System Ser 1997 COPs (AMBAC) ........................... 4.85 01/02/98 5,500,000
6,600 Newport Beach, Hoag Memorial Hospital/Presbyterian Ser 1996 B .. 5.00 01/02/98 6,600,000
COLORADO
9,000 Colorado Health Facilities Authority, Kaiser Permanente 1994 Ser
A ............................................................. 3.75 01/08/98 9,000,000
CONNECTICUT
5,000 Connecticut Health & Educational Facilities Authority, Yale
University Ser T ............................................... 4.00 01/08/98 5,000,000
10,000 Connecticut Special Assessment, Unemployment Compensation 1993
Ser C (FGIC) ................................................... 3.90 07/01/98 10,000,000
DISTRICT OF COLUMBIA
4,800 District of Columbia, The American University Ser 1985 ......... 3.85 01/08/98 4,800,000
FLORIDA
9,800 Dade County, Water & Sewer Ser 1994 (FGIC) ..................... 3.65 01/08/98 9,800,000
6,100 Dade County Health Facilities Authority, Miami Children's
Hospital Ser 1990 ............................................. 5.20 01/02/98 6,100,000
17,600 Dade County Industrial Development Authority, Dolphins Stadium
Ser 1985 A .................................................... 3.65 01/08/98 17,600,000
4,500 Volusia County Health Facilities Authority, Pooled Ser 1985
(FGIC) ........................................................ 3.70 01/08/98 4,500,000
GEORGIA
12,000 Georgia Municipal Association, Pool Ser 1990 COPs (MBIA) ....... 4.15 01/08/98 12,000,000
5,500 Gwinnett County Hospital Authority, Gwinnett Hospital System Inc
Ser 1997 B (MBIA) ............................................. 3.70 01/08/98 5,500,000
HAWAII
5,000 Hawaii Department of Budget & Finance, Kaiser Permanente
Semiannual Tender Ser 1984 B .................................. 3.75 03/02/98 5,000,000
IDAHO
8,000 Idaho Health Facilities Authority, St. Luke's Regional Medical
Center Ser 1995 ............................................... 5.10 01/02/98 8,000,000
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -----------------------------------------------------------------------------------------------------------------
ILLINOIS
$10,000 Illinois Educational Facilities Authority, Northwestern
University Ser 1988 ........................................... 3.85% 01/08/98 $10,000,000
5,000 Illinois Health Facilities Authority, Northwestern Memorial
Hospital Ser 1995 .............................................. 5.05 01/02/98 5,000,000
10,000 Illinois Toll Highway Authority, Refg Ser 1993-B (MBIA) ........ 3.65 01/08/98 10,000,000
10,000 Oak Forest, Homewood South Suburban Mayors & Managers Assn Ser
1989 .......................................................... 3.80 01/08/98 10,000,000
INDIANA
4,000 Indiana Hospital Equipment Financing Authority, Ser 1985 A
(MBIA) ........................................................ 3.75 01/08/98 4,000,000
KENTUCKY
8,950 Mason County, East Kentucky Power Co-op Inc Ser 1984 (NRU-CFC
Gtd) .......................................................... 3.85 01/08/98 8,950,000
LOUISIANA
10,000 New Orleans Aviation Board, Ser 1993 B (MBIA) .................. 3.80 01/08/98 10,000,000
MASSACHUSETTS
5,000 Massachusetts Bay Transportation Authority, 1984 Ser A ......... 3.75 03/01/98 5,000,000
Massachusetts Health & Educational Facilities Authority,
5,500 Amherst College Ser F ......................................... 3.90 01/08/98 5,500,000
5,100 Harvard University Ser 1985 I ................................. 3.80 01/08/98 5,100,000
2,000 Massachusetts Port Authority, Refg Ser 1995 A .................. 4.75 01/02/98 2,000,000
MINNESOTA
1,600 Beltrami County, Environmental Northwood Panelboard Co Ser 1991 . 5.10 01/02/98 1,600,000
4,600 Minneapolis & St Paul Housing & Redevelopment Authority,
Childrens' Health Care Ser 1995 B (FSA) ....................... 5.30 01/02/98 4,600,000
MISSOURI
4,000 Missouri Health & Educational Facilities Authority, Washington
University Ser 1996 C ......................................... 5.00 01/02/98 4,000,000
7,700 St Louis County Industrial Development Authority, Charity
Obligated Group - Daughters of Charity National Health
System Ser 1997 E ............................................. 3.65 01/08/98 7,700,000
NEW JERSEY
4,000 Gloucester County, Mobil Oil Refining Corp Ser 1993 A .......... 3.35 01/08/98 4,000,000
1,600 New Jersey Economic Development Authority, Toys "R" Us Inc ..... 4.75 01/02/98 1,600,000
NEW YORK
400 New York State Dormitory Authority, Cornell University
Ser 1990 B .................................................... 4.75 01/02/98 400,000
NORTH CAROLINA
4,700 Asheville, Ser 1993 A COPs ..................................... 3.65 01/08/98 4,700,000
5,000 North Carolina Medical Care Commission, Duke University Hospital
Ser 1985 B .................................................... 4.10 01/08/98 5,000,000
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -----------------------------------------------------------------------------------------------------------------
OHIO
$9,900 Columbus, Unlimited Tax Ser 1995-1 .............................. 4.05% 01/08/98 $9,900,000
2,100 Ohio Air Quality Development Authority, Mead Co 1986 Ser A ...... 5.00 01/02/98 2,100,000
OKLAHOMA
11,465 Oklahoma Water Resources Board, State Loan Prog Ser 1994A & Ser
1995 .......................................................... 3.75 03/02/98 11,465,000
PENNSYLVANIA
5,000 Pennsylvania Higher Education Facilities Authority, Thomas
Jefferson University 1992 Ser C ............................... 3.80 02/17/98 5,000,000
SOUTH CAROLINA
York County,
7,815 North Carolina Electric Membership Corp, Ser 1984 N-5 (NRU-CFC
Gtd) .......................................................... 3.70 03/15/98 7,815,000
8,650 Saluda River Electric Co-op Inc Ser 1984 E-1 & E-2 (NRU-CFC
Gtd) ........................................................... 3.65 02/15/98 8,650,000
TEXAS
4,300 Nueces River Authority, Reynolds Metal Co Ser 1985 ............. 5.20 01/02/98 4,300,000
9,800 Texas, Veterans' Housing Assistance Fund I Ser 1995 ............ 3.65 01/08/98 9,800,000
UTAH
7,000 Intermountain Power Agency, 1985 Ser F .......................... 3.75 03/16/98 7,000,000
VIRGINIA
5,000 Virginia Housing Development Authority, 1996 Ser H Subser H-STEM 3.84 04/16/98 5,000,000
WEST VIRGINIA
5,000 Pleasants County Commission, American Cyanamid Co Ser 1985 ...... 3.85 01/08/98 5,000,000
WISCONSIN
10,000 Wisconsin Health & Educational Facilities Authority, Franciscan
Health Care Inc Ser 1985 A-1 .................................. 3.70 01/08/98 10,000,000
--------------
TOTAL SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS
(Amortized Cost $328,980,000) .................................. 328,980,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- ----------------------------------------------------------------------------------------------------------------- -----
<S> <C> <C> <C> <C>
TAX-EXEMPT COMMERCIAL PAPER (26.6%)
COLORADO
$6,800 Platte River Power Authority, Electric Subordinate Lien S-1 .... 3.75% 03/09/98 3.75% $6,800,000
GEORGIA
11,700 Georgia Municipal Gas Authority, Southern Portfolio I Ser D .... 3.80 02/23/98 3.80 11,700,000
HAWAII
6,200 Hawaii Department of Budget & Finance, Citizens Utilities Co Ser
1985 .......................................................... 3.80 02/12/98 3.80 6,200,000
INDIANA
5,000 Petersburg, Indianapolis Power & Light Co Ser 1991 ............. 3.75 01/29/98 3.75 5,000,000
LOUISIANA
12,000 Louisiana Public Finance Authority, Our Lady of the Lake
Regional Medical Center Ser 1985 (FSA) ........................ 3.80 02/19/98 3.80 12,000,000
MARYLAND
6,000 Baltimore County, Ser 1995 BANs ................................. 3.70 01/12/98 3.70 6,000,000
MINNESOTA
4,500 Rochester, Mayo Foundation/Mayo Medical Center Ser 1992 B ...... 3.75 02/24/98 3.75 4,500,000
MISSOURI
5,600 Missouri Health & Educational Facilities Authority, SSM Health
Care Ser 1988 C ............................................... 3.80 02/24/98 3.80 5,600,000
NEW YORK
5,000 New York State Power Authority, Ser 2 .......................... 3.70 01/14/98 3.70 5,000,000
OHIO
5,500 Ohio Air Quality Development Authority, Cleveland Electric
Illuminating Co 1988 Ser B (FGIC) ............................. 3.75 02/13/98 3.75 5,500,000
PENNSYLVANIA
Pennsylvania,
5,900 Ser 1997 A BANs ................................................ 3.75 02/25/98 3.75 5,900,000
5,000 Ser 1997 A BANs ................................................ 3.75 03/10/98 3.75 5,000,000
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
TEXAS
Houston,
$8,100 1993 Ser A .................................................... 3.75 % 03/12/98 3.75% $8,100,000
8,000 Water & Sewer Ser A ........................................... 3.75 02/10/98 3.75 8,000,000
10,000 Water & Sewer Ser A ........................................... 3.80 02/17/98 3.80 10,000,000
6,000 San Antonio, Electric & Gas Ser 1995 A ......................... 3.70 03/31/98 3.70 6,000,000
VIRGINIA
5,000 Virginia, 1997 Ser BANs ......................................... 3.70 01/27/98 3.70 5,000,000
WASHINGTON
Seattle,
4,000 Municipal Light & Power Ser 1990 .............................. 3.65 02/11/98 3.65 4,000,000
3,500 Municipal Light & Power Ser 1991 B ............................. 3.80 02/18/98 3.80 3,500,000
2,500 Municipal Light & Power Ser 1991 B ............................. 3.65 02/18/98 3.65 2,500,000
11,500 Municipal Light & Power Ser 1991 B ............................. 3.65 02/26/98 3.65 11,500,000
--------------
TOTAL TAX-EXEMPT COMMERCIAL PAPER (Amortized Cost $137,800,000) 137,800,000
--------------
SHORT-TERM MUNICIPAL NOTES (10.0%)
COLORADO
5,000 Colorado, Ser 1997 A TRANs, dtd 07/01/97 ........................ 4.50 06/26/98 3.86 5,014,838
IDAHO
5,000 Idaho, Ser 1997 TANs, dtd 07/01/97 .............................. 4.625 06/30/98 3.88 5,017,679
INDIANA
5,000 Indiana Bond Bank, Advance Funding Ser 1997 A-2, dtd 02/04/97 ... 4.25 01/21/98 3.70 5,001,456
3,025 Indianapolis Local Improvement Bond Bank, Ser 1997 C Notes, dtd
06/19/97 ...................................................... 4.375 01/08/98 3.76 3,025,349
IOWA
5,570 Iowa School Corporations, Warrant Certificates Ser A 1997-98
(FSA),
dtd 06/26/97 .................................................. 4.50 06/26/98 3.89 5,585,755
MICHIGAN
10,000 Michigan Municipal Bond Authority, Ser 1997 B Notes, dtd
07/02/97 ...................................................... 4.50 07/02/98 3.89 10,029,104
NEW MEXICO
5,000 New Mexico, Ser 1997-1998 TRANs, dtd 07/11/97 .................. 4.50 06/30/98 3.87 5,014,949
PENNSYLVANIA
4,000 Temple University, Ser 1997, dtd 05/19/97 ...................... 4.75 05/18/98 3.90 4,012,270
TEXAS
5,000 Texas, Ser 1997 A TRANs, dtd 09/02/97 .......................... 4.75 08/31/98 3.85 5,028,587
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
WISCONSIN
$3,800 Wisconsin, Operating Notes of 1997, dtd 07/01/97 ............... 4.50% 06/15/98 3.85% $3,810,761
--------------
TOTAL SHORT-TERM MUNICIPAL NOTES (Amortized Cost $51,540,748) ... 51,540,748
--------------
TOTAL INVESTMENTS (Amortized Cost $518,320,748)(a) ............. 100.2 % 518,320,748
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ................. (0.2 ) (882,535)
--------------
NET ASSETS ..................................................... 100.0 % $517,438,213
============ ==============
</TABLE>
- ------------
BANs Bond Anticipation Notes.
COPs Certificates of Participation.
NRU-CFC National Rural Utilities -Cooperative Finance Corporation.
TANs Tax Anticipation Notes.
TRANs Tax and Revenue Anticipation Notes.
+ Rate shown is the rate in effect at December 31, 1997.
* Date on which the principal amount can be recovered through
demand.
(a) Cost is the same for federal income tax purposes.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $518,320,748) ........................................ $518,320,748
Cash .................................................................. 458,689
Receivable for:
Interest ............................................................ 3,839,046
Shares of beneficial interest sold .................................. 1,031
Prepaid expenses and other assets ..................................... 41,868
--------------
TOTAL ASSETS ........................................................ 522,661,382
--------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ........................... 4,830,825
Investments management fee .......................................... 249,794
Plan of distribution fee ............................................ 50,797
Accrued expenses ...................................................... 91,753
---------------
TOTAL LIABILITIES ................................................... 5,223,169
---------------
NET ASSETS .......................................................... $517,438,213
===============
COMPOSITION OF NET ASSETS:
Paid-in-capital ....................................................... $517,440,266
Accumulated undistributed net investment income ....................... 455
Accumulated net realized loss ......................................... (2,508)
---------------
NET ASSETS .......................................................... $517,438,213
===============
NET ASSET VALUE PER SHARE,
517,440,266 shares outstanding (unlimited shares authorized of $.01
par value) ........................................................... $1.00
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $19,905,584
-------------
EXPENSES
Investment management fee .............. 2,695,933
Plan of distribution fee ............... 534,396
Transfer agent fees and expenses ...... 443,247
Registration fees ...................... 99,947
Professional fees ...................... 52,731
Shareholder reports and notices ....... 52,029
Custodian fees ......................... 27,469
Trustees' fees and expenses ............ 16,589
Other .................................. 8,428
-------------
TOTAL EXPENSES ....................... 3,930,769
Less: expense offset ................... (27,428)
-------------
NET EXPENSES ......................... 3,903,341
-------------
NET INVESTMENT INCOME AND NET INCREASE $16,002,243
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME 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 ................................. $ 16,002,243 $ 15,359,674
Net realized gain ..................................... -- 12,513
----------------- -----------------
NET INCREASE ........................................ 16,002,243 15,372,187
Dividends from net investment income .................. (16,002,394) (15,359,493)
Net increase (decrease) from transactions in shares of
beneficial interest .................................. (4,440,989) 214,584
----------------- -----------------
NET INCREASE (DECREASE) ............................. (4,441,140) 227,278
NET ASSETS:
Beginning of period ................................... 521,879,353 521,652,075
----------------- -----------------
END OF PERIOD
(Including undistributed net investment income of
$455 and $606, respectively) ........................ $517,438,213 $521,879,353
================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Tax-Free Daily Income Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is to
provide a high level of daily income which is exempt from federal income tax,
consistent with stability of principal and liquidity. The Fund was
incorporated in Maryland in 1980, commenced operations on February 20, 1981
and reorganized as a Massachusetts business trust on April 30, 1987.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued at amortized
cost, which approximates market value.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. The Fund amortizes premiums and accretes discounts over the life of
the respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to shareholders as of the close of each business day.
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 net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of the daily net assets not exceeding $500
million; 0.425% to the portion of the daily net assets exceeding $500 million
but not exceeding $750 million; 0.375% to the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of
29
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
the daily net assets exceeding $1 billion but not exceeding $1.5 billion;
0.325% to the portion of the daily net assets exceeding $1.5 billion but not
exceeding $2 billion; 0.30% to the portion of the daily net assets exceeding
$2 billion but not exceeding $2.5 billion; 0.275% to the portion of the daily
net assets exceeding $2.5 billion but not exceeding $3 billion; and 0.25% to
the portion of the daily net assets exceeding $3 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and, in
accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act, finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor and other
broker-dealers under the Plan: (1) compensation to, and expenses of, the
Distributor and other broker-dealers; (2) sales incentives and bonuses to
sales representatives and to marketing personnel in connection with promoting
sales of the Fund's shares; (3) expenses incurred in connection with
promoting sales of the Fund's shares; (4) preparing and distributing sales
literature; and (5) providing advertising and promotional activities,
including direct mail solicitation and television, radio, newspaper, magazine
and other media advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no
event exceed an amount equal to a payment at the annual rate of 0.15% of the
Fund's average daily net assets. For the year ended December 31, 1997, the
distribution fee was accrued at the annual rate of 0.10%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio
securities for the year ended December 31, 1997 aggregated $1,158,439,717 and
$1,160,356,000, respectively.
30
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1997, the Fund had
transfer agent fees and expenses payable of approximately $14,000.
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 $2,774. At December 31, 1997, the Fund
had an accrued pension liability of $48,183 which is included in accrued
expenses in the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest, at $1.00 per share, were as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Shares sold .................................. 1,145,733,981 1,127,357,086
Shares issued in reinvestment of dividends .. 16,002,394 15,359,493
----------------- -----------------
1,161,736,375 1,142,716,579
Shares repurchased ........................... (1,166,177,364) (1,142,501,995)
----------------- -----------------
Net increase (decrease) in shares
outstanding.................................. (4,440,989) 214,584
================= =================
</TABLE>
6. FEDERAL INCOME TAX STATUS
At December 31, 1997, the Fund had a net capital loss carryover of
approximately $2,500 which will be available through December 31, 2002 to
offset future capital gains to the extent provided by regulations.
7. FINANCIAL HIGHLIGHTS
See the "Financial Highlights" table on page 4 of this Prospectus.
31
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER TAX-FREE DAILY INCOME 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
(appearing in the "Financial Highlights" table on page 4 of this Prospectus)
present fairly, in all material respects, the financial position of Dean
Witter Tax-Free Daily Income 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 ten years in the period then ended, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1997 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 6, 1998
1997 FEDERAL TAX NOTICE (unaudited)
For the year ended December 31, 1997, all of the Fund's dividends from
net investment income were exempt interest dividends, excludable from
gross income for Federal income tax purposes.
32
<PAGE>
2 1 0 -
for office use only
DEAN WITTER
TAX-FREE DAILY
INCOME TRUST
APPLICATION
DEAN WITTER TAX-FREE DAILY INCOME TRUST
Send to: Dean Witter Trust FSB (the "Transfer Agent"), P.O. Box 1040, Jersey
City, NJ 07303
- -----------------------------------------------------------------------------
INSTRUCTIONS For assistance in completing this application, telephone Dean
Witter Trust FSB at (800) 869-NEWS (Toll-Free).
- -----------------------------------------------------------------------------
TO REGISTER 1.
SHARES First Name Last Name
(please print)
- -As joint tenants, 2.
use line 1 & 2 First Name Last Name
(Joint tenants with rights of survivorship unless otherwise
specified)
Social Security Number
- -As custodian 3.
for a minor, Minor's Name
use lines 1 & 3
Minor's Social Security Number
Under the Uniform Gifts to Minors Act
State of Residence of Minor
- -In the name of a 4.
corporation, Name of Corporation, Trust (including trustee
trust, name(s)) or Other Organization
partnership
or other
institutional Tax Identification
investors, Number
use line 4
If Trust, Date of Trust Instrument: ___________
- -----------------------------------------------------------------------------
ADDRESS ______________________________________________________
______________________________________________________
City State Zip
Code
- -----------------------------------------------------------------------------
TO PURCHASE [ ] CHECK (enclosed) $ (Make Payable to Dean Witter Tax-Free
SHARES: Daily Income Trust)
Minimum Initial [ ] WIRE* On __________ MF* _____________________________
Investment: (Date) (Control number, this
$5,000 transaction)
___________________________________________________________________
Name of Bank Branch
___________________________________________________________________
Address
___________________________________________________________________
Telephone Number
* For an initial investment made by wiring funds, obtain a
control number by calling: (800) 869-NEWS (Toll Free)
Your bank should wire to:
Bank of New York for credit to account of Dean Witter Trust FSB
Account Number: 8900188413
Re: Dean Witter Tax-Free Daily Income Trust
Account Of:__________________________________________________
(Investor's Account as Registered at the Transfer
Agent)
Control or Account Number: ___________________________________
(Assigned by Telephone)
- -----------------------------------------------------------------------------
OPTIONAL SERVICES
- -----------------------------------------------------------------------------
NOTE: If you are a current shareholder of Dean Witter Tax-Free
Daily Income Trust, please indicate your fund account number
here.
2 1 0 -
- -----------------------------------------------------------------------------
DIVIDENDS All dividends will be reinvested daily in additional shares,
unless the following option is selected:
[ ] Pay income dividends by check at the end of each month.
- -----------------------------------------------------------------------------
WRITE YOUR [ ] Send an initial supply of checks.
OWN FOR JOINT ACCOUNTS:
CHECK [ ] Check this box if all owners are required to sign checks.
- -----------------------------------------------------------------------------
SYSTEMATIC [ ] Systematic Withdrawal Plan ($25 minimum)
WITHDRAWAL [ ] Percentage of balance (annualized basis)
PLAN $________ [ ] Monthly or [ ] Quarterly
Minimum [ ] 10th or [ ] 25th of Month/Quarter
Account
Value: _____ % [ ] Monthly [ ] Quarterly
$5,000 [ ] 10th or [ ] 25th of Month/Quarter
[ ] Pay shareholder(s) at address of record.
[ ] Pay to the following: (If this payment option is selected a
signature guarantee is required)
________________________________________________________________
Name
________________________________________________________________
Address
________________________________________________________________
City State Zip Code
<PAGE>
- -----------------------------------------------------------------------------
PAYMENT TO
PREDESIGNATED
BANK ACCOUNT
Bank Account must be in
same name as shares are
registered
Minimum Amount:
$1,000
[ ] Dean Witter Trust FSB is hereby authorized to honor telephonic or other
instructions, without signature guarantee, from any person for the
redemption of any or all shares of Dean Witter Tax-Free Daily Income
Trust held in my (our) account provided that proceeds are transmitted
only to the following bank account. (Absent its own negligence, neither
Dean Witter Tax-Free Daily Income Trust nor Dean Witter Trust FSB (the
"Transfer Agent") shall be liable for any redemption caused by
unauthorized instruction(s)):
_______________________________________________________________________
Name & Bank Account Number
______________________________________________________________________
Name of Bank
_______________________________________________________________________
( )
-----------------------------------------------------------------------
Telephone Number of Bank
------------------------------------
Bank's Routing Transmit Code
(Ask Your Bank)
_______________________________________________________________________________
SIGNATURE AUTHORIZATION
_______________________________________________________________________________
FOR ALL ACCOUNTS
NOTE: RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY
MODIFICATION OF THE INFORMATION BELOW WILL REQUIRE AN
AMENDMENT TO THIS FORM. THIS DOCUMENT IS IN FULL FORCE AND
EFFECT UNTIL ANOTHER DULY EXECUTED FORM IS RECEIVED BY THE
TRANSFER AGENT.
The "Transfer Agent" is hereby authorized to act as agent for
the registered owner of shares of Dean Witter Tax-Free Daily
Income Trust (the "Fund") in effecting redemptions of shares
and is authorized to recognize the signature(s) below in
payment of funds resulting from such redemptions on behalf of
the registered owners of such shares. The Transfer Agent shall
be liable only for its own negligence and not for 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.
I (we) certify to my (our) legal capacity, or the capacity of
the investor named above, to invest in and redeem shares of,
and I (we) acknowledge receipt of a current prospectus of Dean
Witter Tax-Free Daily Income Trust and (we) further certify my
(our) authority to sign and act for and on behalf of the
investor.
Under penalties of perjury, I certify (1) that the number
shown on this form is my correct taxpayer identification
number and (2) that I am not subject to backup withholding
either because I have not been notified that I am subject to
backup withholding as a result of a failure to report all
interest or dividends, or the Internal Revenue Service has
notified me that I am no longer subject to backup withholding.
(Note: You must cross out item (2) above if you have been
notified by IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on
your tax return.)
For Individual, Joint and Custodial Accounts for Minors, Check
Applicable Box:
[ ] I am a United States Citizen.
[ ] I am not a United States Citizen.
Name(s) must be signed ex-
actly the same as shown on
lines 1 to 4 on the reverse
side of this application
SIGNATURE(S) (IF JOINT TENANTS, ALL MUST SIGN)
-----------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
SIGNED THIS__________________ DAY OF _________________, 19__.
<PAGE>
FOR CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER ORGANIZATIONS
The following named persons are currently officers/trustees/general
partners/other authorized signatories of the Registered Owner, and any _____ *
of them ("Authorized Person(s)") is/are currently authorized under the
applicable governing document to act with full power to sell, assign or
transfer securities of the Fund for the Registered Owner and to execute and
deliver any instrument necessary to effectuate the authority hereby conferred:
In addition, complete
Section A or B below.
Name/Title Signature
-----------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
SIGNED THIS__________________ DAY OF _________________, 19__.
The Transfer Agent may, without inquiry, act only upon the instruction of ANY
PERSON(S) purporting to be (an) Authorized Person(s) named in the Certification
Form last received by the Transfer Agent. The Transfer Agent and the Fund
shall not be liable for any claims, expenses (including legal fees) or losses
resulting from the Transfer Agent having acted upon any instruction reasonably
believed genuine.
- -------------------------------------------------------------------------------
* INSERT A NUMBER UNLESS OTHERWISE INDICATED, THE TRANSFER AGENT MAY HONOR
INSTRUCTIONS OF ANY ONE OF THE PERSONS NAMED ABOVE.
- -------------------------------------------------------------------------------
SECTION (A)
CORPORATIONS AND INCORPORATED ASSOCIATIONS ONLY.
SIGN ABOVE AND COMPLETE THIS SECTION
SIGNATURE GUARANTEE** (or Corporate Seal)
SIGNATURE GUARANTEE** (or Corporate Seal)
NOTE: EITHER A SIGNATURE GUARANTEE OR CORPORATE SEAL IS REQUIRED.
I, ________________________________ Secretary of the Registered Owner, do
hereby certify that at a meeting on _________________ at which a quorum was
present throughout, the Board of Directors of the corporation/ the officers
of the association duly adopted a resolution, which is in full force and
effect and in accordance with the Registered Owners's charter and by-laws,
which resolution did the following: (1) empowered the above-named Authorized
Person(s) to effect securities transactions for the Registered Owner on the
terms described above, (2) authorized the Secretary to certify, from time to
time, the names and titles of the officers of the Registered Owner and to
notify the Transfer Agent when changes in office occur; and (3) authorized
the Secretary to certify that such a resolution has been duly adopted and will
remain in full force and effect until the Transfer Agent receives a duly
executed amendment to the Certification Form.
Witness my hand on behalf of the corporation/association this ____ day of
_____________ 19__.
---------------------------------------
Secretary**
The undersigned officer (other than the Secretary) hereby certificates that
the foregoing instrument has been signed by the Secretary of the
corporation/association.
-------------------------------------------------------------------
Certifying Officer of the Corporation or Incorporated Association**
- -------------------------------------------------------------------------------
SECTION (B)
ALL OTHER INSTITUTIONAL INVESTORS
SIGNATURE GUARANTEE**
SIGN ABOVE AND COMPLETE THIS SECTION
NOTE: A SIGNATURE GUARANTEE IS REQUIRED.
-------------------------------------------
Certifying
Trustee(s) General Partner(s) Other(s)**
--------------------------------------------
Certifying
Trustee(s) General Partner(s) Other(s)**
- ----------------------------------------------------------------------
**SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
- -------------------------------------------------------------------------------
DEALER
(if any) Completion by dealer only
Above signature(s) guaranteed, Prospectus has been delivered by unresigned to
above-named applicant(s).
- --------------------- --------------------------------------------------
Firm Name Officer Number-Account Number at Dealer-A/E Number
- --------------------- --------------------------------------------------
Address Account Executive's Last Name
- --------------------- --------------------------------------------------
City, State, Zip Code Branch Office
* 1994 Dean Witter Distributors Inc.
<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
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
<PAGE>
Dean Witter
Tax-Free Daily Income 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
Katherine H. Stromberg
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust 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-FREE DAILY
INCOME TRUST
PROSPECTUS--FEBRUARY 27, 1998
<PAGE>
DEAN WITTER
TAX-FREE
DAILY
INCOME TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 27, 1998
- -----------------------------------------------------------------------------
Dean Witter Tax-Free Daily Income Trust (the "Fund") is a no-load
open-end, diversified management investment company whose investment
objective is to provide as high a level of daily income exempt from federal
income tax as is consistent with stability of principal and liquidity. The
Fund seeks to achieve its objective by investing primarily in high quality
tax-exempt securities with short-term maturities, including Municipal Bonds,
Municipal Notes and Municipal Commercial Paper. (See "Investment Practices
and Policies.")
The Fund is authorized to reimburse specific expenses incurred in
promoting the distribution of the Fund's shares pursuant to a Plan of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Act"). Reimbursement may in no event exceed an amount equal to payments
at the annual rate of 0.15 of 1% of the average daily net assets of the Fund.
A Prospectus for the Fund dated February 27, 1998, which provides the
basic information you should know before investing in the Fund, may be
obtained without charge by request of the Fund at its address or at the
telephone number listed below. This Statement of Additional Information
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-Free Daily Income Trust
Two World Trade Center
New York, New York 10048
(800) 869-NEWS (toll-free) or
(212) 392-2550
<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................ 15
Portfolio Transactions and Brokerage .. 17
Purchase of Fund Shares................ 18
How Net Asset Value is Determined ..... 25
Redemption of Fund Shares.............. 27
Dividends, Distributions and Taxes .... 28
Description of Shares ................. 31
Custodian and Transfer Agent........... 31
Reports to Shareholders................ 31
Independent Accountants................ 32
Legal Counsel.......................... 32
Experts................................ 32
Registration Statement................. 32
Financial Statements--December 31,
1997 ................................. 32
Appendix............................... 33
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund was incorporated in the state of Maryland on March 24, 1980 under
the name InterCapital Reserve Cash Management Inc. From May 19, 1980 to
August 15, 1980, the Fund was engaged in operations as a publicly held,
open-end investment company of the type commonly known as a money market
fund. On August 15, 1980, the Fund terminated its operations as a money
market fund in response to changes in regulations promulgated by the Federal
Reserve Board. At that time, substantially all of the Fund's assets were
transferred to lnterCapital Liquid Asset Fund Inc., another money market
fund, as part of an offer of exchange made to the Fund's shareholders. On
October 13, 1980 the Fund's sole remaining shareholder, Dean Witter Reynolds
InterCapital Inc. ("InterCapital"), approved a change in the Fund's name to
lnterCapital Tax-Free Daily Income Fund Inc. and an amendment to the Fund's
investment objective and fundamental investment policies to those set forth
in the Prospectus and this Statement of Additional Information. The Fund
offered its shares for sale to the public, commencing on February 20, 1981.
On March 21, 1983 the Fund's name was changed to Dean Witter/Sears Tax-Free
Daily Income Fund Inc. On April 30, 1987, the Fund reorganized as a
Massachusetts business trust with the name Dean Witter/Sears Tax-Free Daily
Income Trust. On February 19, 1993, the Fund's name was changed to its
current name, Dean Witter Tax-Free Daily Income Trust.
As of December 31, 1997 no shareholder was known to own beneficially or of
record as much as 5% of the outstanding shares of the Fund. The percentage of
ownership of shares of the Fund changes from time to time depending on
purchases and redemptions by shareholders and the total number of shares
outstanding.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc., a Delaware corporation (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, Discover & 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 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 also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., Dean Witter High Yield Securities Inc.,
Dean Witter Tax-Exempt Securities Trust, Dean Witter Developing Growth
Securities Trust, Dean Witter American Value Fund, Dean Witter Dividend
Growth Securities Inc., Dean Witter Natural Resource Development Securities
Inc., Dean Witter U.S. Government Money Market Trust, Dean Witter California
Tax-Free Income Fund, Dean Witter Variable Investment Series, Dean Witter
Select Dimensions Investment Series, Dean Witter World Wide Investment Trust,
Dean Witter Select Municipal Reinvestment Fund, Dean Witter U.S. Government
Securities Trust, Dean Witter New York Tax-Free Income Fund, Dean Witter
Convertible Securities Trust, Dean Witter Federal Securities Trust, Dean
Witter Value-Added Market Series, High Income Advantage Trust, High Income
Advantage Trust II, High Income Advantage Trust III, Dean Witter Government
Income Trust, Dean Witter California Tax-Free Daily Income Trust, Dean Witter
Utilities Fund, Dean Witter Strategist Fund, Dean Witter World Wide Income
Trust, Dean Witter Intermediate Income Securities, Dean Witter Capital Growth
Securities, Dean Witter European Growth Fund Inc., Dean Witter Pacific Growth
Fund Inc., Dean Witter Precious Metals and Minerals Trust, Dean Witter Global
Short-Term Income Fund Inc., Dean Witter Multi-State
3
<PAGE>
Municipal Series Trust, Dean Witter New York Municipal Money Market Trust,
InterCapital Quality Municipal Investment Trust, Dean Witter Short-Term U.S.
Treasury Trust, InterCapital Insured Municipal Bond Trust, InterCapital
Insured Municipal Trust, InterCapital Quality Municipal Income Trust, Dean
Witter Diversified Income Trust, Dean Witter Health Sciences Trust, Dean
Witter Retirement Series, InterCapital Quality Municipal Securities,
InterCapital California Quality Municipal Securities, InterCapital New York
Quality Municipal Securities, Dean Witter Global Dividend Growth Securities,
Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund,
Dean Witter Global Utilities Fund, Dean Witter International SmallCap Fund,
Dean Witter Mid-Cap Growth Fund, Dean Witter Global Asset Allocation Fund,
Dean Witter Select Dimensions Investment Series, Dean Witter Balanced Growth
Fund, Dean Witter Balanced Income Fund, Dean Witter Hawaii Municipal Trust,
Dean Witter Capital Appreciation Fund, Dean Witter Information 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, InterCapital Insured Municipal Securities,
InterCapital Insured California Municipal Securities, InterCapital Insured
Municipal Income Trust, InterCapital California Insured Municipal Income
Trust, Dean Witter Market Leader Trust, Dean Witter S&P 500 Index Fund, Dean
Witter Fund of Funds, Morgan Stanley Dean Witter Competitive Edge Fund--"Best
Ideas" Portfolio, Active Assets Money Trust, Active Assets California
Tax-Free Trust, Active Assets Tax-Free Trust, Active Assets Government
Securities Trust, Municipal Income Trust, Municipal Income Trust II,
Municipal Income Trust III, Municipal Income Opportunities Trust, Municipal
Income Opportunities Trust II, Municipal Income Opportunities Trust III,
Municipal Premium Income Trust and Prime Income Trust. The foregoing
investment companies, together with the Fund, are collectively referred to as
the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following companies for
which TCW Funds Management, Inc. is the investment adviser: TCW/DW Core
Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002, TCW/DW Term Trust 2003,
TCW/DW Emerging Markets Opportunities Trust, TCW/DW Mid-Cap Equity Trust,
TCW/DW Global Telecom Trust, and TCW/DW Total Return Trust (the "TCW/DW
Funds"). InterCapital also serves as: (i) administrator of The BlackRock
Strategic Term Trust Inc., a closed-end investment company; (ii)
sub-administrator of MassMutual Participation Investors and Templeton Global
Governments Income Trust, closed-end investment companies; and (iii)
investment adviser 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 expense, such office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund
may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be
filed with federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in
the opinion of the Investment Manager, necessary or desirable). In addition,
the Investment Manager pays the salaries of all personnel, including officers
of the Fund, who are employees of the Investment Manager. The Investment
Manager also bears the cost of telephone service, heat, light, power and
other utilities provided to the Fund and the cost of printing (in excess of
costs borne by the Fund) and distributing prospectuses and supplements
thereto of the Fund used for sales purposes.
4
<PAGE>
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 Management Agreement.
Expenses not expressly assumed by the Investment Manager under the
Agreement or by the Distributor of the Fund's shares, Dean Witter
Distributors Inc. ("Distributors" or the "Distributor"), (see "Purchase of
Fund Shares") will be paid by the Fund. Such expenses include, but are not
limited to: the distribution fee under the Plan pursuant to Rule 12b-1 (see
"Purchase of Fund Shares"); charges and expenses of any registrar, custodian
and stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing of share certificates, registration costs of
the Fund and its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing prospectuses of
the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees meetings and of preparing, printing, including
typesetting, 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,
distribution, 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 Fund or of the Investment Manager (not including compensation
or expenses of attorneys who are employees of the Investment Manager) and
independent accountants; membership dues of Industry associations; interest
on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Trustees) of the Fund which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification relating thereto);
and all other costs of the Fund's operation.
As full compensation for the 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 $1.5 billion; 0.325% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2 billion; 0.30% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5 billion;
0.275% of the portion of the daily net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.25% of the portion of the daily net assets
exceeding $3 billion. For the fiscal years ended December 31, 1995, December
31, 1996 and December 31, 1997, the Fund accrued to the Investment Manager
total compensation of $2,793,438, $2,738,887 and $2,695,933, respectively.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
The Agreement was initially approved by the Trustees on February 21, 1997
and by the shareholders of the Fund at a 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 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
5
<PAGE>
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.
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
Trustees of the Fund who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party (the "Independent
Trustees"), which vote must be cast in person at a meeting called for the
purpose of voting on such approval.
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use, or at any
time, permit others to use, the name "Dean Witter." The Fund has also agreed
that in the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent is terminated, the Fund will eliminate the name
"Dean Witter" from its name if DWR or its parent 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 84 Dean Witter Funds and the 14 TCW/DW Funds, are
shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------- --------------------------------------------------------
<S> <C>
Michael Bozic (57) Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly variously Chairman, Chief Executive Officer,
President and Chief Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services, Inc., The United Negro College
Fund and Weirton Steel Corporation.
<PAGE>
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 Dean Witter Trust FSB ("DWT"); Director and/or
officer of various MSDWD subsidiaries.
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------- --------------------------------------------------------
Edwin J. Garn (65) Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah)(1974-1992) and Chairman, Senate
c/o Huntsman Chemical Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
500 Huntsman Way City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman
Corporation; Director of Franklin Covey (time management
systems); John Alden Financial Corp. (health insurance); United
Space Alliance (joint venture between Lockheed Martin and
Boeing Company) and Nuskin Asia Pacific (multilevel marketing);
Member of the board of various civic and charitable
organizations.
John R. Haire (73) Chairman of the Audit Committee and Chairman of the Committee
Trustee of Independent Directors or Trus-tees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Chairman of the Audit Committee
New York, New York and 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; Director
Trustee of The PMI Group, Inc. (private mortgage insurance); Trustee
c/o Gordon Altman Butowsky and Vice Chairman of The Field Museum of Natural History;
Weitzen Shalov & Wein formerly associated with the Allstate Companies (1966- 1994),
Counsel to the Independent Trustees most recently as Chairman of The Allstate Corporation (March,
114 West 47th Street 1993-December, 1994) and Chairman and Chief Executive Officer
New York, New York of its whollyowned 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
1133 Connecticut Avenue, N.W. Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds;
Washington, D.C. Director of NASDAQ (since June, 1995); Director of Greenwich
Capital Markets Inc. (broker-dealer); Chairman and Trustee
of the Financial Accounting Foundation (oversight organization
for the FASB); formerly Vice Chairman of the Board of Governors
of the Federal Reserve System (1986-1990) and Assistant
Secretary of the U.S. Treasury (1982-1986).
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------- --------------------------------------------------------
Michael E. Nugent (61) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Director or Trustee of the Dean Witter Funds;
c/o Triumph Capital, L.P. Trustee of the TCW/DW Funds; formerly Vice President, Bankers
237 Park Avenue Trust Company and BT Capital Corporation (1984-1988); Director
New York, New York of various business organizations.
Philip J. Purcell* (54) Chairman of the Board of Directors and Chief Executive Officer
Trustee of MSDWD, 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
MSDWD 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 Weitzen formerly Executive Vice President and Chief Investment Officer
Shalov & Wein of the Home Insurance Company (August, 1991-September, 1995).
Counsel to the Independent Trustees
114 West 47th Street
New York, New York
Barry Fink (43) Senior Vice President (since March, 1997) and Secretary and
Vice President, Secretary and General Counsel General Counsel (since February, 1997) of InterCapital and
Two World Trade Center DWSC; Senior Vice President (since March, 1997), Assistant
New York, New York Secretary and Assistant General Counsel of Distributors (since
February, 1997); 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 General Counsel
of InterCapital and DWSC and Assistant Secretary of the Dean
Witter Funds and the TCW/DW Funds.
Katherine H. Stromberg (49) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (51) First Vice President and Assistant Treasurer of InterCapital
Treasurer and DWSC and Treasurer of the Dean Witter Funds and the TCW/DW
Two World Trade Center Funds.
New York, New York
</TABLE>
- ------------
* "Interested persons", as defined in the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, and Mitchell M. Merin, President and Chief Strategic Officer
of InterCapital and DWSC, Executive Vice President of Distributors and DWT
and Director of DWT, Executive Vice President, Chief Administrative Officer
and Director of DWR, and Director of SPS Transaction Services, Inc. and
various other MSDWD subsidiaries, and Robert S. Giambrone, Senior Vice
President of InterCapital, DWSC, Distributors and DWT and Director of DWT and
Joseph J. McAlinden, Executive Vice President and Chief Investment Officer of
InterCapital and
8
<PAGE>
Director of DWT and Peter M. Avelar, Jonathan R. Page and James F. Willison,
Senior Vice Presidents of InterCapital, and Joseph R. Arcieri and Gerard J.
Lian, Vice Presidents of InterCapital are Vice Presidents of the Fund. In
addition, Marilyn K. Cranney, First Vice President and Assistant General
Counsel of InterCapital, 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 84 Dean Witter
Funds, comprised of 128 portfolios. As of January 31, 1998, the Dean Witter
Funds had total net assets of approximately $96 billion and more than five
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 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.
9
<PAGE>
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT
COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and
the Funds' operations and management. He screens and/or prepares written
materials and identifies critical issues for the Independent Trustees to
consider, develops agendas for Committee meetings, determines the type and
amount of information that the Committees will need to form a judgment on
various issues, and arranges to have that information furnished to Committee
members. He also arranges for the services of independent experts and
consults with them in advance of meetings to help refine reports and to focus
on critical issues. Members of the Committees believe that the person who
serves as Chairman of both Committees and guides their efforts is pivotal to
the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination
of chief executive and support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and 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.
10
<PAGE>
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 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.
COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF
COMMITTEES OF FOR SERVICE AS
INDEPENDENT CHAIRMAN OF TOTAL
FOR SERVICE DIRECTORS/ COMMITTEES OF COMPENSATION
AS DIRECTOR OR FOR SERVICE AS TRUSTEES AND INDEPENDENT PAID
TRUSTEE AND TRUSTEE AND AUDIT TRUSTEES FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER COMMITTEES OF 82 AND AUDIT 82 DEAN WITTER
NAME OF OF 82 DEAN WITTER OF 14 TCW/DW DEAN WITTER COMMITTEES OF 14 FUNDS AND 14
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS TCW/DW FUNDS TCW/DW FUNDS
- ---------------------- ----------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Michael Bozic ......... $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
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT 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 (835)(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
Municipal Bonds. Municipal Bonds, as referred to in the Prospectus, are
debt obligations of states, cities, municipalities and municipal agencies
(all of which are generally referred to as "municipalities") which generally
have a maturity at the time of their issuance of one year or more. They are
issued to raise funds for various public purposes, such as construction of a
wide range of public facilities, to refund outstanding obligations and to
obtain funds for general operating expenses or to loan to other public
institutions and facilities. In addition, certain types of industrial
development bonds and pollution control bonds are issued by or on behalf of
public authorities to provide funding for various privately operated
facilities.
Municipal Notes. Municipal Notes are short-term obligations of
municipalities, generally with a maturity, at the time of issuance, ranging
from six months to three years the interest from which is, in the opinion of
bond counsel, exempt from federal income tax. The principal types of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes, although there are other types
of Municipal Notes in which the Fund may invest. Notes sold in anticipation
of collection of taxes, a bond sale, or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project Notes are
issued by local agencies and are guaranteed by the United States Department
of Housing and Urban Development. Such notes are secured by the full faith
and credit of the United States. 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 discount and are sometimes referred to as Short-Term Discount
Notes. They
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are 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.
The two principal classifications of Municipal Bonds, Municipal Notes and
Municipal Commercial Paper are "general obligation" and "revenue" bonds,
notes or commercial paper. General obligation bonds, notes and 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 and commercial paper include states, counties,
cities, towns and other governmental units. Revenue bonds, notes and
commercial paper are payable from the revenues derived from a particular
facility or class of facilities and, in some cases, from specific revenue
sources. Revenue bonds, notes and 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
in the instance of 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.
Obligations of issuers of Municipal Bonds, Municipal Notes and Municipal
Commercial Paper are subject to the 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
state legislatures to extend the time for payment of principal or interest,
or both, or to impose 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 issuer to pay, when due, principal of and interest on its, or their,
Municipal Bonds, Municipal Notes and Municipal Commercial Paper may be
materially affected.
PORTFOLIO MANAGEMENT
Variable Rate and Floating Rate Obligations. As stated in the Prospectus,
the Fund may invest in Municipal Bonds and Municipal Notes ("Municipal
Obligations") of the type called variable rate and floating rate obligations.
The interest rate payable on a variable rate obligation is adjusted either at
predesignated periodic intervals and, on a floating rate obligation, 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. As a result, the purchase of variable rate
and floating rate obligations could enhance the ability of the Fund to
maintain a stable net asset value per share (see "Purchase of Fund
Shares--Determination of Net Asset Value" in the Prospectus) and to sell
obligations prior to maturity at a price approximately the full principal
amount of the obligations. 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 an obligation prior
to maturity, is enhanced. The payment of principal and interest by issuers of
certain 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 an
obligation meets the Fund's investment quality requirements.
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 commitment, but delivery and payment can take place a month
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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 liquid portfolio securities 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. During the fiscal year ended December 31, 1997, the Fund's
investments in when-issued and delayed delivery securities did not exceed 5%
of the Fund's net assets.
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, which is usually not more
than seven days from the date of purchase. The Fund will accrue 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 the repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed
to minimize such risks. These procedures include effecting repurchase
transactions only with large, well capitalized and well established financial
institutions, whose financial condition will be continually monitored by the
Investment Manager. In addition, the value of the collateral underlying the
repurchase agreement will always be at least equal to the resale price which
consists of the purchase price paid to the seller of the securities plus the
accrued resale premium which is defined as the amount specified in the
repurchase agreement or the daily amortization of the difference between the
purchase price and the resale price specified in the repurchase agreement.
Such collateral will consist entirely of securities that are direct
obligations of, or that are fully guaranteed as to principal and interest by,
the United States or any agency thereof, and/or certificates of deposit,
bankers' acceptances which are eligible for acceptance by a Federal Reserve
Bank, and, if the seller is a bank, mortgage related securities (as such term
is defined in section 3(a)(41) of the Securities Exchange Act of 1934) that,
at the time the repurchase agreement is entered into, are rated in the
highest rating category by the Requisite NRSROs. Additionally, the collateral
must qualify the repurchase agreement for preferential treatment under the
Federal Deposit Insurance Act or the Federal Bankruptcy Code. In the event of
a default or bankruptcy by a selling financial institution, the Fund will
seek to liquidate such collateral. However, the exercise 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 asset held by the Fund, amount to more than 10% of its
total 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, during the fiscal year ended
December 31, 1997, the Fund did not enter into any repurchase agreements.
Put Options. The Fund may purchase securities together with the right to
resell them to the seller at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell
is commonly known as a "put," and the aggregate price which the Fund pays for
securities with puts may be higher than the price which otherwise would be
paid for the securities. Consistent with the Fund's investment objectives and
subject to the supervision of the Board of Trustees,
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the primary purpose of this practice is to permit the Fund to be fully
invested in securities the interest on which is exempt from Federal income
tax while preserving the necessary flexibility and liquidity to purchase
securities on a when-issued basis, or to meet unusually large redemptions and
to purchase at a later date securities other than those subject to the put.
The Fund's policy is, generally, to exercise the puts on their expiration
date, when the exercise price is higher than the current market price for the
related securities. Puts may be exercised prior to the expiration date in
order to fund obligations to purchase other securities or to meet redemption
requests. These obligations may arise during the periods in which proceeds
from sales of Fund shares and from recent sales of portfolio securities are
insufficient to meet such obligations or when the funds available are
otherwise allocated for investment. In addition, puts may be exercised prior
to their expiration date in the event the Investment Manager revises its
evaluation of the creditworthiness of the issuer of the underlying security.
In determining whether to exercise puts prior to their expiration date and in
selecting which puts to exercise in such circumstances, the Investment
Manager considers, among other things, the amount of cash available to the
Fund, the expiration dates of the available puts, any future commitments for
securities purchases, the yield, quality and maturity dates of the underlying
securities, alternative investment opportunities and the desirability of
retaining the underlying securities in the Fund's portfolio.
The Fund values securities which are subject to puts at their amortized
cost and values the put, apart from the security, at zero. Thus, the cost of
the put will be carried on the Fund's books as an unrealized loss from the
date of acquisition and will be reflected in realized gain or loss when the
put is exercised or expires. Since the value of the put is dependent on the
ability of the put writer to meet its obligation to repurchase, the Fund's
policy is to enter into put transactions only with municipal securities
dealers who are approved by the Fund's Board of Trustees. Each dealer will be
approved on its own merits and it is the Fund's general policy to enter into
put transactions only with those dealers which are determined to present
minimal credit risks. In connection with such determination, the Board of
Trustees will review, among other things, the ratings, if available, of
equity and debt securities of such municipal securities dealers, their
reputations in the municipal securities markets, the net worth of such
dealers and their efficiency in consummating transactions. Bank dealers
normally will be members of the Federal Reserve System, and other dealers
will be members of the National Association of Securities Dealers, Inc. or
members of a national securities exchange. The Board has directed the
Investment Manager not to enter into put transactions with, and to exercise
outstanding puts of, any municipal securities dealer which, in the judgment
of the Investment Manager, ceases at any time to present a minimal credit
risk. In the event that a dealer should default on its obligation to
repurchase an underlying security, the Fund is unable to predict whether all
or any portion of any loss sustained could be subsequently recovered from
such dealer. During the fiscal year ended December 31, 1997, the Fund did not
purchase any put options.
It is the position of the staff of the Securities and Exchange Commission
that certain provisions of the Act may be deemed to prohibit the Fund from
purchasing puts from broker-dealers without an exemptive order. Until such an
order is obtained, the Fund will purchase puts only from commercial banks.
There is no assurance such an order, if applied for, will be obtained. The
duration of puts, which will not exceed 60 days, will not be a factor in
determining the weighted average maturity of the Fund's portfolio securities.
In the Revenue Ruling 82-144, the Internal Revenue Service stated that,
under certain circumstances, a purchaser of tax-exempt obligations which are
subject to puts will be considered the owner of the obligations for Federal
income tax purposes. In connection therewith, the Fund has received an
opinion of counsel to the effect that interest on Municipal Obligations
subject to puts will be tax-exempt to the Fund.
INVESTMENT RESTRICTIONS
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In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of the holders of a
majority of the outstanding voting securities of the Fund, as defined in the
Act. Such a majority is defined in the Act
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as the lesser of (a) 67% or more of the shares present at a Meeting of
Shareholders of the Fund, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy at the meeting, or (b)
more than 50% of the outstanding shares of the Fund. For purposes of the
following restrictions and those recited in the Prospectus: (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 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 of the Fund or any officer or director of the
Investment Manager owns more than 1/2 of 1% of the outstanding securities
of such issuer, and such officers, trustees and 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 or commodity futures contracts.
5. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs.
6. Write, purchase or sell puts, calls, or combinations thereof except
that it may acquire rights to resell Municipal Obligations at an agreed
upon price and at or within an agreed upon time.
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 borrowings effected within the limitations set forth in restriction
(8). To meet the requirements of regulations in certain states, the Fund,
as a matter of operating policy but not as fundamental policy, will limit
any pledge of its assets to 10% of its net assets so long as shares of the
Fund are being sold in those states.
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; or (c) borrowing money in
accordance with restrictions described above.
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.
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Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially
all of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities
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 a "net" basis with dealers
acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer.
The Fund also expects that securities will be purchased at times in
underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or
discount. On occasion the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or
discounts are paid. During the fiscal years ended 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 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 sale of securities for its
portfolio, is that primary consideration 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 possible 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 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.
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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
thereby reduce its expenses, it is of indeterminable value and the Fund does
not reduce the management fee it pays to the Investment Management 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 transaction 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 brokers
and dealers that are affiliates of the Investment Manager. 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 commission, fees or
other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on an
exchange during a comparable period of time. This standard would allow the
affiliated broker or dealer to receive no more than the remuneration which
would be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Trustees of the Fund, including a
majority of the Trustees who are not "interested" Trustees (as defined in the
Act), 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. During the fiscal years
ended December 31, 1995, December 31, 1996 and December 31, 1997, the Fund
paid no brokerage commissions to an affiliated broker or dealer.
Subject to the principle of obtaining best price and execution, the
Investment Manager may consider a broker-dealer's sales of shares of the Fund
as a factor in selecting from among those broker-dealers qualified to provide
comparable prices and execution on the Fund's portfolio transactions. The
Fund does not, however, require a broker-dealer to sell shares of the Fund in
order for it to be considered to execute portfolio transactions, and will not
enter into any arrangement whereby a specific amount or percentage of the
Fund's transactions will be directed to a broker which sells shares of the
Fund to customers. The Board of Trustees reviews, periodically, the
allocation of brokerage orders to monitor the operation of these policies.
Portfolio turnover rate is defined as the lesser of the value of the
securities purchased or securities sold, excluding all securities whose
maturities at time of acquisition were one year or less, divided by the
average monthly value of such securities owned during the year. Because the
Fund's portfolio consists of municipal obligations maturing within one year,
the Fund is unable to predict its turnover rate as so defined. However,
because of the short-term nature of the Fund's portfolio securities, it is
anticipated that the number of purchases and sales of maturities of such
securities will be substantial. Brokerage commissions are not normally
charged on purchases and sales of short-term municipal obligations, but such
transactions may involve transaction costs in the form of spreads between bid
and asked prices.
PURCHASE OF FUND SHARES
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As discussed in the Prospectus, the Fund offers its shares for sale to the
public on a continuous basis, without a sales charge. Pursuant to a
Distribution Agreement between the Fund and Dean Witter Distributors Inc.
(the "Distributor"), an affiliate of the Investment Manager and a
wholly-owned subsidiary of MSDWD, shares of the Fund are distributed by the
Distributor and through certain selected broker-dealers who have entered into
agreements with the Distributor ("Selected Broker-Dealer") at an
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<PAGE>
offering price equal to the net asset value per share next determined
following receipt of an effective purchase order (accompanied by Federal
Funds). Dealers in the securities markets in which the Fund will invest
usually require immediate payment in Federal Funds. Since the payment by a
Fund shareholder for his or her other shares cannot be invested until it is
converted into and available to the Fund in Federal Funds, the Fund requires
such payments to be so available before a share purchase order can be
considered effective. All checks submitted for payment are accepted subject
to collection at full face value in United States funds and must be drawn in
United States dollars in a United States bank.
The Board of Trustees of the Fund, including a majority of the Trustees
who are not and were not at the time of their vote "Interested persons" (as
defined in the Act) of either party to the Distribution Agreement (the
"Independent Trustees"), approved, at its meeting held on April 24, 1997, the
current Distribution Agreement appointing the Distributor exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. The current Distribution
Agreement took effect on May 31, 1997 upon the consummation of the merger of
Dean Witter, Discover & Co. with Morgan Stanley Group Inc. and is
substantially identical to a prior Distribution Agreement except for dates of
effectiveness and termination. 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.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund, maintained by the Fund's
Transfer Agent, Dean Witter Trust FSB (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 directly through the Transfer Agent, the shareholder will
be mailed a written confirmation of such transaction.
Direct Investments Through Transfer Agent. A shareholder may make
additional investments in Fund shares at any time through the Shareholder
Investment Account by sending a check payable to Dean Witter Tax-Free Daily
Income Trust in any amount, not less than $100, directly to the Transfer
Agent. The shares so purchased will be credited to the Shareholder Investment
Account.
Account Statements. All purchases of Fund shares will be credited to the
shareholder in a Shareholder Investment Account maintained for the
shareholder by the Transfer Agent in full and fractional shares of the Fund
(rounded to the nearest 1/100 of a share with the exception of purchases made
through reinvestment of dividends). A statement of the account will be mailed
to the shareholder after each shareholder instituted purchase or redemption
transaction effected through the Transfer Agent. A quarterly statement of the
account is sent to all shareholders. Share certificates will not be issued
unless requested in writing by the shareholder. No certificates will be
issued for fractional shares or to shareholders who have elected the checking
account or predesignated bank account methods of withdrawing cash from their
accounts.
The Fund and the Distributor reserve the right to reject any order for the
purchase of shares of the Fund. In addition, the offering of Fund shares may
be suspended at any time and resumed at any time thereafter.
EXCHANGE PRIVILEGE
As discussed in the Prospectus under the caption "Exchange Privilege," an
Exchange Privilege exists whereby investors who have purchased shares of any
of the Dean Witter Funds that are multiple class funds ("Dean Witter
Multi-Class Funds"), 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"), and shares of Dean Witter Global
Short-Term Income Fund Inc. ("Global Short-Term"),
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<PAGE>
which is a Dean Witter Fund offered with a contingent deferred sales charge
("CDSC"), will be permitted, after the shares of the fund acquired by
purchase (not by exchange or dividend reinvestment) have been held for 30
days, to redeem all or part of their shares in that fund, have the proceeds
invested in shares of the Fund, Dean Witter Liquid Asset Fund Inc., Dean
Witter U.S. Government Money Market Trust, Dean Witter New York Municipal
Money Market Trust, or Dean Witter California Tax-Free Daily Income Trust
(these five funds are hereinafter called "money market funds") or Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund and Dean Witter Intermediate Term U.S.
Treasury Trust (these nine funds, including the Fund, are hereinafter
referred to as the "Exchange Funds"). There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment. Shares of
the Exchange Funds received in an exchange for shares of a Dean Witter
Multi-Class Fund may be redeemed and exchanged only for shares of the
corresponding Class of a Dean Witter Multi-Class Fund or for shares of one of
the other Exchange Funds, provided that shares of the Exchange Funds received
in an exchange for Class A shares of a Dean Witter Multi-Class Fund may also
be redeemed and exchanged for shares of a FSC Fund, and shares of the
Exchange Funds received in an exchange for Class B shares of a Dean Witter
Multi-Class Fund may also be redeemed and exchanged for shares of Global
Short-Term. In addition, shares of the Exchange Funds received in an exchange
for shares of a FSC Fund may be redeemed and exchanged for Class A shares of
a Dean Witter Multi-Class Fund or for shares of one of the other Exchange
Funds, and shares of the Exchange Funds received in an exchange for shares of
Global Short-Term may be redeemed and exchanged for Class B shares of a Dean
Witter Multi-Class Fund or for shares of one of the other Exchange Funds.
Ultimately, any applicable CDSC will have to be paid upon redemption of
shares originally purchased from Global Short-Term or a Class of a Dean
Witter Multi-Class Fund that imposes a CDSC. 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.)
When shares of a Dean Witter Multi-Class Fund or Global Short-Term are
exchanged for shares of the Fund or any other Exchange Fund, the exchange is
executed at no charge to the shareholder, without the imposition of the
contingent CDSC at the time of the exchange. During the period of time the
shareholder remains in the Exchange Fund (calculated 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 actually held shares in a Dean Witter
Multi-Class Fund or Global Short-Term. However, in the case of shares
exchanged into an Exchange Fund on or after April 23, 1990, upon 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 12b-1
distribution fees, if any, 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 Global Short-Term are reacquired. Thus, 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 Global Short-Term. In the case of exchanges of Class A shares of a
Dean Witter Multi-Class Fund that are subject to a CDSC, the holding period
also includes the time (calculated as described above) the shareholder was
invested in a FSC Fund.
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When shares initially purchased in a Dean Witter Multi-Class Fund or
Global Short-Term are exchanged for shares of a Dean Witter Multi-Class Fund,
shares of Global Short-Term, shares of an 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 the 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 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 exchange procedures described in the Dean
Witter Multi-Class Fund Prospectus under the caption "Purchase of Fund
Shares" and in the Global Short-Term Prospectus under the caption "Contingent
Deferred Sales Charge," 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.
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 DWR 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, Distributor, or any Selected
Broker-Dealer.
Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of
various TCW/DW Funds, a group of funds distributed by the Distributor for
which TCW Funds Management, Inc. serves as Adviser, under the terms and
conditions described in the Prospectus and Statement of Additional
Information of each TCW/DW Fund.
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
the shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to DWR or any Selected
Broker-Dealer for any transactions pursuant to this Exchange Privilege.
Shares of the Fund acquired pursuant to the Exchange Privilege will be
held by the Fund's transfer agent in an Exchange Privilege account distinct
from any account of the same shareholder who may have acquired shares of the
Fund directly. A shareholder of the Fund will not be permitted to make
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additional investments in such Exchange Privilege account except through the
exchange of additional shares of the fund in which the shareholder had
initially invested, and the proceeds of any shares redeemed from such
Exchange Privilege account may not thereafter be placed back into that
Exchange Privilege account, except by utilizing the Reinstatement Privilege
(see "Redemptions and Repurchases--Reinstatement Privilege" in the Dean
Witter Multi-Class Fund, Global Short-Term Fund or FSC Fund Prospectus). If
such a shareholder desires to make any additional investments in the Fund, a
separate account will be maintained for receipt of such investments. The Fund
will have additional costs for account maintenance if a shareholder has more
than one account with the Fund.
The Fund also maintains Exchange Privilege Accounts for shareholders who
acquired their shares of the Fund pursuant to exchange privileges offered by
other investment companies with which the Investment Manager is not
affiliated. The Fund also expects to make available such exchange privilege
accounts to other investment companies that may hereafter be managed by the
Investment Manager.
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 $10,000 for Dean Witter
Short-Term U.S. Treasury Trust (although that fund may, in its discretion,
accept initial purchases of as low as $5,000) and $5,000 for the Fund, Dean
Witter Liquid Asset Fund Inc., Dean Witter California Tax-Free Daily Income
Trust and Dean Witter New York Municipal Money Market 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 $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 have acquired their shares directly from that fund. As a
result, certain services normally available to shareholders of money market
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 any of the Dean Witter Funds, 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 or TCW/DW North American Government Income
Trust, including personal services to shareholders and maintenance of
shareholder accounts, pursuant to this Exchange Privilege, and provided
further that the Exchange Privilege may be terminated or materially revised
at times (a) when the New York Stock Exchange is closed for other than
customary weekends and holidays, (b) when trading on the 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.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder
may realize a capital gain or loss. However, the ability to deduct capital
losses on an exchange may be limited in situations where there is an exchange
of shares within ninety days after the shares are purchased. The Exchange
Privilege is only available in states where an exchange may legally be made.
For further information regarding the Exchange Privilege, shareholders should
contact their DWR or other Selected Broker-Dealer account executive or the
Transfer Agent.
PLAN OF DISTRIBUTION
As discussed in the Prospectus, the Fund has entered into a Plan of
Distribution pursuant to Rule 12b-1 under the Act with the Distributor
whereby the expenses of certain activities in connection with the
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distribution of shares of the Fund are reimbursed. The Plan was initially
approved by the Board of Trustees on April 15, 1987 and by the Fund's
shareholders on April 20, 1987. The Plan is substantially identical to the
agreement of distribution adopted by the Fund in 1983 and which was in effect
until the reorganization of the Fund in 1987 as a Massachusetts business
trust. The vote of the Trustees included a majority of the Trustees who are
not and were not at the time of their voting interested persons of the Fund
and who have and had at the time of their votes no direct or indirect
financial interest in the operation of the Plan (the "Independent Trustees"),
cast in person at a meeting called for the purpose of voting on such Plan.
The Plan provides that the Distributor bears the expense of all
promotional and distribution related activities on behalf of the Fund,
including personal services to shareholders and maintenance of shareholder
accounts, except for expenses that the Trustees determine to reimburse, as
described below. The following activities and services may be provided by the
Distributor under the Plan: (1) compensation to and expenses of DWR's and
other Selected Broker-Dealers' account executives and other employees,
including overhead and telephone expenses; (2) sales incentives and bonuses
to sales representatives and to marketing personnel in connection with
promoting sales of the Fund's shares; (3) expenses incurred in connection
with promoting sales of the Fund's shares; (4) preparing and distributing
sales literature; and (5) providing advertising and promotional activities,
including direct mail solicitation and television, radio, newspaper, magazine
and other media advertisements.
The Fund is authorized to reimburse specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares. Reimbursement is
made through monthly payments in amounts determined in advance of each
calendar quarter by the Trustees, including a majority of the Independent
Trustees. The amount of each monthly payment may in no event exceed an amount
equal to a payment at the annual rate of 0.15 of 1% of the Fund's average
daily net assets during the month. No interest or other financing charges, if
any, incurred on any distribution expense incurred pursuant to the Plan will
be reimbursable under the Plan. In the case of all expenses other than
expenses representing 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
a residual to account executives 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 expended by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected incremental 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 shares.
The Distributor has informed the Fund that the entire amount of the fees
payable by the Fund each year pursuant to the Plan is characterized as a
"service fee" under the Rules of the Association of the National Association
of Securities Dealers (of which the Distributor is a member). Such fee is a
payment made for personal service and/or maintenance of shareholder accounts.
DWR's account executives are credited with 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. The residual is
a charge which reflects residual commissions paid by DWR to its account
executives and expenses of DWR associated with the sale and promotion of Fund
shares and the servicing of shareholders' accounts, including the expenses of
operating branch offices in connection with the servicing of shareholders'
accounts, which expenses include lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies and other
expenses relating to branch office servicing of shareholder accounts.
The Fund accrued $534,396 to the Distributor, pursuant to the Plan of
Distribution, for its fiscal year ended December 31, 1997. The amount accrued
is equivalent to an annual rate of 0.10 of 1% of the Fund's average daily net
assets for its fiscal year ended December 31, 1997. Based upon the total
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amounts spent by the Distributor during the period, it is estimated that the
amount paid by the Fund to the Distributor for distribution was spent in
approximately the following ways: (i) advertising--$-0-; (ii) printing and
mailing prospectuses to other than current shareholders--$-0-; (iii)
compensation to underwriters--$-0-; (iv) compensation to dealers--$-0-; (v)
compensation to sales personnel--$-0-; and (vi) other, which accrued for
expenses relating to compensation of sales personnel and other miscellaneous
expenses--$534,396. No payments under the Plan were made for overhead,
interest, carrying or other financing charges.
Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for any losses sustained by
the Fund or its shareholders.
The Plan will continue in effect from year to year, provided such
continuance is approved annually by a vote of the Trustees, including a
majority of the Independent Trustees. An amendment to increase materially the
maximum amount authorized to be spent under the Plan must be approved by the
shareholders of the Fund, and all material amendments to the Plan must 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 the
holders of a majority of the Independent Trustees or by a vote of a majority
of the outstanding voting securities of the Fund (as defined in the Act) on
not more than 30 days written notice to any other party to the Plan. So long
as the Plan is in effect, the selection or nomination of the Independent
12b-1 Trustees is committed to the discretion of the 12b-1 Trustees.
Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each calendar
quarter, a written report regarding the incremental distribution expenses
incurred on behalf of the Fund during such calendar quarter, which report
includes (1) an itemization of the types of expenses and the purposes
therefore; (2) the amounts of such expenses; and (3) a description of the
benefits derived by the Fund. In the Trustees' quarterly review of the Plan,
they consider its continued appropriateness and the level of compensation
provided therein.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments
to the Plan which took effect in January, 1993 and were designed to reflect
the fact that upon the reorganization described above, the share distribution
activities, theretofore performed by the Fund or for the Fund by DWR were
assumed by the Distributor and DWR's, sales activities are now being
performed pursuant to the terms of a selected dealer agreement between the
Distributor and DWR. The amendments provide that payments under the Plan will
be made to the Distributor rather than to the Investment Manager as before
the amendment, and that the Distributor in turn is authorized to make
payments to DWR, its affiliates or other Selected Broker-Dealers (or direct
that the Fund pay such entities directly). The Distributor is also authorized
to retain part of such fee as compensation for its own distribution-related
expenses.
At their meeting held on April 24, 1997, the Board of Trustees approved
the continuance of the Plan until April 30, 1998. In making their
determination to continue the Plan until April 30, 1998, the Board of
Trustees, including all of the Independent Trustees, arrived at the
conclusion that the Plan had benefited the Fund. This conclusion was based
upon the Investment Manager's belief that the expenditures made pursuant to
the Plan had tended to arrest the decline of Fund assets by meeting the
competitive efforts of other, similar financial products, and had encouraged
the account executives employed by DWR and other Selected Broker-Dealers to
increase their efforts in selling shares of the Fund. The Board of Trustees,
including the Independent Trustees, also concluded that, in their judgment,
there is a reasonable likelihood that the Plan will continue to benefit the
Fund and its shareholders.
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, had any direct or
indirect financial interest in the operation of the Plan and Agreement except
to the extent that the Distributor, InterCapital, DWR, DWSC or the Investment
Manager or certain of its 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.
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HOW NET ASSET VALUE IS DETERMINED
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As discussed in the Prospectus, the net asset value of the Fund is
determined as of the close of trading 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.
The Fund utilizes the amortized cost method in valuing its portfolio
securities for purposes of determining the net asset value of shares of the
Fund. The Fund utilizes the amortized cost method in valuing its portfolio
securities even though the portfolio securities may increase or decrease in
market value, generally, in connection with changes in interest rates. The
amortized cost method of valuation involves valuing a security at its cost
adjusted by a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the
instrument. During such periods, the yield to investors in the Fund may
differ somewhat from that obtained in a similar company which uses mark to
market values for all its portfolio securities. For example, if the use of
amortized cost resulted in a lower (higher) aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher (lower) yield than would result from investment in such a
similar company and existing investors would receive less (more) investment
income. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share of $1.00.
The Fund's use of the amortized cost method to value its portfolio
securities and the maintenance of the per share net asset value of $1.00 is
permitted pursuant to Rule 2a-7 of the Act (the "Rule") and pursuant to an
order of exemption granted to the Fund by the Securities and Exchange
Commission, dated February 18, 1981 (the "Order"), and is conditioned on its
compliance with various conditions contained in the Rule including: (a) the
Fund's Board of Trustees is obligated, as a particular responsibility within
the overall duty of care owed to the Fund's shareholders, to establish
procedures reasonably designed, taking into account current market conditions
and the Fund's investment objective, to stabilize the net asset value per
share as computed for the purpose of distribution and redemption at $1.00 per
share; (b) (i) the procedures include calculation, at such intervals as are
reasonable in light of current market conditions, of the deviation, if any
between net asset value per share using amortized cost to value portfolio
securities and net asset value per share based upon available market
quotations with respect to such portfolio securities (for the purpose of
determining market value, securities as to which the Fund has a "put" will be
valued at the higher of market value or exercise price); (ii) periodic review
by the Trustees of the amount of deviation as well as methods used to
calculate it, and (iii) maintenance of written records of the procedures, the
Trustees considerations made pursuant to them and any actions taken upon such
consideration; the Trustees will consider what steps should be taken, if any,
in the event of a difference of more than 0.50 of 1% between the two methods
of valuation; and (c) the Trustees should take such action as they deem
appropriate to eliminate or reduce, to the extent reasonably practicable,
material dilution or other unfair results to investors or existing
shareholders. Such action may include: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average
portfolio maturity of the Fund; withholding dividends; utilizing a net asset
value per share as determined by using available market quotations or
reducing the number of its outstanding shares. Any reduction of outstanding
shares will be effected by having each shareholder proportionately contribute
to the Fund's capital a number of shares which represent the difference
between the amortized cost valuation and market valuation of the portfolio.
Each shareholder will be deemed to have agreed to such contribution by his or
her investment in the Fund.
The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Board of Trustees determines present
minimal credit risks and which are Eligible Securities as defined below. The
Rule also requires the Fund to maintain a dollar weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of maintaining
a stable net asset value of $1.00 per share and precludes the purchase of any
instrument with a remaining maturity of more than thirteen
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months. Should the disposition of a portfolio security result in a dollar
weighted average portfolio maturity of more than 90 days, the Fund would be
required to invest its available cash in such a manner as to reduce such
maturity to 90 days or less as soon as is reasonably practicable.
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. Repurchase agreements are
valued at the face value of the repurchase agreement plus any accrued
interest thereon to date.
Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio instrument is deemed to be the period remaining
(calculated from the trade date or such other date on which the Fund's
interest in the instrument is subject to market action) until the date noted
on the face of the instrument as the date on which the principal amount must
be paid, or in the case of an instrument called for redemption, the date on
which the redemption payment must be made.
A variable rate obligation that is subject to a demand feature is deemed
to have a maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand. A floating rate instrument that is
subject to a demand feature is deemed to have a maturity equal to the period
remaining until the principal amount can be recovered through demand.
An Eligible Security generally is defined in the Rule to mean (i) a
security with a remaining maturity of 397 calendar days or less that has
received a short-term rating (or that has been issued by an issuer that has
received a short-term rating with respect to a class of debt obligations, or
any debt obligation within that class, that is comparable in priority and
security with the security) by the Requisite NRSROs in one of the two highest
short-term rating categories (within which there may be sub-categories or
gradations indicating relative standing); or (ii) a security: (a) that at the
time of issuance had a remaining maturity of more than 397 calendar days but
that has a remaining maturity of 397 calendar days or less; and (b) whose
issuer has received from the Requisite NRSROs a rating with respect to a
class of debt obligations (or any debt obligation within that class) that is
now comparable in priority and security with the security, in one of the two
highest short-term rating categories (within which there may be
sub-categories or gradations indicating relative standing); or (iii) an
Unrated Security that is of comparable quality to a security meeting the
requirements of (i) or (ii) above, as determined by the money market fund's
board of directors.
As permitted by the Rule, the Board has delegated to the Fund's Investment
Manager, subject to the Board's oversight pursuant to guidelines and
procedures adopted by the Board, the authority to determine which securities
present minimal credit risks and which unrated securities are comparable in
quality to rated securities.
Also, as required by the Rule, the Fund will limit its investments in
securities, other than Government securities, so that, at the time of
purchase: (a) except as further limited in (b) below with regard to certain
securities, no more than 5% of its total assets will be invested in the
securities of any one issuer; and (b) with respect to Eligible Securities
that have received a rating in less than the highest category by any one of
the NRSROs whose ratings are used to qualify the security as an Eligible
Security, or are determined to be of comparable quality that are "conduit
securities" as that term is defined in the Rule: (i) no more than 5% in the
aggregate of the Fund's total assets in all such securities, and (ii) no more
than the greater of 1% of total assets, or $1 million, in the securities of
any one issuer.
The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Directors determine present minimal
credit risks and which are Eligible Securities. The Rule also requires the
Fund to maintain a dollar-weighted average portfolio maturity (not more than
90 days) appropriate to its objective of maintaining a stable net asset value
of $1.00 per share and precludes the purchase of any instrument with a
remaining maturity of more than 397 days. Should the disposition of a
portfolio security result in a dollar-weighted average portfolio maturity of
more than 90 days, the Fund will invest its available cash in such a manner
as to reduce such maturity to 90 days or less as soon as is reasonably
practicable.
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If the Board determines that it is no longer in the best interests of the
Fund and its shareholders to maintain a stable price of $1 per share or if
the Board believes that maintaining such price no longer reflects a
market-based net asset value per share, the Board has the right to change
from an amortized cost basis of valuation to valuation based on market
quotations. The Trust will notify shareholders of any such changes.
In determining the "maturity" of variable rate Municipal Obligations, the
Board of Trustees of the Fund has adopted procedures under which the longer
of (i) the date upon which the Fund may obtain prepayment of the principal
amount of an obligation (provided demand for prepayment may be made on not
more than seven days' notice) or (ii) the date upon which the interest rate
of a variable rate obligation is required to be next adjusted, may in certain
circumstances be considered as the maturity date of the obligation. In
addition, the presence of a line of credit or other credit facility offered
by a bank or other financial institution which guarantees the payment
obligation of the issuer of a Municipal Obligation may be taken into account
by the Board of Trustees in determining whether an investment is of "high
quality."
The Fund will manage its portfolio in an effort to maintain a constant
$1.00 per share price, but it cannot assure that the value of its shares will
never deviate from this price. Since dividends from net investment income are
declared and reinvested on a daily basis, the net asset value per share,
under ordinary circumstances, is likely to remain constant. Realized and
unrealized gains and losses will not be distributed on a daily basis but will
be reflected in the Fund's net asset value. The amounts of such gains and
losses will be considered by the Board of Trustees in determining the action
to be taken to maintain the Fund's $1.00 per share net asset value. Such
action may include distribution at any time of part or all of the then
accumulated undistributed net realized capital gains, or reduction or
elimination of daily dividends by an amount equal to part or all of the then
accumulated net realized capital losses. However, if realized losses should
exceed the sum of net investment income plus realized gains on any day, the
net asset value per share on that day might decline below $1.00 per share. In
such circumstances, the Fund may reduce or eliminate the payment of daily
dividends for a period of time in an effort to restore the Fund's $1.00 per
share net asset value. A decline in prices of securities could result in
significant unrealized depreciation on a mark to market basis. Under these
circumstances the Fund may reduce or eliminate the payment of dividends and
utilize a net asset value per share as determined by using available market
quotations or reduce the number of its shares outstanding.
REDEMPTION OF FUND SHARES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund may be redeemed at net
asset value at any time. When a redemption is made by check and a check is
presented to the Transfer Agent for payment, the Transfer Agent will redeem a
sufficient number of full and fractional shares in the shareholder's account
to cover the amount of the check. This enables the shareholder to continue
earning daily income dividends until the check has cleared.
A check drawn by a shareholder against his or her account in the Fund
constitutes a request for redemption of a number of shares sufficient to
provide proceeds equal to the amount of the check. Payment of the proceeds of
a check will normally be made on the next business day after receipt by the
Transfer Agent of the check in proper form. Subject to the foregoing, if a
check is presented for payment to the Transfer Agent by a shareholder or
payee in person, the Transfer Agent will make payment by means of a check
drawn on the Fund's account or, in the case of a shareholder payee, to the
shareholder's predesignated bank account, but will not make payment in cash.
The Fund reserves the right to suspend redemptions or postpone the date of
payment (1) for any periods during which the New York Stock Exchange is
closed (other than for customary weekend and holiday closings), (2) when
trading on that Exchange is restricted or an emergency exists, as determined
by the Securities and Exchange Commission, so that disposal of the Fund's
investments or determination of the Fund's net asset value is not reasonably
practicable, or (3) for such other periods as the Commission by order may
permit for the protection of the Fund's investors.
As discussed in the Prospectus, due to the relatively high cost of
handling small investments, the Fund reserves the right to redeem, at net
asset value, the shares of any shareholder (other than shares
27
<PAGE>
held in an Individual Retirement Account or custodial account under Section
403(b)(7) of the Internal Revenue Code) whose shares due to redemptions by
the shareholders have a value of less than $1,000 or such lesser amounts as
may be fixed by the Board of Trustees. However, before the Fund redeems such
shares and sends the proceeds to the shareholder, it will notify the
shareholder that the value of his or her shares is less than $1,000 and allow
him or her sixty days to make an additional investment in an amount which
will increase the value of his or her account to $1,000 or more before the
redemption is processed.
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.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan is available for shareholders who own or purchase shares of
the Fund having a minimum value of at least $5,000, which provides for
monthly or quarterly checks in any dollar amount not less than $25, or in any
whole percentage of the account balance, on an annualized basis. 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, at the shareholder's option, on
the tenth or twenty-fifth day (or next business day) of the relevant month or
quarter and normally a check for the proceeds will be mailed by the Transfer
Agent within five days after the date of redemption. The withdrawal plan may
be terminated at any time by the Fund.
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 through his or her Account Executive or 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 "Redemption of Fund Shares" in the Prospectus) at any time.
If the number of shares redeemed is greater than the number of shares paid as
dividends, such redemptions may, of course, eventually result in liquidation
of all the shares in the account. The automatic cash withdrawal method of
redemption is not available for shares held in an Exchange Privilege Account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund intends to declare dividends,
payable on each day the New York Stock Exchange is open for business and
distribute all of its daily net investment income to shareholders of record
as of the close of business the preceding business day.
In computing net investment income, the Fund will amortize any premiums
and original issue discount on securities owned, if applicable. Capital gains
or losses realized upon sale or maturity of such securities will be based on
their amortized cost.
Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses. Treasury intends
to issue regulations to permit shareholders to take into account their
proportionate share of the Fund's capital gains distributions that will be
subject to a reduced rate under the Taxpayer Relief Act of 1997. The Taxpayer
Relief Act 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
28
<PAGE>
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 5 years and that are acquired after December 31, 2000 is 18%.
At December 31, 1997, the Fund had a net capital loss carryover of
approximately $2,500 which will be available through December 31, 2002, to
offset future capital gains to the extent provided by regulations.
The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986
(the "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.
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 quarter of its taxable year, at least 50% of the value of its
assets in tax-exempt securities. An exempt-interest dividend is that part of
a dividend distribution 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.
Within 60 days after the end of its fiscal year, the Fund will mail to
shareholders a statement indicating the percentage of the dividend
distributions for such fiscal year which constitutes exempt-interest
dividends and the percentage, if any, that is taxable, and to what extent the
taxable portion is long-term capital gains, short-term capital gains or
ordinary income. This percentage should be applied uniformly to all monthly
distributions made during the fiscal year to determine what proportion of the
dividends paid is tax-exempt. The percentage may differ from the percentage
of tax-exempt dividend distributions for any particular month.
Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of net
short-term gains and long-term capital gains. Such interest and realized net
short-term capital gains 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
cash. Since the Fund's income is expected to be derived entirely from
interest rather than dividends, it is anticipated that none of such dividend
distributions will be eligible for the federal dividends received deduction
available to corporations. Realized net long-term capital gains
distributions, which are taxable as long-term capital gains, are not eligible
for the dividends received deduction.
Any loss on the sale or exchange of shares of the Fund which are held for
6 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 dividend 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 or continued by a shareholder 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 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
29
<PAGE>
for investment by the Fund could be affected. In that event, the Fund would
re-evaluate its investment objective and policies.
The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any
state or local taxing authority. Thus, shareholders of the Fund may be
subject to state and local taxes on exempt-interest dividends. Shareholders
should consult their tax advisers about the status of dividends from the Fund
in their own states and localities. The Fund will report annually to
shareholders the percentage of interest income earned by the Fund during the
preceding year on tax-exempt obligations, indicating, on a state-by-state
basis, the source of such income.
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 stock 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 realized net long-term capital gains, such payment or
distribution would be in part a return of capital but nonetheless would be
taxable to the shareholder. Therefore, an investor should consider the tax
implications of purchasing Fund shares immediately prior to a distribution
record date.
Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.
INFORMATION ON COMPUTATION OF YIELD
The Fund's current yield for the seven days ending December 31, 1997 was
3.21%. The effective annual yield on December 31, 1997 was 3.26%, assuming
daily compounding.
The Fund's annualized "current yield" as may be quoted from time to time
in advertisements and other communications to shareholders and potential
investors, is computed by determining, for a stated seven-day period, the net
change, exclusive of capital changes and including the value of additional
shares purchased with dividends and any dividends declared therefrom (which
reflect deductions of all expenses of the Fund such as management fees), in
the value of a hypothetical pre-existing account having a balance of one
share at the beginning of the period, and dividing the difference by the
value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by (365/7).
The Fund's annualized effective yield, as may be quoted from time to time
in advertisements and other communications to shareholders and potential
investors, is computed by determining (for the same stated seven-day period
as the current yield), the net change, exclusive of capital changes and
including the value of additional shares purchased with dividends and any
dividends declared therefrom (which reflect deductions of all expenses of the
Fund such as management fees), in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period, and
dividing the difference by the value of the account at the beginning of the
base period to obtain the base period return, and then compounding the base
period return by adding 1, raising the sum to a power equal to 365 divided by
7, and subtracting 1 from the result.
The yields quoted in any advertisement or other communication should not
be considered a representation of the yields of the Fund in the future since
the yield is not fixed. Actual yields will depend not only on the type,
quality and maturities of the investments held by the Fund and changes in
interest rates on such investments, but also on changes in the Fund's
expenses during the period. The income used in all calculation of yields are
comprised totally of tax-exempt income.
Yield information may be useful in reviewing the performance of the Fund
and for providing a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments which typically pay a
fixed yield for a stated period of time, the Fund's yield fluctuates.
Based upon a Federal personal income tax bracket of 39.6% (the highest
current individual marginal tax rate), the Fund's tax-equivalent yield for
the seven days ending December 31, 1997 was 5.31%.
30
<PAGE>
Tax-equivalent yield is computed by dividing that portion of the current
yield (calculated as described above) which is tax-exempt by 1 minus a stated
tax rate and adding the quotient to that portion, if any, of the yield of the
Fund that is not tax-exempt.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding the sum of all
distributions on 10,000, 50,000 or 100,000 shares of the Fund since inception
to $10,000, $50,000 and $100,000, as the case may be. Investments of $10,000,
$50,000 and $100,000 in the Fund at inception would have grown to $20,448,
$102,240 and $204,480, respectively, at December 31, 1997.
DESCRIPTION OF SHARES
- -----------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an
unlimited number of shares of beneficial interest. The shareholders of the
Fund are entitled to a full vote for each full share held. All of the
Trustees have been elected by the shareholders of the Fund, most recently at
a Special Meeting of Shareholders held on May 21, 1997.
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, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the
affairs of the Fund.
The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders or
the Trustees.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances in excess
of $100,000 are unprotected by federal deposit insurance. Such balances may,
at times, be substantial.
Dean Witter Trust FSB, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust FSB is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager, and Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust FSB's responsibilities include maintaining shareholder accounts,
disbursing cash dividends and reinvesting dividends, processing account
registration changes, handling purchase and redemption transactions, mailing
prospectuses and reports, mailing and tabulating proxies, processing share
certificate transactions, and maintaining shareholder records and lists. For
these services Dean Witter Trust FSB receives a per shareholder account fee
from 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.
31
<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.
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 financial statements of the Fund included in the Prospectus and
incorporated by reference in this Statement of Additional Information 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.
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
The audited financial statements of the Fund for the fiscal year ended
December 31, 1997, and the report of the independent accountants thereon, are
set forth in the Fund's Prospectus, and are incorporated herein by reference.
32
<PAGE>
APPENDIX
RATING 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 Aa are judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as
well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal payments may be very moderate, and therefore
not well safeguarded during both good and bad times in the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest
and principal payments or of maintenance of other terms of the contract over any long period of time may
be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements
of danger with respect to principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
</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 secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed or (d) payments to
which some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination of
basis of condition.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through 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.
33
<PAGE>
MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal note and other short-term loans
are designated Moody's Investment Grade (MIG). MIG 1 denotes best quality and
means there is present strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the market
for refinancing. MIG 2 denotes high quality and means that margins of
protection are ample although not as large as in MIG 1. MIG 3 denotes
favorable quality and means that all security elements are accounted for but
that the undeniable strength of the previous grades, MIG 1 and MIG 2, is
lacking. MIG 4 denotes adequate quality and means that the protection
commonly regarded as required of an investment security is present and that
while the notes are not distinctly or predominantly speculative, there is
specific risk.
VARIABLE RATE DEMAND OBLIGATIONS
A short-term rating, in addition to the Bond or MIG ratings, designated
VMIG may also be assigned to an issue having a demand feature. The assignment
of the VMIG symbol reflects such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. The VMIG rating criteria are identical to the MIG criteria
discussed above.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess
of nine months. These ratings apply to Municipal Commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment
capacity of rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations; Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3
have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
MUNICIPAL BOND RATINGS
A Standard & Poor's municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers
or lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.
<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.
34
<PAGE>
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits 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 "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.
CI The rating "Cl" is reserved for income bonds on which no interest is being paid.
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" 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" or "CCC" may be modified by the addition of a plus or minus sign
to show relative standing within the major ratings categories.
The foregoing ratings are sometimes followed by a "p" which indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project being financed by the bonds being rated and indicates
that payment of debt service requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood or risk of default upon failure of such completion.
</TABLE>
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.
35
<PAGE>
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:
Issuers 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 payment 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.
36
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A):
Page in
Prospectus
----------
Financial Highlights for the years ended December 31,
1988 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996
and 1997.................................................. 4
Portfolio of Investments at December 31, 1997............. 20
Statement of Assets and Liabilities at December 31, 1997.. 26
Statement of Operations for the year ended December 31,
1997...................................................... 27
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1997................................ 28
Notes to Financial Statements at December 31, 1997........ 29
(2) Financial statements included in the Statement of
Additional Information (Part B):
None
(3) Financial statements included in Part C:
None
b) Exhibits
2. Form of Amended and Restated By-Laws of the Registrant.
5. Form of Investment Management Agreement between the Registrant
and Dean Witter InterCapital Inc.
6. Form of Distribution Agreement between the Registrant and Dean
Witter Distributors Inc.
8. Form of Transfer Agency and Service Agreement between the
Registrant and Dean Witter Trust FSB.
11. Consent of Independent Accountants.
<PAGE>
15. Form of Amended and Restated Plan of Distribution pursuant
to Rule 12b-1.
16. Schedules for Computations of Performance Quotations.
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 January 31, 1998
-------------- -------------------
Shares of Beneficial Interest 23,576
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
2
<PAGE>
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such trustee,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for
which Registrant itself is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser
See "The Fund and its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. InterCapital is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. The principal address
of the Dean Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
Closed-End Investment Companies
- -------------------------------
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
3
<PAGE>
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
Open-end Investment Companies
- -----------------------------
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Short-Term U.S. Treasury Trust
(32) Dean Witter Diversified Income Trust
(33) Dean Witter U.S. Government Money Market Trust
(34) Dean Witter Global Dividend Growth Securities
(35) Active Assets California Tax-Free Trust
(36) Dean Witter Natural Resource Development Securities Inc.
(37) Active Assets Government Securities Trust
(38) Active Assets Money Trust
(39) Active Assets Tax-Free Trust
(40) Dean Witter Limited Term Municipal Trust
(41) Dean Witter Variable Investment Series
4
<PAGE>
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter International SmallCap Fund
(45) Dean Witter Mid-Cap Growth Fund
(46) Dean Witter Select Dimensions Investment Series
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Capital Appreciation Fund
(51) Dean Witter Intermediate Term U.S. Treasury Trust
(52) Dean Witter Information Fund
(53) Dean Witter Japan Fund
(54) Dean Witter Income Builder Fund
(55) Dean Witter Special Value Fund
(56) Dean Witter Financial Services Trust
(57) Dean Witter Market Leader Trust
(58) Dean Witter S&P 500 Index Fund
(59) Dean Witter Fund of Funds
(60) Morgan Stanley Dean Witter Competitive Edge Fund
The term "TCW/DW Funds" refers to the following registered investment
companies:
Open-End Investment Companies
- -----------------------------
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW SmallCap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(11) TCW/DW Emerging Markets Opportunities Trust
Closed-End Investment Companies
- -------------------------------
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
5
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of
Chairman, Chief Executive Dean Witter Reynolds Inc. ("DWR");
Officer and Director Chairman, Chief Executive Officer and
Director of Dean Witter Distributors Inc.
("Distributors") and Dean Witter Services
Company Inc. ("DWSC"); Chairman and
Director of Dean Witter Trust FSB ("DWT");
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, Discover & Co.
("MSDWD") subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and
Director Director of MSDWD and DWR; Director of
DWSC and Distributors; Director or Trustee
of the Dean Witter Funds; Director and/or
officer of various MSDWD subsidiaries.
Richard M. DeMartini President and Chief Operating Officer of
Director Dean Witter Capital, a division of DWR;
Director of DWR, DWSC, Distributors and
DWT; Trustee of the TCW/DW Funds.
James F. Higgins President and Chief Operating Officer of
Director Dean Witter Financial; Director of DWR,
DWSC, Distributors and DWT.
Thomas C. Schneider Executive Vice President and Chief
Executive Vice President Strategic and Administrative Officer of
Chief Financial Officer and MSDWD; Executive Vice President and Chief
Director Financial Officer of DWSC and
Distributors; Director of DWR, DWSC,
Distributors and MSDWD.
Christine A. Edwards Executive Vice President, Chief Legal
Director Officer and Secretary of MSDWD; 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
President and Chief Strategic DWSC; Executive Vice President of
Officer Distributors; Executive Vice President and
Director of DWT; Executive Vice President
and Director of DWR; Director of SPS
Transaction Services, Inc. and various
other MSDWD subsidiaries.
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Robert M. Scanlan President and Chief Operating Officer of
President and Chief Operating DWSC; Executive Vice President of
Officer Distributors; Executive Vice President and
Director of DWT; Vice President of the
Dean Witter Funds and the TCW/DW Funds.
Joseph J. McAlinden Vice President of the Dean Witter Funds
Executive Vice President and and Director of DWT.
Chief Investment Officer
Edward C. Oelsner, III
Executive Vice President
John B. Van Heuvelen President, Chief Operating Officer and
Executive Vice President Director of DWT.
Barry Fink Assistant Secretary of DWR; Senior Vice
Senior Vice President, Secretary President, Secretary and General Counsel
and General Counsel of DWSC; Senior Vice President, Assistant
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
Senior Vice President Vice President of various Dean Witter
Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter
Funds.
Richard Felegy
Senior Vice President
Edward F. Gaylor
Senior Vice President Vice President of various Dean Witter
Funds.
Robert S. Giambrone Senior Vice President of DWSC,
Senior Vice President Distributors and DWT and Director of DWT;
Vice President of the Dean Witter Funds
and the TCW/DW Funds.
Kenton J. Hinchliffe Vice President of various Dean Witter
Senior Vice President Funds.
Kevin Hurley Vice President of various Dean Witter
Senior Vice President Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of Dean Witter Special
Senior Vice President Value Fund.
John B. Kemp, III
Senior Vice President President of Distributors.
Anita H. Kolleeny Vice President of various Dean Witter
Senior Vice President Funds.
Jonathan R. Page Vice President of various Dean Witter
Senior Vice President Funds.
Ira N. Ross Vice President of various Dean Witter
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market
Senior Vice President Leader Trust.
Rafael Scolari
Senior Vice President Vice President of Prime Income Trust.
Rochelle G. Siegel Vice President of various Dean Witter
Senior Vice President Funds.
Jayne M. Stevlingson Vice President of various Dean Witter
Senior Vice President Funds.
Paul D. Vance Vice President of various Dean Witter
Senior Vice President Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison Vice President of various Dean Witter
Senior Vice President Funds.
Ronald J. Worobel Vice President of various Dean Witter
Senior Vice President Funds.
Douglas Brown
First Vice President
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Thomas F. Caloia First Vice President and Assistant
First Vice President Treasurer of DWSC. Treasurer of the
and Assistant 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
First Vice President President and Assistant Secretary of DWSC;
and Assistant Secretary Assistant Secretary of the Dean Witter
Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of
First Vice President and DWSC; Assistant Treasurer of Distributors;
Controller First Vice President and Treasurer of DWT.
David Johnson
First Vice President
Stanley Kapica
First Vice President
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
Vice President Funds.
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Joseph Cardwell
Vice President
Philip Casparius
Vice President
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Bruce Dunn
Vice President
Michael Durbin
Vice President
Jeffrey D. Geffen
Vice President
Michael Geringer
Vice President
Stephen Greenhut
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of Dean Witter
Vice President Variable Investment Series.
Peter Hermann Vice President of various Dean Witter
Vice President Funds.
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
Kevin Jung
Vice President
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
James P. Kastberg
Vice President
Michelle Kaufman Vice President of various Dean Witter
Vice President Funds.
Paula LaCosta Vice President of various Dean Witter
Vice President Funds.
Thomas Lawlor
Vice President
Gerard J. Lian Vice President of various Dean Witter
Vice President Funds.
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
Vice President and of DWSC; Assistant Secretary of the
Assistant Secretary Dean Witter Funds and the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Carsten Otto Vice President and Assistant
Vice President and Secretary of DWSC; Assistant
Assistant Secretary Secretary of the Dean Witter Funds
and the TCW/DW Funds.
11
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Anne Pickrell Vice President of Dean Witter Global
Vice President Short-Term Income Fund Inc.
Michael Roan
Vice President
John Roscoe
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious
Vice President Metals and Minerals Trust.
Ruth Rossi Vice President and Assistant Secretary
Vice President and of DWSC; Assistant Secretary of the Dean
Assistant Secretary Witter Funds and the TCW/DW Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Peter J. Seeley Vice President of Dean Witter World
Vice President Wide Income Trust.
Naomi Stein
Vice President
Kathleen H. Stromberg Vice President of various Dean Witter
Vice President Funds.
Marybeth Swisher
Vice President
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss Vice President of various Dean Witter
Vice President Funds.
12
<PAGE>
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter International SmallCap Fund
13
<PAGE>
(45) Dean Witter Balanced Growth Fund
(46) Dean Witter Balanced Income Fund
(47) Dean Witter Hawaii Municipal Trust
(48) Dean Witter Variable Investment Series
(49) Dean Witter Capital Appreciation Fund
(50) Dean Witter Intermediate Term U.S. Treasury Trust
(51) Dean Witter Information Fund
(52) Dean Witter Japan Fund
(53) Dean Witter Income Builder Fund
(54) Dean Witter Special Value Fund
(55) Dean Witter Financial Services Trust
(56) Dean Witter Market Leader Trust
(57) Dean Witter S&P 500 Index Fund
(58) Dean Witter Fund of Funds
(59) Morgan Stanley Dean Witter Competitive Edge Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW SmallCap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(11) TCW\DW Emerging Markets 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.
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.
14
<PAGE>
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.
15
<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 27th day of February, 1998.
DEAN WITTER TAX-FREE DAILY INCOME 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. 22 has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 02/27/98
--------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 02/27/98
--------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 02/27/98
--------------------------
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 02/27/98
--------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
EXHIBIT INDEX
2. Form of Amended and Restated By-Laws of the Registrant.
5. Form of Investment Management Agreement between the Registrant and Dean
Witter InterCapital Inc.
6. Form of Distribution Agreement between the Registrant and Dean Witter
Distributors Inc.
8. Form of Transfer Agency and Service Agreement between the Registrant and
Dean Witter Trust FSB.
11. Consent of Independent Accountants.
15. Form of Amended and Restated Plan of Distribution pursuant to Rule 12b-1.
16. Schedules for Computations of Performance Quotations.
27. Financial Data Schedules.
Other. Power of Attorney.
<PAGE>
BY-LAWS
OF
DEAN WITTER TAX-FREE DAILY INCOME 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-Free Daily Income Trust (formerly known as Dean Witter/Sears Tax-Free
Daily Income 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 except to the
extent otherwise required by Section 16(c) of the 1940 Act, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
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.
<PAGE>
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 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.
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SECTION 3.10. Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.
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.
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SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(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
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(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit
or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
(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
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at any meeting, whether or not they constitute a quorum, may appoint a
Trustee to act in place of such absent member. Each such committee shall keep
a record of its proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
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 President 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.
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SECTION 6.6. The Chairman. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.
SECTION 6.7 The President. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the Board
of Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
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.
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ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's 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:
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(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
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.
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SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
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-Free Daily Income
Trust, dated April 6, 1987, together with all amendments thereto, 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-Free Daily Income 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-Free Daily Income 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-Free Daily Income Trust, but the Trust
Estate only shall be liable.
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 31st day of May, 1997 by and between Dean
Witter Tax-Free Daily Income Trust, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (hereinafter called the
"Fund"), and Dean Witter InterCapital Inc., a Delaware corporation (hereinafter
called the "Investment Manager"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, and engages in the business of
acting as investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform
services on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Trustees, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities markets and securities as it deems necessary or useful to discharge
its duties hereunder; shall continuously manage the assets of the Fund in a
manner consistent with the investment objectives and policies of the Fund;
shall determine the securities to be purchased, sold or otherwise disposed of
by the Fund and the timing of such purchases, sales and dispositions; and shall
take such further action, including the placing of purchase and sale orders on
behalf of the Fund, as the Investment Manager shall deem necessary or
appropriate. The Investment Manager shall also furnish to or place at the
disposal of the Fund such of the information, evaluations, analyses and
opinions formulated or obtained by the Investment Manager in the discharge of
its duties as the Fund may, from time to time, reasonably request.
2. The Investment Manager shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other persons
as it shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Investment Manager
shall be deemed to include persons employed or otherwise retained by the
Investment Manager to furnish statistical and other factual data, advice
regarding economic factors and trends, information with respect to technical
and scientific developments, and such other information, advice and assistance
as the Investment Manager may desire. The Investment Manager shall, as agent
for the Fund, maintain the Fund's records and books of account (other than
those maintained by the Fund's transfer agent, registrar, custodian and other
agents). All such books and records so maintained shall be the property of the
Fund and, upon request therefor, the Investment Manager shall surrender to the
Fund such of the books and records so requested.
3. The Fund will, from time to time, furnish or otherwise make
available to the Investment Manager such financial reports, proxy statements
and other information relating to the business and affairs of the Fund as the
Investment Manager may reasonably require in order to discharge its duties and
obligations hereunder.
4. The Investment Manager shall bear the cost of rendering the
investment management and supervisory services to be performed by it under this
Agreement, and shall, at its own expense, pay the compensation of the officers
and employees, if any, of the Fund, and provide such office space and equipment
and such clerical and bookkeeping services as the Fund shall reasonably require
in the conduct of its business,
<PAGE>
including the pricing of Fund shares, and preparation of prospectuses, proxy
statements and reports required to be filed with Federal and state securities
commissions (except insofar as the participation or assistance of independent
accountants and attorneys is, in the opinion of the Investment Manager,
necessary or desirable). The Investment Manager shall also bear the cost of
telephone service, heat, light, power and other utilities provided to the Fund,
and the cost of printing (in excess of costs borne by the Fund) and
distributing prospectuses and supplements thereto of the Fund used for sales
purposes.
5. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including without limitation: the charges and expenses of
any registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and any stock
transfer or dividend agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to Federal, State or
other governmental agencies; the cost and expense of engraving or printing
share certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund
and its shares with the Securities and Exchange Commission and various states
and other jurisdictions (including filing fees and legal fees and disbursements
of counsel); the cost and expense of printing (including typesetting) and
distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders
and prospective shareholders; fees and travel expenses of Trustees or members
of any advisory board or committee who are not employees of the Investment
Manager or any corporate affiliate of the Investment Manager; all expenses
incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of legal counsel
and independent accountants in connection with any matter relating to the Fund
(not including compensation or expenses of attorneys employed by the Investment
Manager); membership dues of the Investment Company Institute; interest payable
on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Trustees) of the Fund which inure to its benefit;
extraordinary expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the
Investment Manager monthly compensation determined by applying the following
annual rates to the Fund's daily net assets: 0.50% of 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 $1.5 billion; 0.325% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2 billion; 0.30% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5 billion;
0.275% of the portion of the daily net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.25% of the portion of the daily net assets
exceeding $3 billion. Except as hereinafter set forth, compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. Such calculations shall be made by applying
1/365ths of the annual rates to the Fund's net assets each day determined as of
the close of business on that day or the last previous business day. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth above. Subject to the provisions of
paragraph 7 hereof, payment of the Investment Manager's compensation for the
preceding month shall be made as promptly as possible after completion of the
computation contemplated by paragraph 7 hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by state securities laws or
regulations thereunder, as such limitations may be raised or lowered from time
to time, the Investment Manager shall reduce its management fee to the extent
of such excess and, if required, pursuant to any such laws or
2
<PAGE>
regulations, will reimburse the Fund for annual operating expenses in excess of
any expense limitation that may be applicable; provided, however, there shall
be excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (to the extent permitted by state
securities laws or regulations thereunder) paid or payable by the Fund. Such
reduction, if any, shall be computed and accrued daily, shall be settled on a
monthly basis, and shall be based upon the expense limitation applicable to the
Fund as at the end of the last business day of the month. Should two or more
such expense limitations be applicable as at the end of the last business day
of the month, that expense limitation which results in the largest reduction in
the Investment Manager's fee shall be applicable.
For purposes of this provision, should any applicable expense
limitation be based upon the gross income of the Fund, such gross income shall
include, but not be limited to, interest on debt of fixed income securities in
the Fund's portfolio accrued to and including the last day of the Fund's fiscal
year, and dividends declared but not paid on any equity securities in the
Fund's portfolio, the record dates for which fall on or prior to the last day
of such fiscal year, but shall not include gains from the sales of securities.
8. The Investment Manager will use its best efforts in the supervision
and management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund
or any of its investors for any error of judgment or mistake of law or for any
act or omission by the Investment Manager or for any losses sustained by the
Fund or its investors.
9. Nothing contained in this Agreement shall prevent the Investment
Manager or any affiliated person of the Investment Manager from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way bind or restrict the Investment Manager or any such
affiliated person from buying, selling or trading any securities or commodities
for their own accounts or for the account of others for whom they may be
acting. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Investment Manager to engage in any other
business or to devote his or her time and attention in part to the management
or other aspects of any other business whether of a similar or dissimilar
nature.
10. This Agreement shall remain in effect until April 30, 1999 and
from year to year thereafter provided such continuance is approved at least
annually by the vote of holders of a majority (as defined in the Act) of the
outstanding voting securities of the Fund or by the Board of Trustees of the
Fund; provided that in either event such continuance is also approved annually
by the vote of a majority of the Trustees of the Fund who are not parties to
this Agreement or "interested persons" (as defined in the Act) of any such
party, which vote must be cast in person at a meeting called for the purpose of
voting on such approval; provided, however, that (a) the Fund may, at any time
and without the payment of any penalty, terminate this Agreement upon thirty
days' written notice to the Investment Manager, either by majority vote of the
Board of Trustees of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund; (b) this Agreement shall immediately terminate
in the event of its assignment (within the meaning of the Act) unless such
automatic termination shall be prevented by an exemptive order of the
Securities and Exchange Commission; and (c) the Investment Manager may
terminate this Agreement without payment of penalty on thirty days' written
notice to the Fund. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed post-paid, to the other party at the
principal office of such party.
11. This Agreement may be amended by the parties without the vote or
consent of shareholders of the Fund to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or if
they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund nor the Investment
Manager shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the law of
the State of New York and the applicable provisions of the Act. To the extent
the applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
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13. The Investment Manager and the Fund each agree that the name "Dean
Witter," which comprises a component of the Fund's name, is a property right of
Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will only
use the name "Dean Witter" as a component of its name and for no other purpose,
(ii) it will not purport to grant to any third party the right to use the name
"Dean Witter" for any purpose, (iii) the Investment Manager or its parent,
Morgan Stanley, Dean Witter, Discover & Co., or any corporate affiliate of the
Investment Manager's parent, may use or grant to others the right to use the
name "Dean Witter," or any combination or abbreviation thereof, as all or a
portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company, (iv) at the
request of the Investment Manager or its parent, the Fund will take such action
as may be required to provide its consent to the use of the name "Dean Witter,"
or any combination or abbreviation thereof, by the Investment Manager or its
parent or any corporate affiliate of the Investment Manager's parent, or by any
person to whom the Investment Manager or its parent or any corporate affiliate
of the Investment Manager's parent shall have granted the right to such use,
and (v) upon the termination of any investment advisory agreement into which
the Investment Manager and the Fund may enter, or upon termination of
affiliation of the Investment Manager with its parent, the Fund shall, upon
request by the Investment Manager or its parent, cease to use the name "Dean
Witter" as a component of its name, and shall not use the name, or any
combination or abbreviation thereof, as a part of its name or for any other
commercial purpose, and shall cause its officers, Trustees and shareholders to
take any and all actions which the Investment Manager or its parent may request
to effect the foregoing and to reconvey to the Investment Manager or its parent
any and all rights to such name.
14. The Declaration of Trust establishing Dean Witter Tax-Free Daily
Income Trust, dated April 6, 1987, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Tax-Free Daily Income 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-Free Daily Income
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-Free Daily Income Trust,
but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written in New York, New York.
DEAN WITTER TAX-FREE DAILY INCOME TRUST
By:
....................................
Attest:
.............................
DEAN WITTER INTERCAPITAL INC.
By:
....................................
Attest:
.............................
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 31st day of May, 1997 between Dean Witter
Tax-Free Daily Income Trust, an unincorporated business trust organized under
the laws of the Commonwealth of Massachusetts (the "Fund"), and Dean Witter
Distributors Inc., a Delaware corporation (the "Distributor");
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a diversified open-end investment company and
it is in the interest of the Fund to offer its shares for sale continuously,
and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's transferable
shares of beneficial interest, of $.01 par value (the "Shares"), in order to
promote the growth of the Fund and facilitate the distribution of its Shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Distributor. (a) The Fund hereby appoints
the Distributor as the principal underwriter of the Fund to sell Shares to
the public on the terms set forth in this Agreement and the Fund's prospectus
and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund, during the term of this Agreement, shall sell Shares to
the Distributor upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Fund and to sell Shares as principal to investors and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate
of the Distributor, upon the terms described herein and in the Fund's
prospectus (the "Prospectus") and statement of additional information
included in the Fund's registration statement (the "Registration Statement")
most recently filed from time to time with the Securities and Exchange
Commission (the "SEC") and effective under the Securities Act of 1933, as
amended (the "1933 Act"), and 1940 Act or as said Prospectus may be otherwise
amended or supplemented and filed with the SEC pursuant to Rule 497 under the
1933 Act.
SECTION 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive principal underwriter and distributor of the Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not
apply to Shares issued by the Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company
with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company
by the Fund; or (ii) pursuant to reinvestment of dividends or capital gains
distributions; or (iii) pursuant to the reinstatement privilege afforded
redeeming shareholders.
SECTION 3. Purchase of Shares from the Fund. (a) The Distributor shall
have the right to buy from the Fund the Shares needed, but not more than the
Shares needed (except for clerical errors in transmission), to fill
unconditional orders for Shares placed with the Distributor by investors and
securities dealers. The price which the Distributor shall pay for the Shares
so purchased from the Fund shall be the net asset value, determined as set
forth in the Prospectus, used in determining the public offering price on
which such orders were based.
(b) The Shares are to be resold by the Distributor at the public offering
price, as set forth in the Prospectus, to investors or to securities dealers,
including DWR, having selected dealer agreements with the Distributor
pursuant to Section 7 ("Selected Dealers").
(c) The Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(e) hereof. The Fund shall also have the right to suspend the sale
of the Shares if trading on the New York Stock Exchange shall have been
suspended, if a banking moratorium shall have been declared by federal or New
York authorities, or if there shall have been some other extraordinary event
which, in the judgment of the Fund, makes it impracticable to sell the
Shares.
<PAGE>
(d) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept
orders for the purchase of Shares. The Distributor will confirm orders upon
their receipt, and the Fund (or its agent) upon receipt of payment therefor
and instructions will deliver share certificates for such Shares or a
statement confirming the issuance of Shares. Payment shall be made to the
Fund in New York Clearing House funds. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Fund (or its
agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Fund's transfer agent to receive instructions
directly from the Selected Dealer on behalf of the Distributor as to
registration of Shares in the names of investors and to confirm issuance of
the Shares to such investors. The Distributor is also authorized to instruct
the transfer agent to receive payment directly from the Selected Dealer on
behalf of the Distributor, for prompt transmittal to the Fund's custodian, of
the purchase price of the Shares. In such event the Distributor shall obtain
from the Selected Dealer and maintain a record of such registration
instructions and payments.
SECTION 4. Repurchase or Redemption of Shares. (a) Any of the outstanding
Shares may be tendered for redemption at any time, and the Fund agrees to
redeem the Shares so tendered in accordance with the applicable provisions
set forth in the Prospectus. The price to be paid to redeem the Shares shall
be equal to the net asset value determined as set forth in the Prospectus.
All payments by the Fund hereunder shall be made in the manner set forth
below.
The proceeds of any redemption of Shares shall be paid by the Fund to the
redeeming shareholders, in each case in accordance with applicable provisions
of the Prospectus in New York Clearing House funds.
(b) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office
of the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of
the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Fund, to repurchase
Shares held in a shareholder's account with the Fund for which no share
certificate has been issued, upon the telephonic or telegraphic request of
the shareholder, or at the discretion of the Distributor. The Distributor
shall promptly transmit to the transfer agent of the Fund, for redemption,
all such orders for repurchase of Shares. Payment for Shares repurchased may
be made by the Fund to the Distributor for the account of the shareholder.
The Distributor shall be responsible for the accuracy of instructions
transmitted to the Fund's transfer agent in connection with all such
repurchases.
(d) With respect to Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of the Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and
to instruct the Fund to transmit payments for such redemptions and
repurchases directly to the Selected Dealer on behalf of the Distributor for
the account of the shareholder. The Distributor shall obtain from the
Selected Dealer, and shall maintain, a record of such orders. The Distributor
is further authorized to obtain from the Fund and shall maintain, a record of
payments made directly to the Selected Dealer on behalf of the Distributor.
(e) Redemption of Shares or payment by the Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or during any other period when the SEC, by order, so permits.
SECTION 5. Duties of the Fund. (a) The Fund shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use
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<PAGE>
in connection with the distribution of the Shares, including one certified
copy, upon request by the Distributor, of all financial statements prepared
by the Fund and examined by independent accountants. The Fund shall, at the
expense of the Distributor, make available to the Distributor such number of
copies of the prospectus as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to register Shares under
the 1933 Act, to the end that there will be available for sale such number of
Shares as investors may reasonably be expected to purchase.
(c) The Fund shall use its best efforts to pay the filing fees for an
appropriate number of the Shares for sale under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by the Fund at
any time in its discretion. As provided in Section 8(c) hereof, such filing
fees shall be borne by the Fund. The Distributor shall furnish any
information and other material relating to its affairs and activities as may
be required by the Fund in connection with the sale of its Shares in any
state.
(d) The Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports of the Fund.
SECTION 6. Duties of the Distributor. (a) The Distributor shall sell
shares of the Fund through DWR and may sell Shares through other securities
dealers and its own Account Executives and shall devote reasonable time and
effort to promote sales of Shares, but shall not be obligated to sell any
specific number of Shares. The services of the Distributor hereunder are not
exclusive and it is understood that the Distributor may act as principal
underwriter for other registered investment companies , so long as the
performance of its obligations hereunder is not impaired thereby. It is also
understood that Selected Dealers, including DWR, may also sell shares for
other registered investment companies.
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the Fund.
(c) The Distributor agrees that it will comply with the applicable terms
and limitations of the Rules of the Association the National Association of
Securities Dealers, Inc. ("NASD").
SECTION 7. Selected Dealers Agreements. (a) The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public
offering price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to such Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales of Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers
on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD, as such requirements
may from time to time exist.
SECTION 8. Payment of Expenses. (a) The Distributor shall bear all
expenses incurred by it in connection with its duties and activities under
this Agreement including the payment to Selected Dealers of any service fees
and other expenses for sales of the Fund's Shares (except such expenses as
are specifically undertaken herein by the Fund) incurred or paid by Selected
Dealers, including DWR. The Distributor shall bear the costs and expenses of
preparing, printing and distributing any supplementary sales literature used
by the Distributor or furnished by it for use by Selected Dealers in
connection with the offering of the Shares for sale. Any expenses of
advertising incurred in connection with such offering will also be the
obligation of the Distributor. It is understood and agreed that, so long as
the Fund's Plan of Distribution pursuant to Rule 12b-1 (the "Rule 12b-1
Plan") continues in effect, any expenses incurred by the Distributor
hereunder may be paid in accordance with the terms of such Rule 12b-1 Plan.
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<PAGE>
(b) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Trustees of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund
or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and
Prospectuses and all amendments and supplements thereto, and the expenses of
preparing, printing, mailing and otherwise distributing prospectuses and
statements of additional information, annual or interim reports or proxy
materials to shareholders.
(c) The Fund shall pay the filing fees, and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying the Fund as a
broker or dealer, in such states of the United States or other jurisdictions
as shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. Indemnification. (a) The Fund shall indemnify and hold harmless
the Distributor and each person, if any, who controls the Distributor against
any loss, liability, claim, damage or expense (including the reasonable cost
of investigating or defending any alleged loss, liability, claim, damage or
expense and reasonable counsel fees incurred in connection therewith),
arising by reason of any person acquiring any Shares, which may be based upon
the 1933 Act, or on any other statute or at common law, on the ground that
the Registration Statement or related Prospectus as from time to time may be
amended and supplemented, or the annual or interim reports to shareholders of
the Fund, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made
in reliance upon, and in conformity with, information furnished to the Fund
in connection therewith by or on behalf of the Distributor; provided,
however, that in no case (i) is the indemnity of the Fund in favor of the
Distributor and any such controlling persons to be deemed to protect the
Distributor or any such controlling persons thereof against any liability to
the Fund or its security holders to which the Distributor or any such
controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any
such controlling persons, as the case may be, shall have notified the Fund in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Distributor or such controlling persons (or after the Distributor or
such controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Fund will be entitled to participate at its
own expense in the defense or if it so elects, to assume the defense, of any
suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume
the defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them, but,
in case the Fund does not elect to assume the defense of any such suit, it
will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of
any counsel retained by them. The Fund shall promptly notify the Distributor
of the commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the
Fund against any loss, liability, claim, damage or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in
conformity with, information furnished to the Fund in writing by or on behalf
of the Distributor for use in connection with the Registration Statement or
related Prospectus, as from time to time amended, or the annual or interim
reports to shareholders.
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(ii) The Distributor shall indemnify and hold harmless the Fund and the
Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which
arise as a result of actions taken pursuant to instructions from, or on
behalf of the Distributor to: (1) redeem all or a part of shareholder
accounts in the Fund pursuant to Section 4 hereof and pay the proceeds to the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance
thereof and receive payment therefor pursuant to Section 3(e).
(iii) In case any action shall be brought against the Fund or any person
so indemnified by this subsection 9(b) in respect of which indemnity may be
sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall
have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages, liabilities or expenses
(or actions in respect thereof) referred to herein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Fund on the one hand and the
Distributor on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Fund on the one hand and the Distributor on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Fund on the one hand and the Distributor on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Fund or the Distributor and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Fund and the Distributor agree that
it would not be just and equitable if contribution were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to above
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
claim. Notwithstanding the provisions of this subsection (c), the Distributor
shall not be required to contribute any amount in excess of the amount by
which the total price at which the Shares distributed by it to the public
were offered to the public exceeds the amount of any damages which it has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 10. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1998, and thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Trustees of
the Fund, or by the vote of a majority of the outstanding voting securities
of the Fund, cast in person or by proxy, and (ii) a majority of those
Trustees who are not parties to this Agreement or interested persons of any
such party and who have no direct or indirect financial interest in this
Agreement or in the operation of the Fund's Rule 12b-1 Plan or in any
agreement related thereto, cast in person at a meeting called for the purpose
of voting upon such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Fund, by a majority of the Trustees of the
Fund who are not interested persons of the Fund and
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who have no direct or indirect financial interest in this Agreement, or by
vote of a majority of the outstanding voting securities of the Fund, or by
the Distributor, on sixty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Trustees of the Fund, or by the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Trustees of the Fund who
are not parties to this Agreement or interested persons of any such party and
who have no direct or indirect financial interest in this Agreement or in any
Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a meeting
called for the purpose of voting on such approval.
SECTION 12. Governing Law. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the
1940 Act. To the extent the applicable law of the State of New York, or any
of the provisions herein, conflict with the applicable provisions of the 1940
Act, the latter shall control.
SECTION 13. Personal Liability. The Declaration of the Trust establishing
Dean Witter Tax-Free Daily Income Trust, dated April 30, 1987, a copy of
which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name Dean Witter Tax-Free Daily Income 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-Free Daily Income 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-Free Daily Income Trust, but the Trust Estate only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
DEAN WITTER TAX-FREE DAILY INCOME TRUST
By:
....................................
DEAN WITTER DISTRIBUTORS INC.
By:
....................................
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AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
DEAN WITTER TRUST FSB
<PAGE>
TABLE OF CONTENTS
PAGE
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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
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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
12. Dean Witter Dividend Growth Securities Inc.
7
<PAGE>
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-Free Daily Income Trust
Fees: (1) Annual maintenance fee of $15.00 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.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 22 to the registration statement on Form N-1A
(the "Registration Statement") of our report dated February 6, 1998, relating
to the financial statements and financial highlights of Dean Witter Tax-Free
Daily Income Trust, which appears in such Prospectus, and to the incorporation
by reference of our report into the Statement of Additional Information which
constitutes part of this Registration Statement. We also consent to the
reference to us under the heading "Financial Highlights" in such Prospectus
and to the references to us under the headings "Independent Accountants" and
"Experts" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 25, 1998
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
OF
ACTIVE ASSETS TAX-FREE TRUST
WHEREAS, Active Assets Tax-Free Trust (the "Fund") is engaged in business
as an open-end management investment company and is registered as such under
the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, on January 4, 1993, the Fund amended and restated a Plan and
Agreement of Distribution pursuant to Rule 12b-1 under the Act which had
initially been adopted on March 21, 1983, and the Trustees then determined
that there was a reasonable likelihood that the Plan of Distribution, as then
amended and restated, would benefit the Fund and its shareholders; and
WHEREAS, the Trustees believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to
continue to benefit the Fund and its shareholders; and
WHEREAS, the Agreement incorporated in said initial Plan and Agreement of
Distribution was entered into by the Fund with Dean Witter Reynolds Inc.
("DWR"); and
WHEREAS, on January 4, 1993, the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of
the Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will continue
to promote the sale of Fund shares and provide personal services to Fund
shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor have entered into a separate
Distribution Agreement dated as of May 31, 1997, pursuant to which the Fund
has employed the Distributor in such capacity during the continuous offering
of shares of the Fund.
NOW, THEREFORE, the Fund hereby amends and restates the Plan of
Distribution previously adopted and amended and restated, and the Distributor
hereby agrees to the terms of said Plan of Distribution (the "Plan"), as
amended and restated herein, in accordance with Rule 12b-1 under the Act on
the following terms and conditions:
1. The Fund is hereby authorized to utilize its assets to finance certain
activities in connection with the distribution of its shares.
2. Subject to the supervision of the Trustees and the terms of the
Distribution Agreement, the Distributor is authorized to promote the
distribution of the Fund's shares and to provide related services through
DWR, its affiliates or other broker-dealers it may select, and its own
Registered Representatives. The Distributor, DWR, its affiliates and said
broker-dealers shall be reimbursed, directly or through the Distributor, as
it may direct, as provided in paragraph 4 hereof for their services and
expenses, which may include one or more of the following: (1) compensation
to, and expenses of, account executives and other employees, including
overhead and telephone expenses; (2) sales incentives and bonuses to sales
representatives of the Distributor, DWR, its affiliates and other
broker-dealers, and to marketing personnel in connection with promoting sales
of shares of the Fund; (3) expenses incurred in connection with promoting
sales of shares of the Fund; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements.
3. The Distributor hereby undertakes to directly bear all costs of
rendering the services to be performed by it under this Plan and under the
Distribution Agreement, except for those specific expenses that the Trustees
determine to reimburse as hereinafter set forth.
4. The Fund is hereby authorized to reimburse the Distributor, DWR, its
affiliates and other broker-dealers for incremental distribution expenses
incurred by them specifically on behalf of the Fund. 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 0.15 of 1% of the Fund's average net assets during the month. In the
case of all expenses other than expenses representing
<PAGE>
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 Trustees who are not "interested persons" of the Fund, as defined in the
Act. Expenses representing a residual to account executives 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 the
quarterly determinations of the amounts that may be expended by the Fund, the
Distributor shall provide, and the Trustees shall review, a quarterly budget
of projected incremental distribution expenses to be incurred by the
Distributor, DWR, its affiliates or other broker-dealers on behalf of the
Fund, together with a report explaining the purposes and anticipated benefits
of incurring such expenses. The Trustees shall determine the particular
expenses, and the portion thereof, that may be borne by the Fund, and in
making such determination shall consider the scope of the Distributor's
commitment to promoting the distribution of the shares of the Fund directly
or through DWR, its affiliates or other broker-dealers.
5. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to DWR, its affiliates or
other broker-dealers.
6. If, as of the end of any calendar year, the actual expenses incurred by
the Distributor, DWR, its affiliates and other broker-dealers on behalf of
the Fund (including accrued expenses and amounts reserved for incentive
compensation and bonuses) are less than the amount of payments made by the
Fund pursuant to this Plan, the Distributor shall promptly make appropriate
reimbursement to the Fund. If, however, as of the end of any calendar year,
the actual expenses of the Distributor, DWR, its affiliates and other
broker-dealers are greater than the amount of payments made by the Fund
pursuant to this Plan, the Fund will not reimburse the Distributor, DWR, its
affiliates or other broker-dealers for such expenses through payments accrued
pursuant to this Plan in the subsequent calendar year.
7. The Distributor shall provide to the Trustees of the Fund and the
Trustees shall review, promptly after the end of each calendar quarter, a
written report regarding the incremental distribution expenses incurred by
the Distributor, DWR, its affiliates or other broker-dealers on behalf of the
Fund during such calendar quarter, which report shall include: (1) an
itemization of the types of expenses and the purposes therefor; (2) the
amounts of such expenses; and (3) a description of the benefits derived by
the Fund.
8. This Plan, as amended and restated, shall become effective upon
approval by a vote of the Trustees of the Fund, and of the Trustees 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 this Plan, cast in
person at a meeting called for the purpose of voting on this Plan.
9. This Plan shall continue in effect until April 30, 1998 and from year
to year thereafter, provided such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph
8 hereof. This Plan may not be amended to increase materially the amount to
be spent for the services described herein unless such amendment is approved
by a vote of at least a majority of the outstanding voting securities of the
Fund, as defined in the Act, and no material amendment to this Plan shall be
made unless approved in the manner provided for approval in paragraph 8
hereof.
10. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Trustees 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 this Plan or by a vote of a
majority of the outstanding voting securities of the Fund, as defined in the
Act, on no more than thirty days' written notice to any other party to this
Plan.
11. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons of the Fund shall be committed to the
discretion of the Trustees who are not interested persons.
12. The Fund shall preserve copies of this Plan and all reports made
pursuant to paragraph 7 hereof, for a period of not less than six years from
the date of this Plan, as amended and restated herein, or any such report, as
the case may be, the first two years in an easily accessible place.
13. This Plan shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall
control.
2
<PAGE>
14. The Declaration of Trust establishing Active Assets Tax-Free Trust,
dated March 27, 1981, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Active Assets Tax-Free
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 Active Assets Tax-Free 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 Active Assets Tax-Free Trust, but the Trust Estate only shall
be liable.
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
Plan of Distribution, as amended and restated, as of the day and year set
forth below in New York, New York.
Date: March 21, 1983 ACTIVE ASSETS TAX-FREE TRUST
As amended on January 4, 1993
and July 23, 1997 By:
................................
DEAN WITTER DISTRIBUTORS INC.
Attest: By:
................................
............................. DEAN WITTER REYNOLDS INC.
Attest: By:
................................
.............................
Attest:
.............................
3
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER TAX FREE DAILY INCOME TRUST
(A) GROWTH OF $10,000
(B) GROWTH OF $50,000
(C) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
INVESTED - P TOTAL
$10,000, $50,000 & RETURN - TR (A) GROWTH OF (B) GROWTH OF (C) GROWTH OF
$100,000 31-Dec-97 $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ----------- ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
23-Feb-81 104.48 $20,448 $102,240 $204,480
</TABLE>
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
Exhibit 16: Schedule for computation of each performance
quotation provided in the Statement of Additional Information.
(16) The Trust's current yield for the seven days ending
December 31, 1997.
(A-B) x 365/N
(1.000616-1) x 365/7 = 3.21%
The Trust's effective annualized yield for the seven days ending
December 31, 1997
365/N
A -1
365/7
1.000616 -1 = 3.26%
A = Value of a share of the Trust at end of period.
B = Value of a share of the Trust at beginning of period.
N = Number of days in the period.
CALCULATION
(1.000616-1) x 365/7
= 3.21%
((1.000616) ^ 52.14285714-1)
= 3.26%
TAX BRACKET : 39.6%
FORMULA (CURRENT 7 DAY YIELD/1-39.6)
CURRENT 7 DAY YIELD : 3.21%
3.21%/0.604
= 5.31%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 518,320,748
<INVESTMENTS-AT-VALUE> 518,320,748
<RECEIVABLES> 3,840,077
<ASSETS-OTHER> 500,557
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 522,661,382
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,223,169
<TOTAL-LIABILITIES> 5,223,169
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 517,440,266
<SHARES-COMMON-STOCK> 517,440,266
<SHARES-COMMON-PRIOR> 521,881,255
<ACCUMULATED-NII-CURRENT> 455
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,508)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 517,438,213
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,905,584
<OTHER-INCOME> 0
<EXPENSES-NET> 3,903,341
<NET-INVESTMENT-INCOME> 16,002,243
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 16,002,243
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,002,394)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,145,733,981
<NUMBER-OF-SHARES-REDEEMED> (1,166,177,364)
<SHARES-REINVESTED> 16,002,394
<NET-CHANGE-IN-ASSETS> (4,441,140)
<ACCUMULATED-NII-PRIOR> 606
<ACCUMULATED-GAINS-PRIOR> (2,508)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,695,933
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,930,769
<AVERAGE-NET-ASSETS> 546,101,475
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.029
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.029)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.72
<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 on 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
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.
