<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 11, 1997
REGISTRATION NOS.: 2-84376
811-3878
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 14 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 15 /X/
------------------
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
-------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
____ immediately upon filing pursuant to paragraph (b)
_X_ on March 13, 1997 pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on (date) pursuant to paragraph (a) of rule 485.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 OF THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT HAS FILED THE RULE 24F-2 NOTICE
FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1996 WITH THE SECURITIES AND EXCHANGE
COMMISSION ON FEBRUARY 28, 1997.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ----------------------------------------------- -----------------------------------------------------------------------
<S> <C>
PART A PROSPECTUS
1. .......................................... Cover Page
2. .......................................... Prospectus Summary
3. .......................................... Financial Highlights
4. .......................................... Investment Objective and Policies; The Fund and its Management; Cover
Page; Investment Restrictions; Prospectus Summary; Financial
Highlights
5. .......................................... The Fund and Its Management; Back Cover; Investment Objective and
Policies
6. .......................................... Dividends, Distributions and Taxes; Additional Information
7. .......................................... Terms and Conditions of Participation; Prospectus Summary
8. .......................................... Redemptions and Repurchases
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. .......................................... The Fund and Its Management; Trustees and Officers
16. .......................................... The Fund and Its Management; Terms and Conditions of Participation;
Custodian and Transfer Agent; Independent Accountants
17. .......................................... Portfolio Transactions and Brokerage
18. .......................................... Description of Shares of the Fund
19. .......................................... Terms and Conditions of Participation; Redemptions and Repurchases
20. .......................................... Dividends, Distributions and Taxes; Financial Statements
21. .......................................... Not applicable
22. .......................................... Performance Information
23. .......................................... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
MARCH 13, 1997
Shares of the Dean Witter Select Municipal Reinvestment Fund (the
"Fund") are offered hereby without sales charge to the holders of certain Units
of the various series of the Dean Witter Select Municipal Trust, and to Dean
Witter Reynolds Inc. as holder for the accounts of beneficial owners of Units of
certain other unit investment trusts, including accounts established with Dean
Witter Reynolds Inc. by banks or broker-dealers which have entered into clearing
or correspondent relationships with Dean Witter Reynolds Inc. on a fully
disclosed basis, in order to provide a means for the automatic reinvestment, or
investment, of interest income, capital gains and principal on such Units in
Shares of the Fund on the terms and conditions set forth in this Prospectus and
in the Statement of Additional Information. Shares of the Fund may in the future
also be offered to holders of units of other unit investment trusts.
The Fund is an open-end diversified management investment
company whose investment objective is to provide a high level of current income
exempt from federal income tax, consistent with the preservation of capital. The
Fund invests exclusively in tax-exempt securities; principally in tax-exempt
fixed-income securities with long-term maturities which are rated in the three
highest categories by Moody's Investors Service, Inc. or Standard & Poor's
Corporation (at times, the Fund may invest, without limit, in high quality
tax-exempt securities with short-term maturities), including Municipal Bonds,
Notes and Commercial Paper (see "Investment Objective and Policies"). Income and
capital gains distributed to investors may be subject to state and local taxes.
Capital gains distributions, if any, will be subject to federal income tax.
This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated March 13, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/3
Financial Highlights/4
The Fund and its Management/4
Terms and Conditions of Participation/5
Investment Objective and Policies/7
Risk Considerations/9
Investment Restrictions/10
Redemptions and Repurchases/11
Dividends, Distributions and Taxes/12
Performance Information/14
Additional Information/14
Dean Witter
Select Municipal Reinvestment Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is
Fund an open-end diversified management investment company investing exclusively in tax- exempt
securities.
- ----------------------------------------------------------------------------------------------------------
Shares Offered Shares of beneficial interest of $.01 par value are offered to holders of Units of any
series of the Dean Witter Select Municipal Trust offering a reinvestment option for
distributions on such Units, and to Dean Witter Reynolds Inc. as holder for the accounts
of beneficial owners of Units of certain other unit investment trusts, including accounts
established with Dean Witter Reynolds Inc. by banks or broker-dealers which have entered
into clearing or correspondent relationships with Dean Witter Reynolds Inc. on a fully
disclosed basis, to provide a means for the automatic investment of distributions on such
Units (see pages 5 and 14).
- ----------------------------------------------------------------------------------------------------------
Offering At net asset value without sales charge (see page 5).
Price
- ----------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is to provide a high level of current income exempt
Objective from federal income tax, consistent with the preservation of capital (see page 7).
- ----------------------------------------------------------------------------------------------------------
Investment The Fund will invest exclusively in tax-exempt securities, principally in tax-exempt
Policies fixed- income securities with long-term maturities which are rated in the three highest
categories by Moody's Investors Service, Inc. or Standard & Poor's Corporation. At times,
the Fund may invest, without limit, in high quality tax-exempt securities with short-term
maturities (see page 7).
- ----------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned
Manager subsidiary, Dean Witter Services Company Inc., serve in various investment management,
advisory, management and administrative capacities to 102 investment companies and other
portfolios with assets of approximately $93 billion at February 28, 1997 (see page 4).
- ----------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.50% of daily net
Fee assets. (see page 5).
- ----------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income are declared daily and paid monthly; short-term
Capital Gains capital gains, if any, are distributed at least annually; long-term capital gains, if any,
Distributions are distributed at least annually or retained for reinvestment by the Fund (see page 12).
Dividends and distributions are automatically reinvested in additional Shares at net asset
value unless the Shareholder elects to receive cash.
- ----------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value (without redemption or other
charge). An account with the Fund may be involuntarily redeemed at the Fund's option if
the total value of the account is less than $100 and the Shareholder owns no Units or has
elected that no distributions on any Units owned by such Shareholder be invested in Shares
of the Fund (see page 11).
- ----------------------------------------------------------------------------------------------------------
Risks The value of the Fund's portfolio securities, and therefore the Fund's net asset value per
share, may increase or decrease due to various factors, principally changes in prevailing
interest rates and the ability and willingness of the issuers of the Fund's portfolio
securities to pay interest and principal on such obligations. The Fund's yield will also
vary based on the yield of the Fund's portfolio securities. The Fund may invest in
when-issued and delayed delivery securities and variable rate obligations (see pages
7-10).
- ----------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE
IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended December 31, 1996.
<TABLE>
<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
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------------
Management Fees....................................................................... 0.50%
Other Expenses........................................................................ 0.44%
Total Fund Operating Expenses......................................................... 0.94%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each
time period:......................................................... $ 10 $ 30 $ 52 $ 115
</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."
3
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, the notes thereto and the unqualified report of
independent accountants, which are contained in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, which may be obtained without
charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
---------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $12.48 $11.34 $12.82 $12.12 $11.89 $11.25 $11.41 $11.08 $10.60 $11.85
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment income... 0.61 0.62 0.65 0.67 0.70 0.71 0.70 0.68 0.70 0.72
Net realized and
unrealized gain
(loss)................. (0.19) 1.16 (1.40) 0.75 0.32 0.62 (0.15) 0.33 0.49 (1.15)
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.42 1.78 (0.75) 1.42 1.02 1.33 0.55 1.01 1.19 (0.43)
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions from:
Net investment
income............... (0.61) (0.62) (0.69) (0.67) (0.70) (0.69) (0.71) (0.68) (0.70) (0.72)
Net realized gain..... (0.15) (0.02) (0.04) (0.05) (0.09) -- -- -- (0.01) (0.10)
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions.......... (0.76) (0.64) (0.73) (0.72) (0.79) (0.69) (0.71) (0.68) (0.71) (0.82)
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period................. $12.14 $12.48 $11.34 $12.82 $12.12 $11.89 $11.25 $11.41 $11.08 $10.60
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT
RETURN+.................. 3.55% 16.00% (5.98)% 11.99% 8.88% 12.04% 5.27% 9.47% 11.42% (3.53)%
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ 0.94%(1) 0.97% 0.96 % 1.02% 1.14% 1.20% 1.21% 1.40% 1.41% 1.36 %
Net investment income... 5.01% 5.14% 5.34 % 5.25% 5.79% 6.06% 6.12% 5.90% 6.27% 6.37 %
SUPPLEMENTAL DATA:
Net assets, end of
period, in thousands... $ 92,187 $ 95,231 $ 86,405 $ 96,265 $ 75,918 $ 67,903 $ 60,304 $ 52,485 $ 44,769 $ 40,938
Portfolio turnover
rate................... 17% 17% 18% 9% 13% 30% 22% 15% 13% 43%
<FN>
- ---------------
+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE
PERIOD.
(1) THE ABOVE RATIO DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSETS OF 0.01%.
</TABLE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Select Municipal Reinvestment Fund (the "Fund") is an open-end
diversified management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of Massachusetts on June 1, 1983.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 102 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined total assets of
approximately $89.8 billion as of February 28, 1997. The Investment Manager also
manages portfolios of pension plans, other institutions and individuals which
aggregated approximately $3.2 billion at such date.
4
<PAGE>
On February 5, 1997, DWDC and Morgan Stanley Group Inc. announced that they
had entered into an Agreement and Plan of Merger, with the combined company to
be named Morgan Stanley, Dean Witter, Discover & Co. The business of Morgan
Stanley Group Inc. and its affiliated companies is providing a wide range of
financial services for sovereign governments, corporations, institutions and
individuals throughout the world. DWDC is the direct parent of InterCapital. It
is currently anticipated that the transaction will close in mid-1997.
Thereafter, InterCapital Inc. will be a direct subsidiary of Morgan Stanley,
Dean Witter, Discover & Co.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by or under the
direction of the Investment Manager to ensure that the Fund's general investment
policies and programs are being properly carried out and that administrative
services are being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.50% to the Fund's net assets. For the fiscal year ended
December 31, 1996, the Fund accrued total compensation to the Investment Manager
amounting to 0.50% of the Fund's average daily net assets and the Fund's total
expenses amounted to 0.94% of the Fund's average daily net assets.
TERMS AND CONDITIONS OF PARTICIPATION
- --------------------------------------------------------------------------------
All persons who are or who become holders of Units (the "Units") of any
series of the Dean Witter Select Municipal Trust (the "Unit Trust") offering a
reinvestment option ("Holders") are eligible to reinvest their distributions on
the Units in the Fund. In addition to individuals, Holders may be brokers or
nominees of banks or other financial institutions which are or which become
holders of Units. Furthermore, Dean Witter Reynolds Inc. as Holder for the
accounts of beneficial owners of Units of certain other unit investment trusts,
including accounts established with Dean Witter Reynolds Inc. by banks or
broker-dealers which have entered into clearing or correspondent relationships
with Dean Witter Reynolds Inc. on a fully disclosed basis, is eligible to invest
distributions on such Units in the Fund. Eligibility is subject to the following
terms and conditions of participation:
Distributions on Units of series of the Unit Trust offering a reinvestment
option will be paid in cash unless Holders elect to reinvest such distributions
in the Fund by sending a notice in writing to the Trustee of the Unit Trust or
by notifying their broker, who in turn will advise the Trustee of the Unit Trust
of such election. Each Holder participating in the Fund will receive a copy of
the current Fund prospectus (the "Prospectus") and a form of notice of election;
a Holder not participating in the Fund may request a copy of the Prospectus. The
notice of election accompanying this Prospectus may be used by Holders of Units
registered in their names to elect to participate in the Fund or to change a
previous election. Notice of any change in the basis of participation or of
election to participate in the Fund must be received by the Trustee of the Unit
Trust in writing at least ten (10) calendar days prior to the record date for
the first distribution to which such notice is to apply.
Under these Terms and Conditions, both distributions of interest income and
distributions of
prin-
5
<PAGE>
cipal (including capital gains, if any) on Units of Holders participating in the
Fund will be invested without sales charge in shares of the Fund ("Shares").
Holders who are participating in the Fund and whose Units are therefore subject
to these Terms and Conditions are herein called "Shareholders".
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311, acts as the agent (the "Agent") for the Shareholders.
The Agent also serves as the Transfer Agent of the Fund's Shares, and Dividend
Disbursing Agent for payment of dividends and distributions on Shares of the
Fund, and performs certain other services for the Fund.
Under these Terms and Conditions, each distribution of interest income and
principal (including capital gains, if any) on a Shareholder's Units will, no
later than the business day following the date of such distribution,
automatically be received by the Agent on behalf of such Shareholder and be
applied to purchase Shares at net asset value without sales charge. The proceeds
of redemption or payment at maturity of securities held in the unit investment
trusts represented by the Shareholder's Units will be invested in Shares of the
Fund, rather than being distributed in cash to the Holder. The Fund's net
investment income dividends and net realized capital gains distributions, if
any, will be automatically reinvested in additional Shares of the Fund at net
asset value unless the Shareholder elects, by written notice to the Agent, not
to have such dividends and distributions reinvested in Shares (see "Dividends,
Distributions and Taxes").
In addition to their right to redeem their Shares and receive a payment
equal to the net asset value thereof (see "Redemptions and Repurchases"),
Shareholders may at any time by so notifying the Agent in writing (the Agent
will deliver a copy of such notice to the Trustee for the respective series of
the Unit Trust) elect to terminate their participation in the Fund and
thereafter receive all future distributions on their Units in cash.
Each Shareholder will be sent a confirmation of each shareholder-instituted
transaction and a summary, at least quarterly, of all transactions undertaken
for such Shareholder in receiving distributions on Units and purchasing Shares.
Distributions on Units which are applied to purchase Shares are considered to
have been distributed to Shareholders for federal income tax purposes, and all
taxes which are payable with respect to such distributions must be paid by
Shareholders regardless of participation in the Fund.
On tender for redemption of any or all of his or her Shares, a Shareholder
will be entitled to receive within seven days a payment representing the net
asset value of the Shares (including fractional Shares), provided that such
right of redemption may be suspended or postponed under certain circumstances
described under "Redemptions and Repurchases."
If the Holder is a broker or a nominee of a bank or another financial
institution, the Trustee and Agent will apply these Terms and Conditions on the
basis of the respective numbers of Units certified from time to time by such
Holder to be the total numbers of Units registered in such Holder's name and
held for the accounts of beneficial owners who are to participate in the Fund,
upon the bases of participation offered by the Fund at the time.
Experience may indicate that changes in these Terms and Conditions are
desirable or that this offering should be terminated, and, subject to the
provisions of the Investment Company Act of 1940, such changes may be made or
this offering may be terminated at the direction of the Trustees of the Fund
without prior notice to any Shareholder. The Trustees may at any time appoint a
substitute Agent or an additional agent to act for the Fund.
6
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to provide a high level of current
income which is exempt from federal income tax, consistent with the preservation
of capital. In pursuit of this objective, the Fund has adopted a policy of
investing exclusively in obligations on which the interest income is, in the
opinion of counsel to the issuing authorities, exempt from federal income tax.
The foregoing objective and policy are fundamental and neither can be changed
without shareholder approval. There is no assurance that the objective will be
achieved. The following policies may be changed by the Board of Trustees without
shareholder approval.
The Fund seeks to achieve its investment objective by investing principally
in Municipal Bonds and Municipal Notes ("Municipal Obligations") and Municipal
Commercial Paper (a) at least 75% of which are (i) Municipal Bonds rated at the
time of purchase within the three highest ratings for Municipal Obligations by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"); (ii) Municipal Notes of issuers which at the time of purchase are rated
in the two highest grades by Moody's or S&P or, if not rated, have outstanding
one or more issues of Municipal Bonds rated as set forth in clause (i) above and
(iii) Municipal Commercial Paper which is rated at the time of purchase P-1 by
Moody's or A-1 by S&P or, if not rated, is of comparable quality as determined
by the Trustees and (b) up to 25% of which may be Municipal Obligations which
are not rated by Moody's or S&P or, if rated, are not within the three highest
Bond rating categories of Moody's or S&P or the two highest Note rating
categories of Moody's or S&P. A description of tax-exempt securities ratings is
contained in the Appendix to the Statement of Additional Information.
While the Fund may invest up to 25% of its total assets in Municipal
Obligations which are unrated or, if rated, are not within the three highest
Bond rating categories of Moody's or S&P or the two highest Note rating
categories of Moody's or S&P, the Fund does not intend to invest in Municipal
Bonds which are rated below either Baa by Moody's or BBB by S&P (the lowest
ratings considered investment grade) or, if not rated, are deemed by the
Investment Manager to be below investment grade in amounts exceeding 5% of its
total assets. Investments in Municipal Bonds rated either Baa by Moody's or BBB
by S&P may have speculative characteristics and, therefore, changes in economic
conditions or other circumstances are more likely to weaken their capacity to
make principal and interest payments than would be the case with investments in
securities with higher credit ratings. Municipal Bonds rated below investment
grade may not currently be paying any interest and may have extremely poor
prospects of ever attaining any real investment standing.
The percentage and rating policies discussed above apply at the time of
acquisition of a security based upon the last previous determination of the
Fund's net asset value; any subsequent change in any ratings by a rating service
or change in percentages resulting from market fluctuations or other changes in
the amount of total assets will not require elimination of any security from the
Fund's portfolio until such time as the Investment Manager determines that it is
practicable to sell the security without undue market or tax consequences to the
Fund.
While the Fund will ordinarily invest primarily in long term (i.e., maturity
of one year or more) Municipal Obligations, at times the Fund may, without
limit, hold its assets in cash or invest its assets in tax-exempt securities
with short-term maturities which are rated in the three highest Municipal Bond
categories, the two highest Municipal Note categories or the highest Municipal
Commercial Paper category by either Moody's or S&P or, if not rated, are of
comparable quality as determined by the Trustees. Such investments may be
substantial under any one or more of the following circumstances: (a) pending
investment of distributions on Units or
7
<PAGE>
proceeds of sale of portfolio securities; (b) pending settlement of purchases of
portfolio securities; (c) to maintain liquidity for the purpose of meeting
anticipated redemptions; or (d) in order to maintain a "defensive" posture when,
in the opinion of the Investment Manager, it is advisable to do so because of
market conditions.
Municipal Obligations are debt obligations of a state, its agencies,
authorities or municipalities which generally have maturities, at the time of
their issuance, of either one year or more (Bonds) or from six months to three
years (Notes). Municipal Commercial Paper refers to short-term obligations of
municipalities. Any Municipal Obligation which depends directly or indirectly on
the credit of the federal government, its agencies or instrumentalities shall be
considered to have a Moody's rating of Aaa or an S&P rating of AAA.
The Fund may purchase Municipal Obligations which had originally been issued
by the same issuer as two separate series of the same issue with different
interest rates, but which are now linked together to form one series.
The Fund does not anticipate that it will invest in tax-exempt securities
which are subject to the federal alternative minimum tax for individual
shareholders.
The two principal classifications of Municipal Obligations and Municipal
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
timely 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.
LEASE OBLIGATIONS. 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 or lessee) have developed as a means for
governmental issuers to acquire property and equipment without the necessity of
complying with the constitutional and statutory requirements generally
applicable for the issuance of debt. Certain lease obligations contain
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on an annual
or other periodic basis. Consequently, continued lease payments on those lease
obligations containing "non-appropriation" clauses are dependent on future
legislative actions. If such legislative actions do not occur, the holders of
the lease obligation may experience difficulty in exercising their rights,
including disposition of the property.
8
<PAGE>
Lease obligations represent a type of financing that may not have the depth
of marketability associated with more conventional municipal obligations, and,
as a result, certain of such lease obligations may be considered illiquid
securities. To determine whether or not the Fund will consider such securities
to be illiquid (the Fund may not invest more than ten percent of its net assets
in illiquid securities), the Trustees of the Fund have established guidelines to
be utilized by the Fund in determining the liquidity of a lease obligation. The
factors to be considered in making the determination include: (1) the frequency
of trades and quoted prices for the obligation, (2) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers, (3) the willingness of dealers to undertake to make a market in the
security, and (4) the nature of the marketplace trades, including the time
needed to dispose of the security, the method of soliciting offers, and the
mechanics of the transfer.
VARIABLE RATE OBLIGATIONS. The interest rates payable on certain securities
in which the Fund may invest are not fixed and may fluctuate based upon changes
in market rates. Obligations of this type are called "variable rate"
obligations. The interest rate payable on a variable rate obligation is adjusted
either at predesignated periodic intervals or whenever there is a change in the
market rate of interest on which the interest rate payable is based.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities with maturity dates in each case no
later than ten years from the settlement date for the purchase of such security.
Such securities are purchased at a discount from their face amount, giving the
purchaser the right to receive their full value at maturity. The interest earned
on such securities is, implicitly, automatically compounded and paid out at
maturity. While such compounding at a constant rate eliminates the risk of
receiving lower yields upon reinvestment of interest if prevailing interest
rates decline, the owner of a zero coupon security will be unable to participate
in higher yields upon reinvestment of interest received on interest-paying
securities if prevailing interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
tax-exempt securities on a when-issued or delayed delivery basis; i.e., delivery
and payment can take place a month or more after the date of the transaction.
These securities are subject to market fluctuation and no interest accrues to
the purchaser prior to settlement. At the time the Fund makes the commitment to
purchase such securities, it will record the transaction and thereafter reflect
the value each day of such security in determining its net asset value.
RISK CONSIDERATIONS
The value of the Fund's portfolio securities, and therefore the Fund's net
asset value per share, may increase or decrease due to various factors,
principally changes in prevailing interest rates and the ability and willingness
of the issuers of the Fund's portfolio securities to pay interest and principal
on such obligations. Generally a rise in interest rates will result in a
decrease in the Fund's net asset value per share, while a drop in interest rates
will result in an increase in the Fund's net asset value per share. Because
there is no restriction on the maximum maturities of the obligations that may be
purchased for the Fund's portfolio, average portfolio maturity is not subject to
any limit. As a general matter, the longer the average portfolio maturity, the
greater will
9
<PAGE>
be the impact of fluctuations in interest rates on the value of the Fund's net
assets and on its net asset value per share.
For a discussion of the risks of certain types of Municipal Obligations,
such as lease obligations, and the risks of investing in securities rated either
Baa by Moody's or BBB by S&P, see above in "Investment Objective and Policies."
PORTFOLIO MANAGEMENT
The Fund is actively managed by the Investment Manager with a view to
achieving the Fund's investment objective. The Fund is managed within
InterCapital's Municipal Fixed Income Group, which manages forty tax-exempt
municipal funds and fund portfolios, with approximately $10.8 billion in assets
as of February 28, 1997. James F. Willison, Senior Vice President of
InterCapital and Manager of InterCapital's Municipal Fixed Income Group, and
Joseph R. Arcieri, Vice President of InterCapital and a member of InterCapital's
Municipal Fixed Income Group, have been the primary portfolio co-managers of the
Fund since its inception and February, 1997, respectively, and have been
portfolio managers at InterCapital for over five years.
Securities are purchased and sold principally in response to the Investment
Manager's current evaluation of an issuer's ability to meet its debt obligations
in the future, and the Investment Manager's current assessment of future changes
in the levels of interest rates on tax-exempt securities of varying maturities.
Securities purchased by the Fund are, generally, sold by dealers acting as
principal for their own accounts. The Fund may incur brokerage commissions on
transactions conducted through Dean Witter Reynolds Inc. ("DWR"), a
broker-dealer affiliate of InterCapital.
The portfolio trading engaged in by the Fund may result in its portfolio
turnover rate exceeding 100%. The Fund will incur underwriting discount costs
(on underwritten securities) and brokerage costs commensurate with its portfolio
turnover rate. Short-term gains and losses may result from such portfolio
transactions. See "Dividends, Distributions and Taxes" for a discussion of the
tax implications of the Fund's trading policy. A more extensive discussion of
the Fund's portfolio brokerage policies is set forth in the Statement of
Additional Information.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The following investment restrictions are among the restrictions that have
been adopted by the Fund as fundamental policies. Under the Investment Company
Act of 1940, as amended (the "Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund,
as defined in the Act.
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 debt securities of any one
issuer (other than obligations issued, or guaranteed as to principal and
interest, by the United States Government, its agencies or instrumentalities).
3. Invest more than 25% of the value of its total assets in securities of
issuers in any one industry (other than obligations issued or guaranteed by the
United States Government, its agencies or instrumentalities. Industrial
development and pollution control bonds are grouped into industries based upon
the business in which the issuers of such obligations are engaged).
10
<PAGE>
All percentage limitations apply immediately after a purchase or initial
investment, and any subsequent change in any applicable percentage resulting
from market fluctuations or other changes in the amount of total or net assets
does not require elimination of any security from the portfolio.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTIONS. Shares of the Fund can be redeemed for cash at any time at net
asset value per share (without any redemption or other charge). A written
request for redemption is required. Each request for redemption must be sent to
the Agent, Dean Witter Trust Company, at P.O. Box 983, Jersey City, New Jersey
07303, which will redeem the shares at net asset value next determined (see
"Determination of Net Asset Value" below) after receipt of the redemption
request in good order. The term "good order" means that the request for
redemption is properly signed, accompanied by any documentation required by the
Agent, and bears signature guarantees when required by the Fund or the Agent. If
the proceeds are to be paid to any person other than the record owner, or if the
proceeds are to be paid to a corporation (other than Dean Witter Reynolds Inc.
for the account of the Shareholder), partnership, trust or fiduciary, or sent to
the Shareholder at an address other than the registered address, signature(s)
must be guaranteed by a commercial bank or trust company (not a savings bank),
or a member firm of a national securities exchange. A stock power may be
obtained from any dealer or commercial bank. The Fund may change the signature
guarantee requirements upon notice to Shareholders, which may be by means of a
new prospectus.
REPURCHASES. Dean Witter Reynolds Inc. ("DWR") is authorized to repurchase
shares upon the telephonic request of the Shareholder. The repurchase price is
the net asset value per share next determined as follows: Repurchase orders
received by DWR prior to 4:00 p.m. New York time on any business day will be
priced at the net asset value per share that is based on that day's close.
Repurchase orders received by DWR after 4:00 p.m. New York time will be priced
on the basis of the next business day's close. Neither the Fund nor DWR charges
a fee. The offer by DWR to repurchase shares from Shareholders may be suspended
by DWR at any time. In that event Shareholders may redeem their shares through
the Fund's Agent as set forth above under "Redemptions."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for redemption will be made by check within seven days after receipt by the
Agent of the written request in good order. Payment for shares repurchased will
be made by the Fund to DWR for the account of the Shareholder within three
business days of the repurchase request to DWR. Such payment may be postponed or
the right of redemption suspended under unusual circumstances at times when
normal trading is not taking place on the New York Stock Exchange.
REINSTATEMENT PRIVILEGE. A Shareholder who has had his or her Shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption or
repurchase in Shares of the Fund at net asset value (without sales charge) next
determined after a reinstatement request, together with the proceeds, is
received by the Agent.
INVOLUNTARY REDEMPTION. Due to the relatively high cost of handling small
investments, the Fund reserves the right to redeem, at net asset value, the
Shares of any Shareholder whose Shares have a value of less than $100 as a
result of redemptions or repurchases, or such lesser amount as may be fixed by
the Board of Trustees, if the Shareholder owns no Units or has elected that no
distributions on any Units owned by such Shareholder be invested in Shares.
However, before the Fund redeems such Shares and sends the proceeds to the
Shareholder,
11
<PAGE>
it will notify the Shareholder that the value of his or her Shares is less than
$100 and allow him or her sixty days to elect to have distributions on Units
owned by such Shareholder invested in Shares or to purchase Shares to bring his
or her account up to a net asset value of $100 and thereby avoid such
redemption.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined as of 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open, by taking the value of all assets of the Fund, subtracting its
liabilities, dividing by the number of Shares outstanding and adjusting to the
nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by the
New York Stock Exchange. Portfolio securities are valued for the Fund by an
outside independent pricing service approved by the Fund's Board of Trustees.
The service utilizes a computerized grid matrix of tax-exempt securities and
evaluations by its staff in determining what it believes is the fair value of
the Fund's portfolio securities. The Board believes that timely and reliable
market quotations are generally not readily available to the Fund for purposes
of valuing tax-exempt securities and that the valuations supplied by the pricing
service are more likely to approximate the fair value of such securities.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends from net
investment income on each day the New York Stock Exchange is open for business
to shareholders of record as of the close of business the preceding day. Such
dividends are paid monthly. The Fund intends to distribute all of the Fund's net
investment income on an annual basis.
The Fund will distribute at least once each year all net short-term capital
gains, if there are any. The Fund may, however, determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment.
All dividends and any capital gains distributions will be paid in additional
Fund Shares (without sales charge) and automatically credited to the
Shareholder's account (or paid in cash if the Shareholder so requests) on the
monthly payment date, which will be no later than the last business day of the
month for which the dividend or distribution is payable. Processing of dividend
checks begins immediately following the monthly payment date. Shareholders who
have requested to receive dividends in cash will normally receive their monthly
dividend check during the first ten days of the following month. At any time a
Shareholder may request the Agent in writing to have subsequent dividends and
capital gains distributions paid to him or her in cash, rather than Shares. In
order to provide sufficient time to process the change, such requests should be
received by the Agent at least five (5) business days prior to the record date
for which it commences to take effect. 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 year.
Each Shareholder will be sent a summary of his or her account, including
information as to reinvested dividends and capital gains distributions, at least
quarterly.
TAXES. Because the Fund currently intends to distribute all of its net
investment income and capital gains to shareholders and intends to otherwise
comply with all the provisions of Subchapter M of the Internal Revenue Code to
continue to qualify as a regulated investment company, it is not expected that
the Fund will be required to pay any federal
12
<PAGE>
income tax (if the Fund does retain any net long-term capital gains it will pay
federal income tax thereon, and shareholders will be required to include such
undistributed gains in their taxable income and will be able to claim their
share of the tax paid by the Fund as a credit against their individual federal
income tax).
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by maintaining, as of the close of each quarter of its taxable
year, at least 50% of the value of its total assets in tax-exempt securities.
Exempt-interest dividends reflect interest received by the Fund on tax-exempt
obligations. Shareholders will not incur any federal income tax on the amount of
exempt-interest dividends received by them from the Fund whether taken in cash
or reinvested in additional shares. 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. It should be noted, however, that
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 taxable income.
Under the Revenue Reconciliation Act of 1993, all or a portion of the Fund's
gain from the sale or redemption of tax-exempt obligations purchased at a market
discount after April 30, 1993 will be treated as ordinary income rather than
capital gain. This rule may increase the amount of ordinary income dividends
received by shareholders.
Within sixty days after the end of the calendar year, the Fund will mail to
Shareholders a statement indicating the percentage of the dividend distributions
for such year which constitutes exempt-interest dividends and the percentage, if
any, that is taxable, and to what extent the taxable portion is long-term or
short-term capital gain.
Shareholders will normally be subject to federal income tax on distributions
of net capital gains. For federal income tax purposes, distributions of long-
term capital gains, if any, are taxable as long-term capital gains, regardless
of how long the shareholder has held the Fund Shares and regardless of whether
the distribution is received in additional Shares or in cash. To avoid being
subject to a 31% backup withholding tax on capital gains distributions and the
proceeds of redemptions and repurchases, shareholders' taxpayer identification
numbers must be furnished and certified as to accuracy.
Any loss on the sale or exchange of shares of the Fund which are held for
six months or less is disallowed to the extent of the amount of any
exempt-interest dividend paid with respect to such shares. Treasury Regulations
may provide for a reduction in such required holding periods. If a Shareholder
receives a distribution that is taxed as a long-term capital gain on shares held
for six months or less and sells those shares at a loss, the loss will be
treated as a long-term capital loss.
The Fund may at times make payments from sources other than income or net
capital gains. Payment from such sources will, in effect, represent a return of
a portion of each shareholder's investment. All, or a portion, of such payments
will not be taxable to shareholders.
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. Interest on indebtedness
incurred by shareholders or related parties to purchase or carry shares of an
investment company paying exempt-interest dividends, such as the Fund, will not
be deductible by the investor for federal personal income tax purposes and may
not be deductible by the investor for state personal income tax purposes.
Shareholders should consult their tax advisers as to the applicability of
the above to their own tax situation.
13
<PAGE>
PERFORMANCE INFORMATION
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From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. Both the yield and the total return of
the Fund are based on historical earnings and are not intended to indicate
future performance. The yield of the Fund is computed by dividing the Fund's net
investment income over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the net asset value per share
at the end of the period), all in accordance with applicable regulatory
requirements. Such amount is compounded for six months and then annualized for a
twelve-month period to derive the Fund's yield. The Fund may also quote its
tax-equivalent yield, which is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to the yield
determined as described above.
The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an
initial investment in the Fund of $1,000 over periods of one, five and ten
years. Average annual total return reflects all income earned by the Fund, any
appreciation or depreciation of the Fund's assets and all expenses incurred by
the Fund, for the stated periods. It also assumes reinvestment of all dividends
and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
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 the obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
Shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any Shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
Shareholder incurring financial loss on account of Shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on Shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund Shareholders of personal
liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital and Dean
Witter Services Company Inc. 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
14
<PAGE>
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 investment company managed or advised by
InterCapital ("Dean Witter Fund") is engaged at the same time in a purchase or
sale of the same security. The Code of Ethics bans the purchase of securities in
an initial public offering, and also prohibits engaging in futures and options
transactions and profiting on short-term trading (that is, a purchase within
sixty days of a sale or a sale within sixty days of a purchase) of a security.
In addition, investment personnel may not purchase or sell a security for their
personal account within thirty days before or after any transaction in any Dean
Witter Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
15
<PAGE>
<TABLE>
<S> <C>
No Postage
Necessary
If Mailed
In The
United States
</TABLE>
BUSINESS REPLY MAIL
- -----------------------------------------------------------------------------
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FIRST CLASS PERMIT NO. 40864 NEW YORK, N.Y.
- -----------------------------------------------------------------------------
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POSTAGE WILL BE PAID BY ADDRESSEE
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THE CHASE MANHATTAN BANK
- -----------------------------------------------------------------------------
DEAN WITTER UNIT TRUST REINVESTMENT PROGRAM
- -----------------------------------------------------------------------------
BOWLING GREEN STATION
P.O. BOX 5179
NEW YORK, NY 10274-5179
<PAGE>
AUTHORIZATION FOR REINVESTMENT
I (we) hereby authorize The Chase Manhattan Bank to direct my (our) monthly
payments representing interest and principal, if any, on my (our) Units of the
Dean Witter Select Municipal Trust to Dean Witter Trust Company, the Agent for
the Dean Witter Select Municipal Reinvestment Fund. I (we) understand that this
authorization applies to all my (our) Units of the Series of the Trust indicated
below, and that such authorization will remain in effect until such time as I
(we) notify The Chase Manhattan Bank in writing to the contrary.
I (we) acknowledge receipt of the Prospectus for the Dean Witter Select
Municipal Reinvestment Fund. All dividends and capital gains of the Fund will be
reinvested unless the Fund's agent is notified in writing to the contrary.
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.
<TABLE>
<S> <C>
Please print exact registration of Units: Dean Witter Select Municipal Trust Series for which this
authorization is given:
Name ----------------------------------------------------------
----------------------------------------------------------------
(Series number and portfolio)
- ----------------------------------------------------------------
Address -------------------------------------------------------- Dealer's Name --------------------------------------------------
City, State & Zip Dealer's City & State
- ------------------------------------------------- --------------------------------------------
Soc. Sec./Tax I.D. Number --------------------------------------- Account Number at Dealer ---------------------------------------
</TABLE>
Signature(s) of Unit Holder(s) Date
-------------------------------------------------------------------
------------------------------
(All joint owners must sign)
Please contact your account executive if your Units are held by dealer.
<PAGE>
Dean Witter
Select Municipal Reinvestment Fund
Dean Witter
Two World Trade Center
New York, New York 10048 Select
BOARD OF TRUSTEES Municipal
Michael Bozic Reinvestment
Charles A. Fiumefreddo Fund
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Barry Fink
Vice President, Secretary and
General Counsel
James F. Willison
Vice President
Joseph R. Arcieri
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
PROSPECTUS -- MARCH 13, 1997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DEAN WITTER
MARCH 13, 1997 SELECT
MUNICIPAL
REINVESTMENT
FUND
- --------------------------------------------------------------------------------
Dean Witter Select Municipal Reinvestment Fund (the "Fund") is an open-end
diversified management investment company whose investment objective is to
provide a high level of current income exempt from federal income tax,
consistent with preservation of capital. The Fund invests exclusively in
tax-exempt securities; principally in tax-exempt fixed-income securities with
long-term maturities which are rated in the three highest categories by Moody's
Investors Service, Inc. or Standard & Poor's Corporation (at times, the Fund may
invest, without limit, in high quality tax-exempt securities with short-term
maturities). (See "Investment Practices and Policies".)
A Prospectus for the Fund dated March 13, 1997, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below.
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than that set forth in the
Prospectus. It is intended to provide you additional information regarding the
activities and operations of the Fund, and should be read in conjunction with
the Prospectus.
Dean Witter
Select Municipal Reinvestment Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
The Fund and Its Management............................................................ 3
Trustees and Officers.................................................................. 6
Investment Practices and Policies...................................................... 11
Investment Restrictions................................................................ 16
Portfolio Transactions and Brokerage................................................... 17
Terms and Conditions of Participation.................................................. 18
Redemptions and Repurchases............................................................ 18
Dividends, Distributions and Taxes..................................................... 19
Performance Information................................................................ 21
Description of Shares of the Fund...................................................... 22
Custodian and Transfer Agent........................................................... 22
Independent Accountants................................................................ 23
Reports to Shareholders................................................................ 23
Legal Counsel.......................................................................... 23
Experts................................................................................ 23
Registration Statement................................................................. 23
Financial Statements--December 31, 1996................................................ 24
Report of Independent Accountants...................................................... 35
Appendix--Ratings of Investments....................................................... 36
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund was organized under the laws of the Commonwealth of Massachusetts
on June 1, 1983 under the name Sears Tax-Exempt Reinvestment Fund and is a trust
of the type commonly known as a "Massachusetts business trust." On February 19,
1993, the Trustees of the Fund adopted an Amendment to the Declaration of Trust
of the Fund changing the name of the Fund to Dean Witter Select Municipal
Reinvestment Fund.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation. In
an internal reorganization which took place in January, 1993, InterCapital
assumed the investment advisory, administrative and management activities
previously performed by the InterCapital Division of Dean Witter Reynolds Inc.
("DWR"), a broker-dealer affiliate of InterCapital. (As hereinafter used in this
Statement of Additional Information, the terms "InterCapital" and "Investment
Manager" refer to DWR's InterCapital Division prior to the internal
reorganization and Dean Witter InterCapital Inc. thereafter). As part of that
reorganization, Dean Witter Distributors Inc. ("Distributors") assumed the
investment company share distribution activities previously performed by DWR.
The daily management of the Fund and research relating to the Fund's portfolio
are conducted by or under the direction of officers of the Fund and of the
Investment Manager, subject to periodic review by the Fund's Board of Trustees.
Information as to these Trustees and officers is contained under the caption
"Trustees and Officers."
InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc., InterCapital
Income Securities Inc., InterCapital Insured Municipal Bond Trust, InterCapital
Insured Municipal Trust, InterCapital Insured Municipal Income Trust,
InterCapital California Insured Municipal Income Trust, InterCapital Quality
Municipal Investment Trust, InterCapital Quality Municipal Income Trust,
InterCapital Quality Municipal Securities, InterCapital California Quality
Municipal Securities, InterCapital New York Quality Municipal Securities, High
Income Advantage Trust, High Income Advantage Trust II, High Income Advantage
Trust III, Dean Witter Government Income Trust, Dean Witter High Yield
Securities Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter Developing
Growth Securities Trust, Dean Witter Tax-Exempt Securities Trust, Dean Witter
Natural Resource Development Securities Inc., Dean Witter Dividend Growth
Securities Inc., Dean Witter American Value Fund, Dean Witter U.S. Government
Money Market Trust, Dean Witter Variable Investment Series, Dean Witter World
Wide Investment Trust, Dean Witter U.S. Government Securities Trust, Dean Witter
California Tax-Free Income Fund, Dean Witter New York Tax-Free Income Fund, Dean
Witter Convertible Securities Trust, Dean Witter Federal Securities Trust, Dean
Witter Value-Added Market Series, Dean Witter Utilities Fund, Dean Witter
Strategist Fund, Dean Witter California Tax-Free Daily Income Trust, Dean Witter
World Wide Income Trust, Dean Witter Intermediate Income Securities, Dean Witter
Capital Growth Securities, Dean Witter European Growth Fund Inc., Dean Witter
Pacific Growth Fund Inc., Dean Witter Precious Metals and Minerals Trust, Dean
Witter Global Short-Term Income Fund Inc., Dean Witter Multi-State Municipal
Series Trust, Dean Witter Premier Income Trust, Dean Witter Short-Term U.S.
Treasury Trust, Dean Witter New York Municipal Money Market Trust, Dean Witter
Diversified Income Trust, Dean Witter Health Sciences Trust, Dean Witter
Retirement Series, 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 National Municipal Trust, Dean Witter High
Income Securities, Dean Witter International SmallCap Fund, Dean Witter Mid-Cap
Growth Fund, Dean Witter Select Dimensions Investment Series, Dean Witter Global
Asset Allocation Fund, Dean Witter Balanced Growth Fund, Dean Witter Balanced
Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter Capital
Appreciation Fund, Dean Witter 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, Dean
Witter Market Leader Trust, Active Assets Money Trust, Active Assets Tax-Free
Trust, Active Assets California Tax-Free Trust, Active Assets Government
Securities Trust,
3
<PAGE>
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
Balanced Fund, TCW/DW Total Return Trust, TCW/DW Mid-Cap Equity Trust, TCW/DW
Global Telecom Trust, TCW/DW Strategic Income Trust, TCW/DW Emerging Markets
Opportunities Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002 and TCW/DW
Term Trust 2003 (the "TCW/ DW Funds"). InterCapital also serves as: (i)
sub-adviser to Templeton Global Opportunities Trust, an open-end investment
company; (ii) administrator of The BlackRock Strategic Term Trust Inc., a
closed-end investment company; and (iii) subadministrator of MassMutual
Participation Investors and Templeton Global Governments Income Trust,
closed-end investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective and policies.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, bookkeeping and legal services as the Fund may
reasonably require in the conduct of its business, including the preparation of
prospectuses, proxy statements and reports required to be filed with federal and
state securities commissions (except insofar as the participation or assistance
of independent accountants and attorneys is, in the opinion of the Investment
Manager, necessary or desirable). In addition, the Investment Manager pays the
salaries of all personnel, including officers of the Fund, who are employees of
the Investment Manager. The Investment Manager also bears the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. On April 17,
1995, DWSC was reorganized in the State of Delaware, necessitating the entry
into a new Services Agreement by InterCapital and DWSC on that date. The
foregoing internal reorganizations did not result in any change in the nature or
scope of the administrative services being provided to the Fund or any of the
fees being paid by the Fund for the overall services being performed under the
terms of the existing Management Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
(see "The Fund and Its Management" in the Prospectus) will be paid by the Fund.
The expenses borne by the Fund include, but are not limited to: charges and
expenses of any registrar, custodian, share transfer and dividend disbursing
agent; brokerage commissions; taxes, engraving and printing share certificates;
registration costs of the Fund and its shares under federal and state securities
laws; the cost and expense of printing, including typesetting, and distributing
prospectuses and statements of additional information of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and trustees' meetings and of preparing, printing and mailing proxy statements
and reports to shareholders; fees and travel expenses of Trustees or members of
any advisory board or committee who are not employees of the Investment Manager
or any corporate affiliate of the Investment Manager; all expenses incident to
any dividend, withdrawal or redemption options; charges and expenses of any
outside service used for pricing of the Fund's shares; fees and expenses of
legal counsel, including
4
<PAGE>
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 and accrued daily by applying
the annual rate of 0.50 of 1% to the Fund's net assets. For the fiscal years
ended December 31, 1994, 1995 and 1996, the amount of compensation accrued to
the Investment Manager under the Agreement was $461,478, $456,678 and $464,650
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 does not restrict the Investment Manager from
acting as investment manager or adviser to others.
The Agreement was initially approved by the Trustees on October 30, 1992 and
by the Shareholders at a Meeting of Shareholders on January 12, 1993. The
Agreement is substantially identical to a prior investment agreement which was
initially approved by the Trustees on July 19, 1983, by DWR as the then sole
shareholder of the Fund on August 11, 1983, and by the Shareholders at a Meeting
of Shareholders on April 22, 1985. The Agreement took effect on June 30, 1993
upon the spin-off by Sears, Roebuck and Co. of its remaining shares of DWDC. The
Agreement may be terminated at any time, without penalty, on thirty days' notice
by the Board of Trustees of the Fund, by the holders of a majority, as defined
in the Investment Company Act of 1940 (the "Act"), of the outstanding shares of
the Fund, or by the Investment Manager. The Agreement will automatically
terminate in the event of its assignment (as defined in the Act).
Under its terms, the Agreement had an initial term ending April 30, 1994 and
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 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. At their meeting
held on April 17, 1996, the Fund's Board of Trustees, including a majority of
the Independent Trustees, approved continuation of the Agreement until April 30,
1997.
The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent company may use or, at any time,
permit others to use the name "Dean Witter." The Fund has also agreed that in
the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate the
name "Dean Witter" from its name if DWR or its parent company shall so request.
5
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 84 Dean Witter Funds and the 14 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Michael Bozic (56) Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief
6111 Broken Sound Parkway, N.W. Executive Officer of Hills Department Stores (May,
Boca Raton, Florida 1991-July, 1995); formerly variously Chairman, Chief
Executive Officer, President and Chief Operating Officer
(1987-1991) of the Sears Merchandise Group of Sears,
Roebuck and Co.; Director of Eaglemark Financial Services,
Inc., the United Negro College Fund and Weirton Steel
Corporation.
Charles A. Fiumefreddo* (63) Chairman, Chief Executive Officer and Director of
Chairman of the Board, President, InterCapital, Distributors and DWSC; Executive Vice
Chief Executive Officer and Trustee President and Director of DWR; Chairman, Director or
Two World Trade Center Trustee, President and Chief Executive Officer of the Dean
New York, New York Witter Funds; Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Chairman and Director of Dean
Witter Trust Company ("DWTC"); Director and/or officer of
various DWDC subsidiaries; formerly Executive Vice
President and Director of DWDC (until February, 1993).
Edwin J. Garn (64) Director or Trustee of the Dean Witter Funds; formerly
Trustee United States Senator (R-Utah) (1974-1992) and Chairman,
c/o Huntsman Corporation Senate Banking Committee (1980-1986); formerly Mayor of
500 Huntsman Way Salt Lake City, Utah (1971-1974); formerly Astronaut,
Salt Lake City, Utah Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Corporation (since January, 1993);
Director of Franklin Quest (time management systems) and
John Alden Financial Corp.; Member of the board of various
civic and charitable organizations.
John R. Haire (72) Chairman of the Audit Committee and Chairman of the
Trustee Committee of the Independent Directors or Trustees and
Two World Trade Center Director or Trustee of Dean Witter Funds; Chairman of the
New York, New York Audit Committee 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 Advisor (1964-1978);
Director of Washington National Corporation (insurance).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (48) Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Co-Chairman and a founder of the Group of
c/o Johnson Smick International, Inc. Seven Council (G7C), an international economic commission;
1133 Connecticut Avenue, N.W. Director of Greenwich Capital Markets, Inc.
Washington, DC (broker-dealer); Director or Trustee of the Dean Witter
Funds; Trustee of the TCW/DW Funds; Director of NASDAQ
(since June, 1995); 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).
Michael E. Nugent (60) General Partner, Triumph Capital, L.P., a private invest-
Trustee ment partnership; Director or Trustee of the Dean Witter
c/o Triumph Capital, L.P. Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital
New York, New York Corporation (1984-1988); Director of various business
organizations.
Philip J. Purcell* (53) Chairman of the Board of Directors and Chief Executive
Trustee Officer of DWDC, DWR and Novus Credit Services Inc.;
Two World Trade Center Director of InterCapital, DWSC and Distributors; Director
New York, New York or Trustee of the Dean Witter Funds; Director and/or
officer of various DWDC subsidiaries.
John L. Schroeder (66) Retired; Director or Trustee of the Dean Witter Funds;
Trustee Trustee of the TCW/DW Funds; Director of Citizens
c/o Gordon Altman Butowsky Utilities Company; formerly Executive Vice President and
Weitzen Shalov & Wein Chief Investment Officer of the Home Insurance Company
Counsel to the Independent Trustees (August, 1991-September, 1995) and Chairman and Chief
114 West 47th Street Investment Officer of Axe- Houghton Management and the
New York, New York Axe-Houghton Funds (1983-1991).
Barry Fink (42) First Vice President (since June, 1993) and Secretary and
Vice President, Secretary and General Counsel General Counsel (since February, 1997) of InterCapital and
Two World Trade Center DWSC; First Vice President, Assistant Secretary and
New York, New York Assistant General Counsel of Dean Witter Distributors Inc.
(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 Vice President,
Assistant Secretary and Assistant General Counsel of
InterCapital and DWSC and Assistant Secretary of the Dean
Witter Funds and the TCW/DW Funds.
James F. Willison (53) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Joseph R. Arcieri (48) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (51) First Vice President and Assistant Treasurer of Inter-
Treasurer Capital and DWSC; Treasurer of the Dean Witter Funds and
Two World Trade Center the TCW/DW Funds.
New York, New York
<FN>
- ------------------------
*Denotes Trustees who are "interested persons" of the Fund, as defined in the
Investment Company Act of 1940, as amended.
</TABLE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of InterCapital and Director of DWTC, Robert S. Giambrone,
Senior Vice President of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC; Peter M. Avelar and Jonathan R. Page, Senior Vice Presidents of
InterCapital, and Gerard J. Lian and Katherine H. Stromberg, Vice Presidents of
InterCapital, are Vice Presidents of the Fund, and Marilyn K. Cranney, First
Vice President and Assistant General Counsel of InterCapital and DWSC, Lou Anne
D. McInnis and Ruth Rossi, Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Frank Bruttomesso and Carsten Otto, Staff Attorneys
with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of eight (8) trustees. These same individuals
also serve as directors or trustees for all of the Dean Witter Funds, and are
referred to in this section as Trustees. As of the date of this Statement of
Additional Information, there are a total of 84 Dean Witter Funds, comprised of
127 portfolios. As of February 28, 1997, the Dean Witter Funds had total net
assets of approximately $84.2 billion and more than five million shareholders.
Six Trustees (75% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, DWDC. These
are the "disinterested" or "independent" Trustees. The other two Trustees (the
"management Trustees") are affiliated with InterCapital. Four of the six
independent Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee and
the Committee of the Independent Trustees. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1996,
the three Committees held a combined total of sixteen meetings. The Committees
hold some meetings at InterCapital's offices and some outside InterCapital.
Management Trustees or officers do not attend these meetings unless they are
invited for purposes of furnishing information or making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio
8
<PAGE>
securities, brokerage commissions, transfer agent costs and performance, and
trading among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Most of the Dean Witter Funds have
such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and the
Funds' operations and management. He screens and/or prepares written materials
and identifies critical issues for the Independent Trustees to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on various issues,
and arranges to have that information furnished to Committee members. He also
arranges for the services of independent experts and consults with them in
advance of meetings to help refine reports and to focus on critical issues.
Members of the Committees believe that the person who serves as Chairman of both
Committees and guides their efforts is pivotal to the effective functioning of
the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since July
1, 1996, as Chairman of the Committee of the Independent Trustees and the Audit
Committee of the TCW/DW Funds. The current Committee Chairman has had more than
35 years experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Trustees serve on all Fund
9
<PAGE>
Boards enhances the ability of each Fund to obtain, at modest cost to each
separate Fund, the services of Independent Trustees, and a Chairman of their
Committees, of the caliber, experience and business acumen of the individuals
who serve as Independent Trustees of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Trustees an additional annual fee of $1,200). The Fund also
reimburses such Trustees for travel and other out-of-pocket expenses incurred by
them in connection with attending such meetings. Trustees and officers of the
Fund who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended December 31, 1996.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,800
Edwin J. Garn................................................. 1,800
John R. Haire................................................. 3,900
Dr. Manuel H. Johnson......................................... 1,750
Michael E. Nugent............................................. 1,800
John L. Schroeder............................................. 1,750
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1996 for services
to the 82 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1996.
With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW Funds
are included solely because of a limited exchange privilege between those Funds
and five Dean Witter Money Market Funds.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS FOR SERVICE
CHAIRMAN OF AS TOTAL CASH
COMMITTEES OF CHAIRMAN OF COMPENSATION
FOR SERVICE INDEPENDENT COMMITTEES OF FOR SERVICES
AS DIRECTOR OR DIRECTORS/ INDEPENDENT TO
TRUSTEE AND FOR SERVICE AS TRUSTEES AND TRUSTEES AND 82 DEAN
COMMITTEE MEMBER TRUSTEE AND AUDIT AUDIT WITTER
OF 82 DEAN COMMITTEE MEMBER COMMITTEES OF COMMITTEES OF FUNDS AND
NAME OF WITTER OF 14 TCW/DW 82 DEAN WITTER 14 TCW/DW 14 TCW/DW
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
Michael Bozic.............. $138,850 -- -- -- $138,850
<S> <C> <C> <C> <C> <C>
Edwin J. Garn.............. 140,900 -- -- -- 140,900
John R. Haire.............. 106,400 $64,283 $195,450 $ 12,187 378,320
Dr. Manuel H. Johnson...... 137,100 66,483 -- -- 203,583
Michael E. Nugent.......... 138,850 64,283 -- -- 203,133
John L. Schroeder.......... 137,150 69,083 -- -- 206,233
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, not 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
10
<PAGE>
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.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 57 Dean Witter Funds (not including the Fund)
for the year ended December 31, 1996, and the estimated retirement benefits for
the Fund's Independent Trustees, to commence upon their retirement, from the 57
Dean Witter Funds as of December 31, 1996.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
RETIREMENT ANNUAL
BENEFITS BENEFITS
ESTIMATED ACCRUED AS UPON
CREDITED YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- ----------------------------------------------------- ------------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Michael Bozic........................................ 10 50.0% $ 20,147 $ 51,325
Edwin J. Garn........................................ 10 50.0 27,772 51,325
John R. Haire........................................ 10 50.0 46,952 129,550
Dr. Manuel H. Johnson................................ 10 50.0 10,926 51,325
Michael E. Nugent.................................... 10 50.0 19,217 51,325
John L. Schroeder.................................... 8 41.7 38,700 42,771
</TABLE>
- ------------------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
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
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PORTFOLIO SECURITIES
TAX-EXEMPT SECURITIES. As discussed in the Prospectus, at least 75% of the
municipal obligations in which the Fund will invest will be (i) Municipal Bonds
rated at the time of purchase within the three highest ratings for municipal
obligations by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P"); (ii) Municipal Notes of issuers which at the time of
purchase are rated in the two highest grades by Moody's or S&P or, if not rated,
have outstanding one or more issues of Municipal Bonds rated as set forth in
clause (i) above and (iii) Municipal Commercial Paper which is rated at the time
of purchase in the two highest grades by Moody's or S&P or, if not rated, is of
comparable quality as determined by the Trustees. Up to 25% of such investments
may be Municipal Bonds or Notes which are not rated by Moody's or S&P or, if
rated, are not within the three highest Bond rating categories of
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Moody's or S&P or the two highest Note rating categories of Moody's or S&P. In
regard to the Moody's and S&P ratings discussed in the Prospectus, it should be
noted that the ratings represent the organizations' opinions as to the quality
of the securities which they undertake to rate and that the ratings are general
and not absolute standards of quality. For a description of Municipal Bonds,
Municipal Notes and Municipal Commercial Paper ratings by Moody's and S&P, see
the Appendix.
The percentage and rating policies discussed above and in the Prospectus
apply at the time of acquisition of a security based upon the last previous
determination of the Fund's net asset value; any subsequent change in any
ratings by a rating service or change in percentages resulting from market
fluctuations or other changes in the amount of total assets will not require
elimination of any security from the Fund's portfolio until such time as the
Investment Manager determines that it is practicable to sell the security
without undue market or tax consequences to the Fund. Therefore, the Fund may
hold securities which have been downgraded to ratings of Ba or BB or lower by
Moody's or S&P. Such securities are considered to be speculative investments.
Furthermore, the Fund does not have any minimum quality rating standard for
its downgraded or lower-rated investments. As such, the Fund may invest in
securities rated as low as Caa, Ca or C by Moody's or CCC, CC, C or CI by S&P.
Bonds rated Caa or Ca by Moody's may already be in default on payment of
interest or principal, while bonds rated C by Moody's, their lowest bond rating,
can be regarded as having extremely poor prospects of ever attaining any real
investment standing. Bonds rated CI by S&P, their lowest bond rating, are no
longer making interest payments.
The payment of principal and interest by issuers of certain municipal
obligations purchased by the Fund may be guaranteed by letters of credit or
other credit facilities offered by banks or other financial institutions. Such
guarantees will be considered in determining whether a municipal obligation
meets the Fund's investment quality requirements. In addition, some issues may
contain provisions which permit the Fund to demand from the issuer repayment of
principal at some specified period(s) prior to maturity.
MUNICIPAL BONDS. Municipal Bonds, as referred to in the Prospectus, are
debt obligations of a state, its cities, municipalities and municipal agencies
(all of which are generally referred to as "municipalities") which generally
have a maturity at the time of issue of one year or more, and the interest from
which is, in the opinion of bond counsel, exempt from federal income tax. They
are issued to raise funds for various public purposes, such as construction of a
wide range of public facilities, to refund outstanding obligations and to obtain
funds for general operating expenses or to loan to other public institutions and
facilities. In addition, certain types of industrial development bonds and
pollution control bonds are issued by or on behalf of public authorities to
provide funding for various privately operated facilities.
MUNICIPAL NOTES. Municipal Notes are short-term obligations of
municipalities, generally with a maturity at the time of issuance ranging from
six months to three years, the interest from which is, in the opinion of bond
counsel, exempt from federal income tax. The principal types of Municipal Notes
include tax anticipation notes and project notes, although there are other types
of Municipal Notes in which the Fund may invest. Notes sold in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project Notes are
issued by local agencies and are guaranteed by the United States Department of
Housing and Urban Development. Such notes are secured by the full faith and
credit of the United States Government. Project notes are not currently being
issued.
MUNICIPAL COMMERCIAL PAPER. Municipal Commercial Paper refers to short-term
obligations of municipalities the interest from which is, in the opinion of bond
counsel, exempt from federal income tax. It may be issued at a discount and is
sometimes referred to as Short-term Discount Notes. Municipal Commercial Paper
is likely to be used to meet seasonal working capital needs of a municipality or
interim construction financing and to be paid from general revenues of the
municipality or refinanced with long-term debt. In most cases Municipal
Commercial Paper is backed by letters of credit, lending agreements, note
repurchase agreements or other credit facility agreements offered by banks or
other institutions.
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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 any state
extending the time for payment of principal or interest, or both, or imposing
other constraints upon enforcement of such obligations or upon municipalities to
levy taxes. There is also the possibility that as a result of litigation or
other conditions the power or ability of any one or more issuers to pay, when
due, principal of and interest on its, or their, Municipal Bonds, Municipal
Notes and Municipal Commercial Paper may be materially affected.
SPECIAL INVESTMENT CONSIDERATIONS. Because of the special nature of
securities which are rated below investment grade by national credit rating
agencies ("lower-rated securities"), the Investment Manager must take account of
certain special considerations in assessing the risks associated with such
investments. For example, as the lower-rated securities market is relatively
new, its growth has paralleled a long economic expansion and it has not
weathered a recession in its present size and form. Therefore, an economic
downturn or increase in interest rates is likely to have a negative effect on
this market and on the value of the lower-rated securities held by the Fund, as
well as on the ability of the securities' issuers to repay principal and
interest on their borrowings.
The prices of lower-rated securities have been found to be less sensitive to
changes in prevailing interest rates than higher-rated investments, but are
likely to be more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet their projected business goals or to obtain
additional financing. If the issuer of a fixed-income security owned by the Fund
defaults, the Fund may incur additional expenses to seek recovery. In addition,
periods of economic uncertainty and change can be expected to result in an
increased volatility of market prices of lower-rated securities and a
concomitant volatility in the net asset value of a share of the Fund. Moreover,
the market prices of certain of the Fund's portfolio securities which are
structured as zero coupon securities are affected to a greater extent by
interest rate changes and thereby tend to be more volatile than securities which
pay interest periodically and in cash (see "Dividends, Distributions and Taxes"
for a discussion of the tax ramifications of investments in such securities).
The secondary market for lower-rated securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse effect
on the market prices of certain securities. The limited liquidity of the market
may also adversely affect the ability of the Fund's Trustees to arrive at a fair
value for certain lower-rated securities at certain times and should make it
difficult for the Fund to sell certain securities.
New laws and proposed new laws may have a potentially negative impact on the
market for lower-rated securities. For example, recent legislation requires
federally-insured savings and loan associations to divest their investments in
lower-rated securities. This legislation and other proposed legislation may have
an adverse effect upon the value of lower-rated securities and a concomitant
negative impact upon the net asset value of a share of the Fund.
VARIABLE RATE OBLIGATIONS. As stated in the Prospectus, the Fund may invest
in obligations of the type called "variable rate obligations." The interest rate
payable on a variable rate obligation is adjusted either at predesignated
periodic intervals or whenever there is a change in the market rate of interest
on which the interest rate payable is based. Other features may include the
right whereby the Fund may demand prepayment of the principal amount of the
obligation prior to its stated maturity (a "demand feature") and the right of
the issuer to prepay the principal amount prior to maturity. The principal
benefit of a variable rate obligation is that the interest rate adjustment
minimizes changes in the market value of the obligation. The principal benefit
to the Fund of purchasing obligations with a demand feature is that liquidity,
and the ability of the Fund to obtain repayment of the full principal amount of
the obligation prior to maturity, is enhanced.
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The payment of principal and interest by issuers of certain municipal
obligations purchased by the Fund may be guaranteed by letters of credit or
other credit facilities offered by commercial banks or other financial
institutions, for example, insurance or finance companies or a consortium of
insurance companies such as the Municipal Bond Insurance Association (MBIA).
Letters of credit issued by commercial banks or the insurance arrangements may
be drawn upon (i) if an issuer fails to make payments of principal of, premium,
if any, or interest on a security backed by such letter of credit or insurance
arrangement or (ii) in the event interest on such a security is deemed to be
taxable and full payment of principal and any premium due is not made by the
issuer. A business failure of the bank or insurance company could affect its
ability to meet its obligations under a letter of credit or insurance
arrangement. Such guarantees and the creditworthiness of the guarantor will be
considered in determining whether a municipal obligation meets (and continues to
meet) 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
the commitment, but delivery and payment can take place a month or more after
the date of the commitment. While the Fund will only purchase securities on a
when-issued or delayed delivery basis with the intention of acquiring the
securities, the Fund may sell the securities before the settlement date, if it
is deemed advisable. The securities so purchased or sold are subject to market
fluctuation and no interest accrues to the purchaser during this period. At the
time the Fund makes the commitment to purchase a municipal obligation on a
when-issued or delayed delivery basis, it will record the transaction and
thereafter reflect the value, each day, of the municipal obligation in
determining its net asset value. The Fund will also establish a segregated
account with its custodian bank in which it will maintain cash or cash
equivalents or other high quality municipal obligations equal in value to
commitments for such when-issued or delayed delivery securities. The Fund does
not believe that its net asset value or income will be adversely affected by its
purchase of municipal obligations on a when-issued or delayed delivery basis.
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 objective and subject
to the supervision of the Board of Trustees, 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, 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 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 market value 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
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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 Trustees have 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.
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 that 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 Revenue Rule 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.
PORTFOLIO MANAGEMENT
The Fund may engage in short-term trading consistent with its investment
objective. Securities may be sold in anticipation of a market decline (a rise in
interest rates) or purchased in anticipation of a market rise (a decline in
interest rates). In addition, a security may be sold and another security of
comparable quality purchased at approximately the same time to take advantage of
what the Investment Manager believes to be a temporary disparity in the normal
yield relationship between the two securities. These yield disparities may occur
for reasons not directly related to the investment quality of particular issues
or the general movement of interest rates, such as changes in the overall demand
for, or supply of, various types of tax-exempt securities.
In general, purchases and sales may also be made to restructure the
portfolio in terms of average maturity, quality, coupon yield, or
diversification for any one or more of the following purposes: (a) to increase
income, (b) to improve portfolio quality, (c) to minimize capital depreciation,
(d) to realize gains or losses, or for such other reasons as the Investment
Manager deems relevant in light of economic and market conditions.
The Fund may invest in obligations customarily sold to institutional
investors in private transactions with the issuers thereof and up to 5% of its
total assets in securities for which a readily available market does not exist
at the time of purchase. With respect to any securities as to which a readily
available market does not exist, the Fund may be unable to dispose of such
securities promptly at reasonable prices.
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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, which may not be changed without the vote of a majority of
the outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% of the Shares present at a meeting
of Shareholders, if the holders of more than 50% of the outstanding Shares of
the Fund are present or represented by proxy or (b) more than 50% of the
outstanding Shares of the Fund. For purposes of the following restrictions 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; and (b)
all percentage limitations apply immediately after a purchase or initial
investment, and any subsequent change in any applicable percentage resulting
from market fluctuations or other changes in the amount of total or net assets
does not require elimination of any security from the portfolio.
The Fund may not:
1. Invest in common stock.
2. Invest in securities of any issuer if to the knowledge of the Fund,
any officer or trustee 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 the Fund 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 permitted borrowings. To meet the requirements of regulations in
certain states, the Fund, as a matter of operating policy but not as a
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)
purchasing any securities on a when-issued or delayed delivery basis; or (b)
borrowing money in accordance with restrictions described above.
11. Make loans of money or securities, except by the purchase of debt
obligations in which the Fund may invest consistent with its investment
objective and policies.
12. Make short sales of securities.
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13. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of purchases of portfolio securities.
14. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.
15. Invest for the purpose of exercising control or management of any
other issuer.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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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 charging 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,
1994, 1995 and 1996, the Fund did not pay any 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 persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain initial
and secondary public offerings, the Investment Manager may utilize a pro-rata
allocation process based on the size of the Dean Witter Funds involved and the
number of shares available from the public offering.
The policy of the Fund, regarding purchases and sales of securities for its
portfolio, is that primary consideration be given to obtaining the most
favorable prices and efficient execution of transactions. 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 prices and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager. Such services may include, but
are not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not, in every case, 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 will not reduce the management fee it
pays to the Investment Manager by any amount that may be attributable to the
value of such services.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR. The commissions,
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fees or other remuneration received by DWR must be reasonable and fair compared
to the commissions, fees or other remuneration paid to other brokers in
connection with comparable transactions involving similar securities being
purchased or sold on an exchange during a comparable period of time. This
standard would allow DWR to receive no more than the remuneration which would be
expected to be received by an unaffiliated broker in a commensurate arms-length
transaction. Furthermore, the Trustees of the Fund, including a majority of the
Trustees who are not "interested" Trustees, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to DWR are consistent with the foregoing standard. During the fiscal years
ended December 31, 1994, 1995 and 1996, the Fund did not effect any securities
transactions through DWR.
TERMS AND CONDITIONS OF PARTICIPATION
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All persons who are or who become holders of Units (the "Units") of any
series of the Dean Witter Select Municipal Trust offering a reinvestment option
("Holders") are eligible to reinvest their distributions on the Units in the
Fund. In addition to individuals, Holders may be brokers or nominees of banks or
other financial institutions which are or which become Holders of Units.
Furthermore, Dean Witter Reynolds Inc. as Holder for the accounts of beneficial
owners of Units of certain other unit investment trusts, including accounts
established with Dean Witter Reynolds Inc. by banks or broker-dealers which have
entered into clearing or correspondent relationships with Dean Witter Reynolds
Inc. on a fully disclosed basis, are eligible to invest their distributions on
such Units in the Fund. Eligibility is subject to the terms and conditions of
participation set forth in the Prospectus. Under the terms and conditions of
participation, each distribution of interest income and principal (including
capital gains, if any) on a Shareholder's Units will, no later than the business
day following the date of such distribution, automatically be received by Dean
Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey City, NJ
07311, the Fund's Transfer Agent, on behalf of such Shareholder and be applied
to purchase Shares at net asset value without sales charge.
DETERMINATION OF NET ASSET VALUE
As discussed in the Prospectus, the net asset value of a share of the Fund
is determined once daily at 4:00 p.m., New York time (or, on days when the New
York Stock Exchange closes prior to 4:00 p.m., at such earlier time), on each
day that the New York Stock Exchange is open. The New York Stock Exchange
currently observes the following holidays: New Year's Day; Presidents' Day; Good
Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and
Christmas Day.
As discussed in the Prospectus, portfolio securities are valued for the Fund
by an outside independent pricing service approved by the Board of Trustees. The
pricing service has informed the Fund that in valuing the Fund's portfolio
securities it uses both a computerized grid matrix of tax-exempt securities and
evaluations by its staff, in each case based on information concerning market
transactions and quotations from dealers which reflect the bid side of the
market each day. The Fund's portfolio securities are thus valued by reference to
a combination of transactions and quotations for the same or other securities
believed to be comparable in quality, coupon, maturity, type of issue, call
provisions, trading characteristics and other features deemed to be relevant.
The Board of Trustees believes that timely and reliable market quotations are
generally not readily available to the Fund for purposes of valuing tax-exempt
securities and that the valuations supplied by the pricing service, using the
procedures outlined above and subject to periodic review, are more likely to
approximate the fair value of such securities. The Investment Manager will
periodically review and evaluate the procedures, methods and quality of services
provided by the pricing service then being used by the Fund and may, from time
to time, recommend to the Board of Trustees the use of other pricing services or
discontinuance of the use of any pricing service in whole or part. The Board may
determine to approve such recommendation or to make other provisions for pricing
of the Fund's portfolio securities.
REDEMPTIONS AND REPURCHASES
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As discussed in the Prospectus, Shares of the Fund may be redeemed at net
asset value on any day the New York Stock Exchange is open and on such other
days on which the Fund's net asset value is
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calculated (see "Determination of Net Asset Value"). Redemptions will be
effected at the net asset value per share next determined after the receipt of a
written redemption request meeting the applicable requirements discussed in the
Prospectus.
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares presented for repurchase or redemption will be made by check
within seven days after receipt by the Transfer Agent of the written request in
good order. Such payment may be postponed or the right of redemption suspended
at times (a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c) when
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) during any
other period when the Securities and Exchange Commission by order so permits;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist.
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a Shareholder who
has had his or her Shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within thirty days after the
redemption or repurchase, reinstate any portion or all of the proceeds of such
redemption or repurchase in Shares of the Fund at the net asset value next
determined after a reinstatement request, together with the proceeds, is
received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in Shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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As stated in the Prospectus, the Fund intends to distribute substantially
all of its net investment income and its net short-term capital gains, if any,
and will determine whether to retain all or part of any net long-term capital
gains for reinvestment. If any such gains are retained, the Fund will pay
federal income tax thereon, and will notify shareholders that, following an
election by the Fund, the shareholders will be required to include such
undistributed gains in their taxable income and will be able to claim their
share of the tax paid by the Fund as a credit against their individual federal
income tax.
Each shareholder will be sent a summary of his or her account, including
information as to reinvested dividends and capital gains distributions, at least
quarterly.
In computing interest income, the Fund will amortize any premiums and
original issue discounts on securities owned, if applicable. Capital gains or
losses realized upon sale or maturity of such securities will be based on their
amortized cost.
Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses.
The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code (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.
With respect to the Fund's investments in zero coupon bonds, the Fund
accrues income prior to any actual cash payments by their issuers. In order to
continue to comply with Subchapter M of the Code and remain able to forego
payment of federal income tax on its income and capital gains, the Fund must
distribute all of its net investment income, including income accrued from zero
coupon bonds. As such, the Fund may be required to dispose of some of its
portfolio securities under disadvantageous circumstances to generate the cash
required for distribution.
19
<PAGE>
As discussed in the Prospectus, the Fund intends to qualify to pay
"exempt-interest dividends" to its Shareholders. An exempt-interest dividend is
that part of dividend distributions made by the Fund which consists of interest
received by the Fund on tax-exempt securities upon which the Shareholder incurs
no federal income taxes.
Within sixty days after the end of its fiscal year, the Fund will mail to
Shareholders a statement indicating the percentage of the dividend distributions
for 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 or short-term capital gain. This percentage should be applied
uniformly to all monthly distributions made during the fiscal year to determine
the proportion of dividends that is tax-exempt. The percentage may differ from
the percentage of tax-exempt dividend distributions for any particular month.
The Code provides that every person required to file a tax return must include
on such return the amount of exempt-interest dividends received from the Fund
during the taxable year.
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.
Shareholders will be subject to federal income tax on distributions of net
short-term capital gains. Such distributions are taxable to the Shareholder as
ordinary dividend income regardless of whether the Shareholder receives such
distributions in additional Shares or in cash. Since the Fund's income is
expected to be derived entirely from interest rather than dividends, none of
such dividend distributions will be eligible for the dividends received
deduction generally available to corporations. Net long-term capital gains
distributions are not eligible for the dividends received deduction.
Any loss on the sale or exchange of shares of the Fund which are held for
six months or less is disallowed to the extent of the amount of any
exempt-interest dividends paid with respect to such shares. Treasury Regulations
may provide for a reduction in such required holding period. If a Shareholder
receives a distribution that is taxed as 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 to the extent of the capital gains
distribution.
Interest on indebtedness incurred or continued by a Shareholder to purchase
or carry shares of the Fund is not deductible to the extent allocable to
exempt-interest dividends of the Fund (which allocation does not take into
account capital gain dividends of the Fund). Furthermore, entities or persons
who are "substantial users" (or related persons) of facilities financed by
industrial development bonds should consult their tax advisers before purchasing
Shares of the Fund. "Substantial user" is defined generally by Income Tax
Regulation 1.103-11(b) as including a "non-exempt person" who regularly uses in
a trade or business a part of a facility financed from the proceeds of
industrial development bonds.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. It can be expected that similar proposals may
be introduced in the future. If such a proposal were enacted, the availability
of municipal securities for investment by the Fund could be affected. In such
event, the Fund would re-evaluate its investment objective and policies.
The Fund is organized as a Massachusetts business trust. Under the current
law, so long as it qualifies as a "regulated investment company" under the Code,
the Fund itself is not liable for any income or franchise tax in The
Commonwealth of Massachusetts.
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
20
<PAGE>
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 distribution of realized capital
gains, such distribution would be in part a return of capital but nonetheless
taxable to the shareholder.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. Yield
is calculated for any 30-day period as follows: the amount of interest income
for each security in the Fund's portfolio is determined in accordance with
regulatory requirements; the total for the entire portfolio constitutes the
Fund's gross income for the period. Expenses accrued during the period are
subtracted to arrive at "net investment income". The resulting amount is divided
by the product of the net asset value per share on the last day of the period
multiplied by the average number of Fund shares outstanding during the period
that were entitled to dividends. This amount is added to 1 and raised to the
sixth power. 1 is then subtracted from the result and the difference is
multiplied by 2 to arrive at the annualized yield.
To determine interest income from debt obligations, a yield-to-maturity,
expressed as a percentage, is determined for obligations held at the beginning
of the period, based on the current market value of the security plus accrued
interest, generally as of the end of the month preceding the 30-day period, or,
for obligations purchased during the period, based on the cost of the security
(including accrued interest). The yield-to-maturity is multiplied by the market
value (plus accrued interest) for each security and the result is divided by 360
and multiplied by 30 days or the number of days the security was held during the
period, if less. Modifications are made for determining yield-to-maturity on
certain tax-exempt securities. For the 30-day period ended December 31, 1996,
the Fund's yield, calculated pursuant to the formula described above, was 4.49%.
The Fund may also quote a "tax-equivalent yield" determined by dividing the
tax-exempt portion of the quoted yield by 1 minus the stated income tax rate and
adding the result to the portion of the yield that is not tax-exempt. The Fund's
tax-equivalent yield, based upon the maximum federal personal income tax bracket
of 39.6%, for the 30-day period ended December 31, 1996 was 7.43% based upon the
yield quoted above.
The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment, taking a root of the quotient (where the root is equivalent to the
number of years in the period) and subtracting 1 from the result.
The average annual total returns of the Fund for the year ended December 31,
1996, for the five years ended December 31, 1996 and for the ten years ended
December 31, 1996 were 3.55%, 6.61% and 6.69%, respectively.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. The Fund may compute its aggregate total return
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value by the initial $1,000 investment and subtracting 1 from the result. Based
on the foregoing calculation, the Fund's total return for the year ended
December 31, 1996 was 3.55%, the total return for the five years ended December
31, 1996 was 37.71% and the total return for the ten years ended December 31,
1996 was 91.11%.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a
21
<PAGE>
decimal) and multiplying by $10,000, $50,000 or $100,000. Investments of
$10,000, $50,000 and $100,000 in the Fund at inception (September 22, 1983)
would have grown to $30,273, $151,365 and $302,730, respectively, at December
31, 1996.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The Shareholders of the Fund are entitled to a full vote for each full Share
held. All of the Trustees, except for Messrs. Bozic, Purcell and Schroeder, have
been elected by the shareholders of the Fund, most recently at a Special Meeting
of Shareholders held on January 12, 1993. Messrs. Bozic, Purcell and Schroeder
were elected by the other Trustees of the Fund on April 8, 1994. The Fund is
authorized to issue an unlimited number of shares of beneficial interest. The
Trustees themselves have the power to alter the number and the terms of office
of the Trustees (as provided for in the Declaration of Trust), and they may at
any time lengthen their own terms or make their terms of unlimited duration and
appoint their own successors, provided that always at least a majority of the
Trustees has been elected by the Shareholders of the Fund. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
Shareholders also have the right under certain circumstances to remove the
Trustees. The voting rights of Shareholders are not cumulative, so that holders
of more than 50 percent of the Shares voting can, if they choose, elect all
Trustees being selected, while the holders of the remaining Shares would be
unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). The Trustees have not presently authorized
any such additional series or classes of Shares.
The Declaration of Trust further provides that no Trustee, officer, employee
or agent of the Fund is liable to the Fund or to a Shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his/her or
its own bad faith, willful misfeasance, gross negligence, or reckless disregard
of his/her or its 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.
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 with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for Shareholders as described herein. Dean Witter Trust Company is an
affiliate of Dean Witter InterCapital Inc., the Fund's Investment Manager. As
Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust Company's
responsibilities include maintaining shareholder accounts, disbursing cash
dividends and reinvesting dividends, processing account registration changes,
handling purchase and redemption transactions, mailing prospectuses and reports,
mailing and tabulating proxies, processing share certificate transactions, and
maintaining shareholder records and lists. For these services, Dean Witter Trust
Company receives a per shareholder account fee from the Fund.
22
<PAGE>
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to Shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report, containing
financial statements audited by independent accountants, will be sent to
Shareholders each year.
The Fund's fiscal year ends on December 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The annual financial statements of the Fund for the year ended December 31,
1996, which are included in this Statement of Additional Information and
incorporated by reference in the Prospectus, have been so included and
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
23
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MUNICIPAL BONDS (89.5%)
GENERAL OBLIGATION (16.5%)
$ 4,000 North Slope Borough, Alaska, Ser 1996 B (MBIA).......................................... 0.00 % 06/30/07
2,000 Chicago, Illinois, Refg Ser 1995 B (FGIC)............................................... 5.125 01/01/25
2,000 Washington Suburban Sanitation District, Maryland, Gen Constr Refg 1994................. 5.00 06/01/14
3,000 New York City, New York, 1990 Ser D..................................................... 6.00 08/01/07
2,000 Pennsylvania, First Ser 1995 (FGIC)..................................................... 5.50 05/01/12
2,000 Shelby County, Tennessee, Refg 1995 Ser A............................................... 5.625 04/01/12
2,000 Washington, Ser 1995 A.................................................................. 5.80 09/01/08
- -----------
17,000
- -----------
EDUCATIONAL FACILITIES REVENUE (8.4%)
2,000 District of Columbia, Georgetown University Ser 1993.................................... 5.375 04/01/23
2,000 Massachusetts Health & Educational Facilities Authority, Boston College Ser K........... 5.25 06/01/18
1,500 Rutgers - The State University, New Jersey, Refg Ser R.................................. 6.50 05/01/13
2,000 New York State Dormitory Authority, State University Ser 1989 B......................... 0.00 05/15/03
1,000 Ohio Higher Educational Facility Commission, Oberlin College Ser 1993................... 5.375 10/01/15
- -----------
8,500
- -----------
ELECTRIC REVENUE (6.9%)
1,000 Gainesville, Florida, Utilities 1996 Ser A.............................................. 5.20 10/01/22
2,000 Nebraska Public Power District, Power Supply 1993 Ser................................... 6.125 01/01/15
2,000 Intermountain Power Agency, Utah, Refg 1996 Ser D....................................... 5.00 07/01/21
3,000 Washington Public Power Supply System, Proj #2 Refg Ser 1994 A (FGIC)................... 0.00 07/01/09
- -----------
8,000
- -----------
HOSPITAL REVENUE (6.8%)
2,000 Birmingham - Carraway Special Care Facilities Financing Authority, Alabama, Carraway
Methodist Health Ser 1995 A (Connie Lee).............................................. 6.25 08/15/09
2,000 Maryland Industrial Development Financing Authority, Holy Cross Health System Corp Refg
Ser 1996.............................................................................. 5.50 12/01/08
2,000 North Central Texas Health Facilities Development Corporation, University Medical Center
Ser 1997 (FSA) (WI)................................................................... 5.50 04/01/10
- -----------
6,000
- -----------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (7.9%)
700 Connecticut Development Authority, Bridgeport Hydraulic Co Refg Ser 1990................ 7.25 06/01/20
1,000 Michigan Strategic Fund, Ford Motor Co Refg Ser 1991 A.................................. 7.10 02/01/06
1,000 Claiborne County, Mississippi, Middle South Energy Inc Ser C............................ 9.875 12/01/14
2,000 Ohio Water Development Authority, Dayton Power & Light Co Collateralized Refg 1992 Ser
A..................................................................................... 6.40 08/15/27
1,500 Matagorda County Navigation District #1, Texas, Central Power & Light Co
Collateralized Ser 1984 A............................................................. 7.50 12/15/14
500 Russell County Industrial Development Authority, Virginia, Appalachian Power Co Ser G... 7.70 11/01/07
- -----------
6,700
- -----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------
<C> <C>
$ 4,000 $ 2,279,040
2,000 1,842,680
2,000 1,927,820
3,000 3,023,310
2,000 2,014,940
2,000 2,039,540
2,000 2,084,420
--------------
- -----------
15,211,750
17,000
--------------
- -----------
2,000 1,878,260
2,000 1,891,740
1,500 1,611,765
2,000 1,402,300
1,000 971,730
--------------
- -----------
7,755,795
8,500
--------------
- -----------
1,000 950,940
2,000 2,057,880
2,000 1,813,920
3,000 1,496,850
--------------
- -----------
6,319,590
8,000
--------------
- -----------
2,000
2,161,600
2,000
2,059,880
2,000
2,014,000
--------------
- -----------
6,235,480
6,000
--------------
- -----------
700 752,906
1,000 1,145,860
1,000 1,107,940
2,000
2,105,860
1,500
1,654,035
500 546,895
--------------
- -----------
7,313,496
6,700
--------------
- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE REVENUE - MULTI-FAMILY (1.4%)
$ 1,000 Michigan Housing Development Authority, Rental 1992 Ser A............................... 6.60 % 04/01/12
290 Pennsylvania Housing Finance Agency, Moderate Rehabilitation - Section 8 Assisted Issue
B..................................................................................... 9.00 08/01/01
- -----------
1,290
- -----------
MORTGAGE REVENUE - SINGLE FAMILY (2.2%)
2,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A (MBIA)...................... 5.875 12/01/24
- -----------
PUBLIC FACILITIES REVENUE (2.3%)
1,000 Hennepin County, Minnesota, Ser 1991 COPs............................................... 6.80 05/15/17
1,000 Puerto Rico Infrastructure Financing Authority, Special Tax Ser 1988 A.................. 7.90 07/01/07
- -----------
2,000
- -----------
TRANSPORTATION FACILITIES REVENUE (12.1%)
2,000 Los Angeles County Transportation Commission, California, Sales Tax
Ser 1991 B............................................................................ 6.50 07/01/13
2,000 Lee County, Florida, Ser 1995 (MBIA).................................................... 5.75 10/01/22
3,500 Kentucky Turnpike Authority, Resource Recovery Road 1987 Ser A BIGS..................... 0.00+ 07/01/06
1,000 Ohio Turnpike Commission, 1994 Ser A.................................................... 5.75 02/15/24
2,000 Puerto Rico Highway & Transportation Authority, Refg Ser X.............................. 5.25 07/01/21
- -----------
10,500
- -----------
WATER & SEWER REVENUE (13.4%)
2,000 San Francisco Public Utilities Commission, California, Water 1996 Ser A................. 5.00 11/01/21
2,000 Boston Water & Sewer Commission, Massachusetts, 1992 Ser A.............................. 6.00 11/01/15
1,500 Massachusetts Water Resource Authority, 1993 Ser C...................................... 5.25 12/01/08
2,000 Suffolk County Industrial Development Agency, New York, Southwest Sewer Ser 1994
(FGIC)................................................................................ 4.75 02/01/09
1,000 Columbus, Ohio, Sewerage Refg Ser 1992.................................................. 6.25 06/01/08
Spartanburg, South Carolina,
1,000 Water Improvement Refg Ser A 1992....................................................... 6.25 06/01/12
1,000 Water Improvement Refg Ser A 1992....................................................... 6.25 06/01/17
2,000 Metropolitan Government of Nashville & Davidson County, Tennessee,
Refg of 1986.......................................................................... 5.50 01/01/16
- -----------
12,500
- -----------
REFUNDED (11.6%)
2,000 Maryland Water Quality Financing Administration, 1990 Ser A............................. 7.25 09/01/00++
2,000 Massachusetts, 1994 Ser C (FGIC)........................................................ 6.75 11/01/04++
2,000 Saint Cloud, Minnesota, The Saint Cloud Hospital Ser 1990 B (AMBAC)..................... 7.00 07/01/01++
1,500 New York Local Government Assistance Corporation, Ser 1991 D............................ 7.00 04/01/02++
2,000 Clermont County, Ohio, Mercy Health Ser 1991 (AMBAC).................................... 6.733 09/01/01++
- -----------
9,500
- -----------
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $77,314,804)....................................................................................
83,990
- -----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------
<C> <C>
$ 1,000 $ 1,033,510
290
294,994
--------------
- -----------
1,328,504
1,290
--------------
- -----------
2,000 1,993,080
--------------
- -----------
1,000 1,083,640
1,000 1,072,800
--------------
- -----------
2,156,440
2,000
--------------
- -----------
2,000
2,119,160
2,000 2,020,560
3,500 4,139,905
1,000 997,200
2,000 1,844,820
--------------
- -----------
11,121,645
10,500
--------------
- -----------
2,000 1,855,080
2,000 2,000,380
1,500 1,511,835
2,000
1,890,720
1,000 1,067,040
1,000 1,044,030
1,000 1,037,370
2,000
1,953,940
--------------
- -----------
12,360,395
12,500
--------------
- -----------
2,000 2,235,860
2,000 2,291,160
2,000 2,236,120
1,500 1,696,095
2,000 2,218,460
--------------
- -----------
10,677,695
9,500
--------------
- -----------
83,990 82,473,870
- ----------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS (8.2%)
$ 1,200 Maricopa County, Arizona, Arizona Public Service Co Palo-Verde Ser 1994 A
(Demand 01/02/97)..................................................................... 5.10*% 05/01/29
2,900 Moffat County, Colorado, Pacificorp Ser 1994 (AMBAC) (Demand 01/02/97).................. 5.10* 05/01/13
700 Louisiana Offshore Terminal Authority, Loop Inc Ser 1992 A
(Demand 01/02/97)..................................................................... 5.10* 09/01/08
2,800 Platte County, Wyoming, Tri-State Generation & Transportation Association Ser 1984 A
(Demand 01/02/97)..................................................................... 5.05* 07/01/14
TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS
7,600 (IDENTIFIED COST $7,600,000).....................................................................................
- -----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------
<C> <C>
$ 1,200
$ 1,200,000
2,900 2,900,000
700
700,000
2,800
2,800,000
7,600
7,600,000
--------------
- -----------
$ 91,590 TOTAL INVESTMENTS
(IDENTIFIED COST $84,914,804) (A)............................................ 97.7% 90,073,870
- -----------
- -----------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................... 2.3 2,113,400
----- -----------
NET ASSETS................................................................... 100.0% $92,187,270
----- -----------
----- -----------
<FN>
- ---------------------
BIGS Bond Income Growth Security.
COPs Certificates of Participation.
WI Security purchased on a when issued basis.
+ Zero coupon; will convert to 8.50% on July 1, 1997.
++ Prerefunded to call date shown.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $5,379,922, and the
aggregate gross unrealized depreciation is $220,856, resulting in net
unrealized appreciation of $5,159,066.
BOND INSURANCE:
AMBAC AMBAC Indemnity Corporation.
Connie Connie Lee Insurance Company.
Lee
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996, CONTINUED
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
DECEMBER 31, 1996
<TABLE>
<S> <C>
Alabama.......... 2.4%
Florida.......... 3.2%
Mississippi...... 1.2%
Tennessee........ 4.3%
Alaska........... 4.6
Illinois......... 2.0
Nebraska......... 2.2
Texas............ 4.0
Arizona.......... 1.3
Kentucky......... 4.5
New Jersey....... 1.7
Utah............. 2.0
California....... 4.3
Louisiana........ 0.8
New York......... 8.7
Virginia......... 0.6
Colorado......... 3.1
Maryland......... 6.8
Ohio............. 8.0
Washington....... 3.9
Connecticut...... 0.8
Massachusetts.... 8.3
Pennsylvania..... 2.5
Wyoming.......... 3.0
-----
District of
Michigan......... 2.4
Puerto Rico...... 3.2
Total............ 97.7%
-----
-----
Columbia........ 2.0
Minnesota........ 3.6
South Carolina... 2.3
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $84,914,804)............................. $90,073,870
Cash........................................................ 490,699
Receivable for:
Investments sold........................................ 2,654,928
Interest................................................ 1,169,752
Shares of beneficial interest sold...................... 19,204
Prepaid expenses and other assets........................... 28,885
-----------
TOTAL ASSETS........................................... 94,437,338
-----------
LIABILITIES:
Payable for:
Investments purchased................................... 1,981,001
Shares of beneficial interest repurchased............... 85,008
Dividends and distributions............................. 77,236
Investment management fee............................... 40,201
Accrued expenses and other payables......................... 66,622
-----------
TOTAL LIABILITIES...................................... 2,250,068
-----------
NET ASSETS:
Paid-in-capital............................................. 86,857,821
Net unrealized appreciation................................. 5,159,066
Accumulated undistributed net realized gain................. 170,383
-----------
NET ASSETS............................................. $92,187,270
-----------
-----------
NET ASSET VALUE PER SHARE,
7,595,015 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$12.14
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 5,525,675
-----------
EXPENSES
Investment management fee................................... 464,650
Transfer agent fees and expenses............................ 233,105
Shareholder reports and notices............................. 60,264
Professional fees........................................... 49,552
Registration fees........................................... 31,048
Trustees' fees and expenses................................. 16,338
Custodian fees.............................................. 5,886
Other....................................................... 8,580
-----------
TOTAL EXPENSES......................................... 869,423
LESS: EXPENSE OFFSET................................... (5,859)
-----------
NET EXPENSES........................................... 863,564
-----------
NET INVESTMENT INCOME.................................. 4,662,111
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 1,184,073
Net change in unrealized appreciation....................... (2,771,254)
-----------
NET LOSS............................................... (1,587,181)
-----------
NET INCREASE................................................ $ 3,074,930
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
29
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 4,662,111 $ 4,697,296
Net realized gain........................................... 1,184,073 179,336
Net change in unrealized appreciation/depreciation.......... (2,771,254) 8,626,901
----------------- -----------------
NET INCREASE........................................... 3,074,930 13,503,533
----------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (4,688,098) (4,694,507)
Net realized gain........................................... (1,111,976) (134,761)
----------------- -----------------
TOTAL.................................................. (5,800,074) (4,829,268)
----------------- -----------------
Net increase (decrease) from transactions in shares of
beneficial interest....................................... (318,257) 151,008
----------------- -----------------
NET INCREASE (DECREASE)................................ (3,043,401) 8,825,273
NET ASSETS:
Beginning of period......................................... 95,230,671 86,405,398
----------------- -----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND
$25,987, RESPECTIVELY).................................. $92,187,270 $95,230,671
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Select Municipal Reinvestment Fund (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to provide a
high level of current income which is exempt from federal income tax, consistent
with the preservation of capital. The Fund was organized as a Massachusetts
business trust on June 1, 1983 and commenced operations on September 22, 1983.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the Fund by
an outside independent pricing service approved by the Trustees. The pricing
service has informed the Fund that in valuing the Fund's portfolio securities,
it uses both a computerized matrix of tax-exempt securities and evaluations by
its staff, in each case based on information concerning market transactions and
quotations from dealers which reflect the bid side of the market each day. The
Fund's portfolio securities are thus valued by reference to a combination of
transactions and quotations for the same or other securities believed to be
comparable in quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted and premiums are amortized 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.
31
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, CONTINUED
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the annual rate
of 0.50% to the daily net assets of the Fund determined as of the close of each
business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended December 31, 1996 aggregated
$15,186,053 and $24,018,003, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the Fund's
transfer agent. At December 31, 1996, the Fund had transfer agent fees and
expenses payable of approximately $23,000.
32
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, CONTINUED
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 2,918,884 $ 35,510,031 2,857,613 $ 34,313,758
Reinvestment of dividends and distributions...................... 451,479 5,481,141 379,503 4,576,988
----------- -------------- ----------- ------------
3,370,363 40,991,172 3,237,116 38,890,746
Repurchased...................................................... (3,404,589) (41,309,429) (3,227,249) (38,739,738)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... (34,226) $ (318,257) 9,867 $ 151,008
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
33
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.............. $ 12.48 $ 11.34 $ 12.82 $ 12.12 $ 11.89 $ 11.25 $ 11.41 $ 11.08 $ 10.60 $ 11.85
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Net investment
income.............. 0.61 0.62 0.65 0.67 0.70 0.71 0.70 0.68 0.70 0.72
Net realized and
unrealized gain
(loss).............. (0.19) 1.16 (1.40) 0.75 0.32 0.62 (0.15) 0.33 0.49 (1.15)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations.......... 0.42 1.78 (0.75) 1.42 1.02 1.33 0.55 1.01 1.19 (0.43)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Less dividends and
distributions from:
Net investment
income............ (0.61) (0.62) (0.69) (0.67) (0.70) (0.69) (0.71) (0.68) (0.70) (0.72)
Net realized
gain.............. (0.15) (0.02) (0.04) (0.05) (0.09) -- -- -- (0.01) (0.10)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Total dividends and
distributions....... (0.76) (0.64) (0.73) (0.72) (0.79) (0.69) (0.71) (0.68) (0.71) (0.82)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Net asset value, end
of period........... $ 12.14 $ 12.48 $ 11.34 $ 12.82 $ 12.12 $ 11.89 $ 11.25 $ 11.41 $ 11.08 $ 10.60
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
TOTAL INVESTMENT
RETURN+.............. 3.55% 16.00% (5.98)% 11.99% 8.88% 12.04% 5.27% 9.47% 11.42% (3.53)%
RATIOS TO AVERAGE NET
ASSETS:
Expenses............. 0.94%(1) 0.97% 0.96% 1.02% 1.14% 1.20% 1.21% 1.40% 1.41% 1.36%
Net investment
income.............. 5.01% 5.14% 5.34% 5.25% 5.79% 6.06% 6.12% 5.90% 6.27% 6.37%
SUPPLEMENTAL DATA:
Net assets, end of
period, in
thousands........... $92,187 $95,231 $86,405 $96,265 $75,918 $67,903 $60,304 $52,485 $44,769 $40,938
Portfolio turnover
rate................ 17% 17% 18% 9% 13% 30% 22% 15% 13% 43%
<FN>
- ---------------------
+ Calculated based on the net asset value as of the last business day of the
period.
(1) The above ratio does not reflect the effect of expense offsets of 0.01%.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Select Municipal
Reinvestment Fund (the "Fund") at December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the ten years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 7, 1997
1996 FEDERAL TAX NOTICE
During the year ended December 31, 1996, the Fund paid to the
shareholders $0.61 per share from net investment income. All of
the Fund's dividends from net investment income were exempt
interest dividends, excludable from gross income for Federal
income tax purposes. For the year ended December 31, 1996, the
Fund paid to shareholders $0.15 per share from long-term capital
gains.
35
<PAGE>
APPENDIX--RATINGS OF INVESTMENTS
- --------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
MUNICIPAL BOND RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
CONDITIONAL RATING: Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are 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.
36
<PAGE>
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 a mid-range ranking; and a modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). MIG 1 denotes best quality and means
there is present strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing. MIG 2 denotes high quality and means that margins of protection are
ample although not as large as in MIG 1. MIG 3 denotes favorable quality and
means that all security elements are accounted for but that the undeniable
strength of the previous grades, MIG 1 and MIG 2, is lacking. MIG 4 denotes
adequate quality and means that the protection commonly regarded as required of
an investment security is present and that while the notes are not distinctly or
predominantly speculative, there is specific risk.
VARIABLE RATE DEMAND OBLIGATIONS
A short-term rating, in addition to the Bond or MIG ratings, designated VMIG
may also be assigned to an issue having a demand feature. The assignment of the
VMIG symbol reflects such characteristics as payment upon periodic demand rather
than fixed maturity dates and payment relying on external liquidity. The VMIG
rating criteria are identical to the MIG criteria discussed above.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. These ratings apply to Municipal Commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
MUNICIPAL BOND RATINGS
A Standard & Poor's municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees. The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
37
<PAGE>
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally 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 could
lead to inadequate capacity to meet timely interest and principal payment.
B Debt rated "B" has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC Debt rated "CCC" has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayments of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC" rating.
C The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC"-debt rating.
CI The rating "CI" is reserved for income bonds on which no interest is being
paid.
D Debt rated "D" is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The 'D' rating also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
Bonds rated "BB," "B," "CCC," "CC" and "C" are regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of
speculation and "C" the highest degree of speculation. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the
major ratings categories.
The foregoing ratings are sometimes followed by a "p" which indicates that
the rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This
rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood or risk of default upon
failure of such completion.
38
<PAGE>
MUNICIPAL NOTE RATINGS
Commencing on July 27, 1984, Standard & Poor's instituted a new rating
category with respect to certain municipal note issues with a maturity of less
than three years. The new note ratings denote the following:
SP-1 denotes a very strong or strong capacity to pay principal and interest.
Issues determined to possess overwhelming safety characteristics are given
a plus (+) designation (SP-1+).
SP-2 denotes a satisfactory capacity to pay principal and interest.
SP-3 denotes a speculative capacity to pay principal and interest.
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. The ratings
may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information. Ratings are graded into group categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Ratings are applicable to both taxable and tax-exempt commercial paper. The
categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2 and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely 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.
39
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
----------
Financial highlights for the fiscal years ended
December 31, 1987, 1988, 1989, 1990, 1991, 1992,
1993, 1994, 1995 and 1996............................. 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Portfolio of Investments at December 31, 1996......... 24
Statement of assets and liabilities at
December 31, 1996..................................... 28
Statement of operations for the year ended
December 31, 1996..................................... 29
Statement of changes in net assets for the
years ended December 31, 1995 and 1996................ 30
Notes to Financial Statements......................... 31
Financial highlights for the fiscal years ended
December 31, 1987, 1988, 1989, 1990, 1991, 1992,
1993, 1994, 1995 and 1996............................. 34
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
2. - Amended and Restated By-Laws of the Registrant dated as of
October 25, 1996
8. - Amendment to the Custodian Agreement between the Registrant
and The Bank of New York
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance Quotations
27. - Financial Data Schedule
<PAGE>
--------------------------------
All other exhibits were previously filed and are hereby incorporated
by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at January 31, 1997
-------------- ------------------------
Shares of Beneficial Interest 14,217
Item 27. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the indemnification of
the Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was not
unlawful. In addition, indemnification is permitted only if it is determined
that the actions in question did not render them liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be indemnified for
the expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such
<PAGE>
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. The principal address of the Dean
Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
3
<PAGE>
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
OPEN-END INVESTMENT COMPANIES:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
(33) Dean Witter Diversified Income Trust
(34) Dean Witter U.S. Government Money Market Trust
(35) Dean Witter Global Dividend Growth Securities
(36) Active Assets California Tax-Free Trust
(37) Dean Witter Natural Resource Development Securities Inc.
(38) Active Assets Government Securities Trust
(39) Active Assets Money Trust
4
<PAGE>
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund
(59) Dean Witter Financial Services Trust
(60) Dean Witter Market Leader Trust
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10)TCW/DW Strategic Income Trust
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
5
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co. ("DWDC"); Director and/or officer
of various DWDC subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since
January, 1993) and Chairman (since January,
1995) of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Joseph J. McAlinden
Executive Vice President
and Chief Investment
Officer Vice President of the Dean Witter Funds and
Director of DWTC.
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 Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC, Distributors
and DWTC and Director of DWTC; Vice President
of the Dean Witter Funds and the TCW/DW Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader
Senior Vice President Trust.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Barry Fink Assistant Secretary of DWR; First Vice President,
First Vice President, Secretary and General Counsel of DWSC; First Vice
Secretary and General President, Assistant Secretary and Assistant
Counsel General Counsel of Distributors; Vice President,
Secretary and General Counsel of the Dean Witter
Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors; First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Kirk Balzer
Vice President Vice President of Various Dean Witter Funds.
Douglas Brown
Vice President
Philip Casparius
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Peter W. Gurman
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of various Dean Witter Funds
Elizabeth Hinchman
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
James Kastberg
Vice President
Stanley Kapica
Vice President
Michael Knox
Vice President Vice President of various Dean Witter Funds
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- --------------------------------------------------
Anne Pickrell
Vice President Vice President of Dean Witter Global Short-
Term Income Fund Inc.
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metals and
Vice President Minerals Trust.
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Katherine Wickham
Vice President
Item 29. PRINCIPAL UNDERWRITERS
Not applicable.
11
<PAGE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service
contract.
Item 32. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
12
<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 10th day of March, 1997.
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
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. 14 has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 03/10/97
- --------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 03/10/97
- --------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 03/10/97
- --------------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/ David M. Butowsky 03/10/97
- --------------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
EXHIBITS
2. -- Amended and Restated By-Laws of the Registrant dated as of
October 25, 1996
8. -- Amended to the Custodian Agreement between the Registrant and The
Bank of New York
11. -- Consent of Independent Accountants
16. -- Schedules for Computation of Performance Quotations
27. -- Financial Data Schedule
- ---------------------------
All other exhibits were previously filed and are hereby incorporated by
reference.
<PAGE>
BY-LAWS
OF
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
AMENDED AND RESTATED AS OF OCTOBER 25, 1996
ARTICLE I
DEFINITIONS
The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT
ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES",
"TRANSFER AGENT", "TRUST", "TRUST PROPERTY", and "TRUSTEES" have the
respective meanings given them in the Declaration of Trust of Dean Witter Select
Municipal Reinvestment Fund (formerly known as Sears Tax-Exempt Reinvestment
Fund), dated June 1, 1983, as amended from time to time.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. MEETINGS. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting. Such request
shall state the purpose or purposes of such meeting and the matters proposed
to be acted on thereat. The Secretary shall inform such Shareholders
of the reasonable estimated cost of preparing and mailing such notice of the
meeting, and upon payment to the Trust of such costs, the Secretary shall
give notice stating the purpose or purposes of the meeting to all entitled to
vote at such meeting. No meeting need be called upon the request of the
holders of Shares entitled to cast less than a majority of all votes entitled
to be cast at such meeting, to consider any matter which is substantially the
same as a matter voted upon at any meeting of Shareholders held during the
preceding twelve months.
SECTION 3.3. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
SECTION 3.4. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the
<PAGE>
Shareholders present or represented by proxy and entitled to vote thereat shall
have power to adjourn the meeting from time to time. Any adjourned meeting may
be held as adjourned without further notice. At any adjourned meeting at which a
quorum shall be present, any business may be transacted as if the meeting had
been held as originally called.
SECTION 3.5. VOTING RIGHTS, PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under the Corporations and Associations Law of
the State of Maryland.
SECTION 3.9. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
SECTION 3.10. PRESENCE AT MEETINGS. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.
2
<PAGE>
SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. TELEPHONE MEETINGS. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. ACTION BY TRUSTEES WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by reason
of the fact that he is or was a Trustee, officer, employee, or agent of the
Trust. The indemnification shall be against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by him in connection with the action, suit, or proceeding, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
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(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties as described
in Section 17(h) and (i) of the Investment Company Act of 1940
("disabling conduct"). A person shall be deemed not liable by reason of
disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
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(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
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SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the 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.
SECTION 6.6. THE CHAIRMAN. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.
SECTION 6.7. THE PRESIDENT. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the Board
of Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.
SECTION 6.8. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
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SECTION 6.9. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of
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the Trust by the President or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. APPOINTMENT AND DUTIES. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank or trust
company organized under the laws of the United States or one of the states
thereof and having capital, surplus and undivided profits of at least five
million dollars ($5,000,000).
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
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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 Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. SEAL. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. FISCAL YEAR. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
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ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Select Municipal
Reinvestment Fund, dated June 1, 1983, a copy of which is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that
the name Dean Witter Select Municipal Reinvestment Fund 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 Select Municipal Reinvestment Fund 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 Select Municipal Reinvestment Fund, but the Trust
Estate only shall be liable.
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AMENDMENT TO CUSTODY AGREEMENT
Amendment made as of this 17th day of April, 1996 by and between Dean
Witter Select Municipal Reinvestment Fund (the "Fund") and The Bank of New York
(the "Custodian") to the Custody Agreement between the Fund and the Custodian
dated September 20, 1991 (the "Custody Agreement"). The Custody Agreement is
hereby amended as follows:
Article XV Section 8 of the Custody Agreement shall be deleted and be
replaced by Sections 8.(a), 8.(b) and 8.(c) as set forth below:
"8. (a) The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Securities and moneys
owned by the Fund. The Custodian shall indemnify the Fund against and save the
Fund harmless from all liability, claims, losses and demands whatsoever,
including attorneys' fees, howsoever arising or incurred as the result of the
failure of a subcustodian which is a banking institution located in a foreign
country and identified on Schedule A attached hereto and as amended from time to
time upon mutual agreement of the parties (each, a "Subcustodian") to exercise
reasonable care with respect to the safekeeping of such Securities and moneys to
the same extent that the Custodian would be liable to the Fund if the Custodian
were holding such securities and moneys in New York. In the event of any loss
to the Fund by reason of the failure of the Custodian or a Subcustodian to
utilize reasonable care, the Custodian shall be liable to the Fund only to the
extent of the Fund's direct damages, to be determined based on the market value
of the Securities and moneys which are the subject of the loss at the date of
discovery of such loss and without reference to any special conditions or
circumstances.
8. (b) The Custodian shall not be liable for any loss which results from
(i) the general risk of investing, or (ii) investing or holding Securities and
moneys in a particular country including, but not limited to, losses resulting
from nationalization, expropriation or other governmental actions; regulation of
the banking or securities industry; currency restrictions, devaluations or
fluctuations; or market conditions which prevent the orderly execution of
securities transactions or affect the value of Securities or moneys.
8. (c) Neither party shall be liable to the other for any loss due to
forces beyond its control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
[SEAL] By:
----------------------
Attest:
- ------------------------
THE BANK OF NEW YORK
[SEAL] By:
----------------------
Attest:
- ------------------------
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Argentina The Bank of Boston
Australia ANZ Banking Group Limited
Austria Girocredit Bank AG
Bangladesh* Standard Chartered Bank
Belgium Banque Bruxelles Lambert
Botswana* Stanbic Bank Botswana Ltd.
Brazil The Bank of Boston
Canada Royal Trust/Royal Bank of Canada
Chile The Bank of Boston/Banco de Chile
China Standard Chartered Bank
Colombia Citibank, N.A.
Denmark Den Danske Bank
Euromarket CEDEL
Euroclear
First Chicago Clearing Centre
Finland Union Bank of Finland
France Banque Paribas/Credit Commercial de
France
Germany Dresdner Bank A.G.
Ghana* Merchant Bank Ghana Ltd.
Greece Alpha Credit Bank
Hong Kong Hong Kong and Shanghai Banking Corp.
Indonesia Hong Kong and Shanghai Banking Corp.
Ireland Allied Irish Bank
Israel Israel Discount Bank
Italy Banca Commerciale Italiana
Japan Yasuda Trust & Banking Co., Lt.
Korea Bank of Seoul
Luxembourg Kredietbank S.A.
Malaysia Hong Kong Bank Malaysia Berhad
Mexico Banco Nacional de Mexico (Banamex)
Netherlands Mees Pierson
New Zealand ANZ Banking Group Limited
Norway Den Norske Bank
Pakistan Standard Chartered Bank
Peru Citibank, N.A.
Philippines Hong Kong and Shanghai Banking Corp.
Poland Bank Handlowy w Warsawie
Portugal Banco Comercial Portugues
Singapore United Overseas Bank
South Africa Standard Bank of South Africa Limited
Spain Banco Bilbao Vizcaya
Sri Lanka Standard Chartered Bank
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Sweden Skandinaviska Enskilda Banken
Switzerland Union Bank of Switerzland
Taiwan Hong Kong and Shanghai Banking
Corp.
Thailand Siam Commercial Bank
Turkey Citibank, N.A.
United Kingdom The Bank of New York
United States The Bank of New York
Uruguay The Bank of Boston
Venezuela Citibank N.A.
Zimbabwe* Stanbic Bank Zimbabwe Ltd.
*Not yet 17(f)5 compliant
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 14 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 7, 1997, relating to the financial statements and financial
highlights of Dean Witter Select Municipal Reinvestment Fund, which appears
in such Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the references to us under the
headings "Independent Accountants" and "Experts" in such Statement of
Additional Information and to the reference to us under the heading
"Financial Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 7, 1997
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER SELECT MUNI REINVESTMENT FUND
(A) AVERAGE ANNUAL TOTAL RETURNS
(B) TOTAL RETURN
_ -
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ------ ------------ --- ----------
31-Dec-95 $1,035.50 3.55% 1 3.55%
31-Dec-91 $1,377.10 37.71% 5 6.61%
31-Dec-86 $1,911.10 91.11% 10 6.69%
(E) GROWTH OF $10,000
(F) GROWTH OF $50,000
(G) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ----- ------ ------- ------- ------- --------
<S> <C> <C> <C> <C>
22-Sep-83 202.73 $30,273 $151,365 $302,730
</TABLE>
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
Dean Witter Select Municipal Reinvestment
FOR THE 30 DAY PERIOD ENDED December 31, 1996
6
(A) YIELD = 2{ [ ((a-b)/c d) + 1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = The maximum offering price per share on the last
day of the period
6
YIELD = 2{ [(( 397,600.54 - 60,624.73)/7,482,980.522 X 12.14)+1] -1}
= 4.49
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.49% / (1-.3960)
= 7.43%
(A) 397,600.54 - 60,624.73 = 336,975.81
7,482,980.522*12.14 90,843,383.54
336,975.81/90,843,383.54 0.0037094
1+.0037094 1.0037094
1.0037094^6= 1.02246381837032774
.02246381837032774*2 4.49%
(B) 1-.396= 0.604
4.49%/0.604= 7.43%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 84,914,804
<INVESTMENTS-AT-VALUE> 90,073,870
<RECEIVABLES> 3,843,884
<ASSETS-OTHER> 519,584
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94,437,338
<PAYABLE-FOR-SECURITIES> 1,981,001
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 269,067
<TOTAL-LIABILITIES> 2,250,068
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86,857,821
<SHARES-COMMON-STOCK> 7,595,015
<SHARES-COMMON-PRIOR> 7,629,241
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 170,383
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,159,066
<NET-ASSETS> 92,187,270
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,525,675
<OTHER-INCOME> 0
<EXPENSES-NET> 863,564
<NET-INVESTMENT-INCOME> 4,662,111
<REALIZED-GAINS-CURRENT> 1,184,073
<APPREC-INCREASE-CURRENT> (2,771,254)
<NET-CHANGE-FROM-OPS> 3,074,930
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,688,098
<DISTRIBUTIONS-OF-GAINS> 1,111,976
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,918,884
<NUMBER-OF-SHARES-REDEEMED> 3,404,589
<SHARES-REINVESTED> 451,479
<NET-CHANGE-IN-ASSETS> (3,043,401)
<ACCUMULATED-NII-PRIOR> 25,987
<ACCUMULATED-GAINS-PRIOR> 98,286
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 464,650
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 869,423
<AVERAGE-NET-ASSETS> 92,929,916
<PER-SHARE-NAV-BEGIN> 12.48
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> (.19)
<PER-SHARE-DIVIDEND> (.61)
<PER-SHARE-DISTRIBUTIONS> (.15)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.14
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
