AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1996
REGISTRATION NO.: 33-37562
811-6208
==============================================================================
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. 7
[X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
[X]
AMENDMENT NO. 8
[X]
----------------
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
X immediately upon filing pursuant to paragraph (b)
-----
_____ on (date) pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
_____ on (date) pursuant to paragraph (a) of rule 485.
----------------
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. PURSUANT TO SECTION (B)(2) OF RULE 24F-2, THE
REGISTRANT FILED A RULE 24F-2 NOTICE FOR ITS FISCAL YEAR ENDED NOVEMBER 30,
1995 WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 17, 1996.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
==============================================================================
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
PART A
ITEM CAPTION PROSPECTUS
---------- ------------------
<S> <C>
1. ........................... Cover Page
2. ........................... Summary of Fund Expenses; Prospectus Summary
3. ........................... Financial Highlights; Performance Information
4. ........................... Investment Objective and Policies; The Fund and its
Management; Cover Page; Investment Restrictions;
Prospectus Summary
5. ........................... The Fund and Its Management; Back Cover; Investment
Objective and Policies
6. ........................... Dividends, Distributions and Taxes; Additional
Information
7. ........................... Purchase of Fund Shares; Shareholder Services
8. ........................... Redemptions and Repurchases; Shareholder Services
9. ........................... Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM STATEMENT OF ADDITIONAL INFORMATION
------- -----------------------------------------------------------
<S> <C>
10. ........................... Cover Page
11. ........................... Table of Contents
12. ........................... The Fund and Its Management
13. ........................... Investment Practices and Policies; Investment Restrictions;
Portfolio Transactions and Brokerage
14. ........................... The Fund and Its Management; Trustees and Officers
15. Trustees and Officers
16. ........................... The Fund and Its Management; Purchase of Fund Shares;
Custodian and Transfer Agent; Independent Accountants
17. ........................... Portfolio Transactions and Brokerage
18. ........................... Description of Shares; Validity of Shares of Beneficial
Interest
19. ........................... Repurchase of Fund Shares; Redemptions and Repurchases;
Statement of Assets and Liabilities; Shareholder Services
20. ........................... Dividends, Distributions and Taxes
21. ........................... Not applicable
22. ........................... Dividends, Distributions and Taxes
23. ........................... Performance Information; 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 19, 1996
Dean Witter Multi-State Municipal Series Trust (the "Fund") is an open-
end non-diversified management investment company currently consisting of ten
separate series: the Arizona Series, the California Series, the Florida Series,
the Massachusetts Series, the Michigan Series, the Minnesota Series, the New
Jersey Series, the New York Series, the Ohio Series and the Pennsylvania Series
(the "State Series"). The investment objective of the State Series is to provide
a high level of current income exempt from both federal and the designated State
income taxes consistent with the preservation of capital. Each Series ("Series")
seeks to achieve its investment objective by investing principally in investment
grade tax-exempt securities of municipal issuers in the designated state. (See
"Investment Objective and Policies.")
The Fund, on behalf of each Series, is authorized to reimburse Dean
Witter Distributors Inc. (the "Distributor") for specific expenses incurred in
promoting the distribution of the Fund's shares pursuant to a Plan of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Act"). Reimbursement may in no event exceed an amount equal to payments at
the annual rate of 0.15% of the average daily net assets of each Series.
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 19, 1996, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER MULTI-STATE MUNICIPAL
SERIES TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550
(800) 869-NEWS
TABLE OF CONTENTS
Prospectus Summary/ 2
Summary of Fund Expenses/ 3
Financial Highlights/ 4
The Fund and its Management/ 8
Investment Objective and Policies/ 8
Investment Restrictions/ 14
Purchase of Fund Shares/ 15
Shareholder Services/ 18
Redemptions and Repurchases/ 20
Dividends, Distributions and Taxes/ 21
Performance Information/ 29
Additional Information/ 30
Appendix/ 31
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Dean Witter Distributors Inc.,
Distributor
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------
The The Fund is organized as a Trust, commonly known as a Massachusetts
Fund business trust, and is an open-end, non-diversified management investment
company currently consisting of ten separate series: the Arizona Series,
the California Series, the Florida Series, the Massachusetts Series, the
Michigan Series, the Minnesota Series, the New Jersey Series, the New York
Series, the Ohio Series and the Pennsylvania Series. Each Series invests
principally in investment grade, tax-exempt securities of the designated
State.
- --------------------------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page 30).
Offered
- --------------------------------------------------------------------------------------------
Offering The price of the shares offered by this prospectus varies with the changes
Price in the value of the Fund's investments. The offering price, determined once
daily as of 4:00 p.m., New York time, on each day that the New York Stock
Exchange is open, is equal to the net asset value plus a sales charge of
4.0% of the offering price, scaled down on purchases of $25,000 or over
(see page 15).
- --------------------------------------------------------------------------------------------
Minimum Minimum initial investment, $1,000 ($100 if the account is opened through
Purchase EasyInvestsm); Minimum subsequent investment, $100 (see page 15).
- --------------------------------------------------------------------------------------------
Investment The investment objective of each Series is to provide a high level of
Objective current income exempt from both federal and the designated state income
taxes consistent with preservation of capital.
- --------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., ("InterCapital"), the Investment Manager of
Manager the Fund, and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-five investment companies and other
portfolios with assets of approximately $81.6 billion at January 31, 1996
(see page 8).
- --------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.35%
Fee of daily net assets of each Series (see page 8).
- --------------------------------------------------------------------------------------------
Dividends and Income dividends are declared daily and paid monthly; capital gains
Capital Gains distributions, if any, may be distributed annually or retained for
Distributions reinvestment by the Fund. Dividends and distributions are automatically
reinvested in additional shares at net asset value (without sales charge),
unless the shareholder elects to receive cash (see pages 18 and 20).
- --------------------------------------------------------------------------------------------
Plan of The Fund is authorized to reimburse Dean Witter Distributors Inc. (the
Distribution "Distributor") for specific expenses incurred in promoting the distribution
of the Fund's shares pursuant to a Plan of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940. Reimbursement may in no
event exceed an amount equal to payments at the annual rate of 0.15 of 1%
of average daily net assets of each Series of the Fund (see page 17).
- --------------------------------------------------------------------------------------------
Sales Charge 4.0% of offering price (4.17% of amount invested); reduced charges on
purchases of $25,000 or more (see pages 15-16).
- --------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value. An account may
be involuntarily redeemed if shares owned have a net asset value of less
than $100 or, if the account was opened through EasyInvestsm, if after
twelve months the shareholder has invested less than $1,000 in the account.
(see pages 20 and 21).
- --------------------------------------------------------------------------------------------
Risks and The value of each Series' portfolio securities, and therefore the net asset
Other value per share of each Series, may increase or decrease due to various
Considerations factors, principally changes in prevailing interest rates and the ability
of the issuers of the portfolio securities of each Series to pay interest
and principal on such obligations. Additionally, because the Fund is a
non-diversified investment company, a relatively high percentage of the
assets of each Series may be invested in a limited number of issuers within
a single state, thereby causing a greater fluctuation of the net asset
value of each Series as a result of changes in the financial condition or
in the market's assessment of the various issuers. Each Series, to the
extent permitted by applicable state law, also may invest in futures and
options which may be considered speculative in nature and involve greater
risks than those customarily assumed by certain other investment companies
which do not invest in such instruments. Since each Series concentrates its
investments in tax-exempt securities of a particular State, each Series is
affected by any political, economic or regulatory developments affecting
the ability of the issuers of that particular State to pay interest or
repay principal. During periods of significant economic slowdowns, the
securities of any particular State will be subject to a greater degree of
credit risk in which the ratings of such securities have been or may be
downgraded or placed on a credit watch, thereby affecting their market
value. Investors should refer to the Appendix for specific information
regarding the economic situation of their particular State. (See pages
10-13 and the Appendix on page 31). Certain of the tax-exempt securities in
which each Series may invest without limit may subject certain investors to
the federal, and any applicable state, alternative minimum tax. (see page
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 year ended November 30, 1995, except as otherwise noted.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses (for each Series)
- --------------------------------------------------
Maximum Sales Charge Imposed on Purchases ............... 4.0%
Maximum Sales Charge Imposed on Reinvested Dividends ... None
Deferred Sales Charge ................................... None
Redemption Fees ......................................... None
Exchange Fee ............................................ None
</TABLE>
Annual Operating Expenses (as a Percentage of Average Net Assets)*
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS MICHIGAN MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
--------- ------------ --------- ------------- ---------- ---------- ---------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MANAGEMENT
FEES*
(AFTER FEE
WAIVER) ... .3500% .3500% .3500% .0673% .0933% .0% .3500% .0114% .0856% .3500%
12B-1 FEES**. .1439 .1464 .1422 .1453 .1370 .1427 .1397 .1433 .1433 .1460
OTHER
EXPENSES*
(AFTER
EXPENSE
ASSUMPTION). .1588 .0996 .1352 .2874 .2697 .3573 .1762 .3453 .2711 .1624
TOTAL SERIES
OPERATING
EXPENSES*... .6527% .5960% .6274% .5000% .5000% .5000% .6659% .5000% .5000% .6584%
</TABLE>
- ------------
**The 12b-1 fee is characterized as a service fee within the meaning of
National Association of Securities Dealers, Inc. ("NASD") guidelines (see
"Purchase of Fund Shares").
Example
- -------
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:
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS MICHIGAN MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
--------- ------------ --------- ------------- ---------- ---------- ---------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR .... $ 46 $ 46 $ 46 $ 45 $ 45 $ 45 $ 47 $ 45 $ 45 $ 46
3 YEARS ... 60 58 59 55 55 55 61 55 55 60
5 YEARS ... 75 72 74 67 67 67 76 67 67 75
10 YEARS .. 118 112 116 100 100 100 120 100 100 119
</TABLE>
*The annual Operating Expenses are based upon the actual expenses incurred
by the Fund during the fiscal year ended November 30, 1995. The Investment
Manager had undertaken to waive management fees and assume expenses to the
extent that they exceeded 0.50% of the daily net assets with respect to the
Massachusetts Series, Michigan Series, Minnesota Series, New York Series and
Ohio Series until January 1, 1996 and has undertaken, until December 31,
1996, to continue to assume expenses and waive management fees with respect
to each aforementioned Series to the extent that such expenses and
compensation on an annualized basis exceed 0.50% of the average daily net
assets of each respective Series.
Total operating expenses for the Massachusetts Series, Michigan Series,
Minnesota Series, New York Series and Ohio Series for the fiscal year of the
Fund ended November 30, 1995, assuming no waiver of the management fees and
no assumption of other expenses for the entire year, would have been:
APITAL PRINTING SYSTEMS]
<TABLE>
<CAPTION>
MASSACHUSETTS MICHIGAN MINNESOTA NEW YORK OHIO
SERIES SERIES SERIES SERIES SERIES
------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Management Fees ....... .3500% .3500% .3500% .3500% .3500%
12b-1 Fees ............ .1453 .1370 .1427 .1433 .1433
Other Expenses ........ .2974 .2782 .4915 .3568 .2791
Total Series Operating
Expenses* ............ .7927% .7652% .9842% .8501% .7724%
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR LESS
THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management" and "Purchase of Fund Shares" in this
Prospectus.
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period ended November 30 for each Series have
been audited by Price Waterhouse LLP, independent accountants. This data
should be read in conjunction with the financial statements, 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>
NET ASSET
YEAR VALUE NET NET REALIZED TOTAL FROM TOTAL DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO DISTRIBUTIONS TO AND
NOVEMBER 30, OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ------------ ----------- ------------ -------------- ------------ -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arizona Series
1991(b) $ 9.60 $0.36 $ 0.17 $ 0.53 $(0.36) $ -- $(0.36)
1992 9.77 0.64 0.41 1.05 (0.64) -- (0.64)
1993 10.18 0.58 0.56 1.14 (0.58) (0.02) (0.60)
1994 10.72 0.55 (1.29) (0.74) (0.55) (0.01) (0.56)
1995 9.42 0.54 1.23 1.77 (0.54) -- (0.54)
California Series
1991(a) 9.60 0.60 0.39 0.99 (0.60) -- (0.60)
1992 9.99 0.67 0.34 1.01 (0.67) (0.01) (0.68)
1993 10.32 0.61 0.68 1.29 (0.61) -- (0.61)
1994 11.00 0.58 (1.48) (0.90) (0.58) (0.14) (0.72)
1995 9.38 0.56 1.29 1.85 (0.56) -- (0.56)
Florida Series
1991(a) 9.60 0.55 0.28 0.83 (0.55) -- (0.55)
1992 9.88 0.64 0.41 1.05 (0.64) -- (0.64)
1993 10.29 0.59 0.64 1.23 (0.59) -- (0.59)
1994 10.93 0.56 (1.33) (0.77) (0.56) -- (0.56)
1995 9.60 0.56 1.28 1.84 (0.56) -- (0.56)
Massachusetts Series
1991(a) 9.60 0.54 0.38 0.92 (0.54) -- (0.54)
1992 9.98 0.66 0.42 1.08 (0.66) (0.04) (0.70)
1993 10.36 0.60 0.72 1.32 (0.60) -- (0.60)
1994 11.08 0.56 (1.38) (0.82) (0.56) (0.10) (0.66)
1995 9.60 0.57 1.37 1.94 (0.57) -- (0.57)
Michigan Series
1991(a) 9.60 0.54 0.36 0.90 (0.54) -- (0.54)
1992 9.96 0.65 0.46 1.11 (0.65) (0.01) (0.66)
1993 10.41 0.61 0.64 1.25 (0.61) -- (0.61)
1994 11.05 0.56 (1.41) (0.85) (0.56) (0.18) (0.74)
1995 9.46 0.57 1.35 1.92 (0.57) -- (0.57)
</TABLE>
- ------------
(a) January 15, 1991 (commencement of operations) to November 30, 1991.
(b) April 30, 1991 (commencement of operations) to November 30, 1991.
* After application of the Fund's expense limitation.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
4
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS RATIOS TO AVERAGE NET ASSETS
(AFTER EXPENSES WERE ASSUMED) (BEFORE EXPENSES WERE ASSUMED)*
NET ASSET NET ASSETS -------------------------------- -------------------------------
VALUE TOTAL END OF NET NET PORTFOLIO
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER
PERIOD RETURN+ (000'S) EXPENSES INCOME EXPENSES INCOME RATE
- ----------- ---------- ----------- ------------ ----------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.77 5.66%(1) $ 20,733 0.15%(2) 6.32%(2) 1.43%(2) 5.04%(2) 8%(1)
10.18 11.08 38,812 0.15 6.33 0.74 5.74 15
10.72 11.42 59,877 0.48 5.40 0.65 5.22 5
9.42 (7.16) 47,628 0.62 5.33 0.63 5.32 11
10.65 19.21 50,290 0.65 (3) 5.33 0.65 5.33 6
9.99 10.29 (1) 41,568 0.15 (2) 6.53 (2) 0.97 (2) 5.71 (2) 24 (1)
10.32 10.23 95,604 0.15 6.36 0.67 5.84 5
11.00 12.77 139,308 0.48 5.57 0.60 5.45 11
9.38 (8.65) 112,450 0.58 5.59 0.59 5.58 12
10.67 20.15 117,769 0.60 (3) 5.50 0.60 5.50 5
9.88 8.84 (1) 17,719 0.15 (2) 6.45 (2) 1.27 (2) 5.33 (2) 10 (1)
10.29 10.92 51,560 0.15 6.19 0.73 5.62 6
10.93 12.20 84,494 0.48 5.39 0.63 5.23 3
9.60 (7.29) 71,458 0.61 5.34 0.62 5.33 3
10.88 19.54 74,058 0.63 (3) 5.34 0.63 5.34 8
9.98 9.87 (1) 3,205 0.15 (2) 6.50 (2) 2.50 (2) 4.08 (2) 40 (1)
10.36 11.19 10,113 0.14 6.26 1.25 5.16 10
11.08 13.06 18,344 0.48 5.47 0.84 5.10 12
9.60 (7.71) 15,507 0.50 5.35 0.78 5.07 10
10.97 20.58 16,954 0.50 (3)++ 5.39 0.79 5.11 7
9.96 9.54 (1) 6,630 0.15 (2) 6.54 (2) 1.73 (2) 4.96 (2) 46 (1)
10.41 11.78 13,809 0.14 6.28 1.01 5.42 9
11.05 12.28 22,083 0.48 5.53 0.80 5.20 15
9.46 (8.07) 19,831 0.50 5.44 0.75 5.19 9
10.81 20.69 21,673 0.50 (3)++ 5.49 0.77 5.23 22
</TABLE>
- ------------
(3) The above expense ratios reflect the effect for gross-up of custody
cash credits for the Arizona, California, Florida, Massachusetts and
Michigan Series of 0.01%, 0.01%, 0.01%, 0.01% and 0.01%,
respectively.
++ After application of the Investment Manager's voluntary waiver.
5
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- -----------------------------------------------------------------------------
Selected data and ratios for a share of beneficial interest outstanding
throughout each period for their respective years ended November 30:
<TABLE>
<CAPTION>
NET ASSET
YEAR VALUE NET NET REALIZED TOTAL FROM TOTAL DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO DISTRIBUTIONS TO AND
NOVEMBER 30, OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ------------- ----------- ------------ -------------- ------------ -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Minnesota Series
1991(a) $ 9.60 $0.51 $ 0.19 $ 0.70 $(0.51) $-- $(0.51)
1992 9.79 0.63 0.32 0.95 (0.63) -- (0.63)
1993 10.11 0.58 0.67 1.25 (0.58) -- (0.58)
1994 10.78 0.55 (1.42) (0.87) (0.55) (0.08) (0.63)
1995 9.28 0.54 1.33 1.87 (0.54) -- (0.54)
New Jersey Series
1991(a) 9.60 0.55 0.35 0.90 (0.55) -- (0.55)
1992 9.95 0.66 0.44 1.10 (0.66) (0.04) (0.70)
1993 10.35 0.60 0.62 1.22 (0.60) (0.03) (0.63)
1994 10.94 0.55 (1.39) (0.84) (0.55) (0.08) (0.63)
1995 9.47 0.56 1.26 1.82 (0.56) -- (0.56)
New York Series
1991(a) 9.60 0.54 0.46 1.00 (0.54) -- (0.54)
1992 10.06 0.68 0.34 1.02 (0.68) (0.06) (0.74)
1993 10.34 0.62 0.69 1.31 (0.62) -- (0.62)
1994 11.03 0.57 (1.52) (0.95) (0.57) (0.05) (0.62)
1995 9.46 0.56 1.42 1.98 (0.56) -- (0.56)
Ohio Series
1991(a) 9.60 0.53 0.25 0.78 (0.53) -- (0.53)
1992 9.85 0.66 0.41 1.07 (0.66) (0.01) (0.67)
1993 10.25 0.60 0.72 1.32 (0.60) -- (0.60)
1994 10.97 0.55 (1.43) (0.88) (0.55) (0.12) (0.67)
1995 9.42 0.56 1.38 1.94 (0.56) -- (0.56)
Pennsylvania Series
1991(a) 9.60 0.53 0.30 0.83 (0.53) -- (0.53)
1992 9.90 0.66 0.44 1.10 (0.66) -- (0.66)
1993 10.34 0.61 0.67 1.28 (0.61) -- (0.61)
1994 11.01 0.56 (1.39) (0.83) (0.56) (0.06) (0.62)
1995 9.56 0.55 1.29 1.84 (0.55) -- (0.55)
</TABLE>
- ------------
(a) January 15, 1991 (commencement of operations) to November 30, 1991.
* After application of the Fund's expense limitation.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
6
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS RATIOS TO AVERAGE NET ASSETS
(AFTER EXPENSES WERE ASSUMED) (BEFORE EXPENSES WERE ASSUMED)*
NET ASSETS NET ASSETS ----------------------------- -----------------------------
VALUE TOTAL END OF NET NET PORTFOLIO
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER
PERIOD RETURN+ (000'S) EXPENSES INCOME EXPENSES INCOME RATE
- ------------ ----------- --------- ------------ ----------- ------------ ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.79 $ 7.42 (1) $ 3,131 0.15%(2) 6.04%(2) 2.50%(2) 2.87%(2) 4%(1)
10.11 9.91 6,420 0.14 6.16 1.46 4.85 23
10.78 12.64 11,538 0.48 5.39 1.04 4.83 8
9.28 (8.42) 9,793 0.50 5.41 0.91 5.00 14
10.61 20.60 11,230 0.50 (4)++ 5.35 0.98 4.88 3
9.95 9.59 (1) 15,812 0.15 (2) 6.43 (2) 1.21 (2) 5.36 (2) 36 (1)
10.35 11.34 32,123 0.15 6.36 0.79 5.71 19
10.94 12.03 54,499 0.48 5.41 0.69 5.20 7
9.47 (7.96) 45,497 0.64 5.38 0.65 5.37 6
10.73 19.60 47,889 0.67 (4) 5.42 0.67 5.42 14
10.06 10.73 (1) 3,976 0.15 (2) 6.44 (2) 2.22 (2) 4.37 (2) 51 (1)
10.34 10.35 9,604 0.15 6.45 1.23 5.37 21
11.03 12.91 15,955 0.48 5.61 0.88 5.21 11
9.46 (8.96) 14,522 0.50 5.48 0.82 5.16 14
10.88 21.40 14,388 0.50 (4)++ 5.43 0.85 5.09 24
9.85 8.35 (1) 6,267 0.15 (2) 6.38 (2) 2.04 (2) 4.48 (2) 22 (1)
10.25 11.12 13,686 0.15 6.41 1.01 5.56 23
10.97 13.19 24,849 0.48 5.45 0.78 5.14 20
9.42 (8.34) 20,693 0.50 5.31 0.71 5.10 18
10.80 21.02 23,104 0.50 (4)++ 5.42 0.77 5.16 19
9.90 8.77 (1) 12,147 0.15 (2) 6.46 (2) 1.54 (2) 5.07 (2) 12 (1)
10.34 11.47 31,509 0.15 6.31 0.81 5.65 3
11.01 12.64 53,378 0.48 5.54 0.68 5.33 5
9.56 (7.84) 47,557 0.64 5.37 0.66 5.35 19
10.85 19.65 53,935 0.66 (4) 5.29 0.66 5.29 8
</TABLE>
- ------------
(4) The above expense ratios reflect the effect for gross-up of custody
cash credits for the Minnesota, New Jersey, New York, Ohio and
Pennsylvania Series of 0.01%, 0.01%, 0.01%, 0.01% and 0.01%,
respectively.
++ After application of the Investment Manager's voluntary waiver.
7
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
Dean Witter Multi-State Municipal Series Trust (the "Fund") is an
open-end, non-diversified management investment company consisting of ten
separate series: the Arizona Series, the California Series, the Florida
Series, the Massachusetts Series, the Michigan Series, the Minnesota Series,
the New Jersey Series, the New York Series, the Ohio Series and the
Pennsylvania Series. The Fund is a trust of the type commonly known as a
"Massachusetts business trust" and was organized under the laws of
Massachusetts on October 29, 1990.
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 ninety-five investment companies, thirty of
which are listed on the New York Stock Exchange, with combined assets of
approximately $79.0 billion at January 31, 1996. The Investment Manager also
manages and advises portfolios of pension plans, other institutions and
individuals which aggregated approximately $2.6 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. InterCapital has retained Dean Witter Services Company
Inc. to perform the aforementioned administrative services for the Fund. The
Fund's Trustees review the various services provided by 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, each Series
of the Fund pays the Investment Manager monthly compensation calculated daily
by applying the annual rate of 0.35% to the net assets of each Series. The
Investment Manager has undertaken, until December 31, 1996, to assume
expenses and waive management fees with respect to Massachusetts, Michigan,
Minnesota, New York and Ohio Series to the extent that such expenses and
compensation on an annualized basis exceed 0.50% of the average daily net
assets of each respective Series. For the fiscal year ended November 30,
1995, the Arizona Series, California Series, Florida Series, Massachusetts
Series, Michigan Series, Minnesota Series, New Jersey Series, New York
Series, Ohio Series and Pennsylvania Series accrued total compensation to the
Investment Manager of 0.35%, 0.35%, 0.35%, 0.07%, 0.09%, 0.0%, 0.35%, 0.01%,
0.09% and 0.35% respectively of average daily net assets and the total
expenses of each respective Series amounted to 0.65%, 0.60%, 0.63%, 0.50%,
0.50%, 0.50%, 0.67%, 0.50%, 0.50% and 0.66%, respectively, of the average
daily net assets of each Series.
The Fund's expenses include: the fee of the Investment Manager; the fee
pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;
certain legal, transfer agent, custodian and auditing fees; and printing and
other expenses relating to the Fund's operations which are not expressly
assumed by the Investment Manager under its Management Agreement with the
Fund.
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
The investment objective of the State Series is to provide a high level of
current income exempt from both federal and the designated State income taxes
consistent with preservation of capital. It is a fundamental policy that
under normal conditions each Series will invest at least 80% of its total
assets
8
<PAGE>
in securities, the interest on which is exempt from federal income taxes and
the income taxes of the designated State. This policy and the investment
objective may not be changed with respect to any Series without the approval
of the holders of a majority of the shares of that Series. There is no
assurance that the investment objective of any Series will be achieved.
Each Series seeks to achieve its investment objective by investing
principally in tax-exempt, investment grade securities of municipal issuers
in that designated State as well as any debt obligations (such as debt
obligations of governmental entities and territories such as Puerto Rico,
Guam and the Virgin Islands) that generate interest income which is exempt
from federal income taxes and the income taxes of the designated State.
Tax-exempt securities primarily consist of Municipal Bonds, Municipal Notes
and Municipal Commercial Paper. Each Series may only invest in (a) Municipal
Bonds which are rated at the time of purchase within the four highest grades
by either Moody's Investors Service Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P"); (b) Municipal Notes which at the time of purchase are
rated in the two highest grades by either Moody's or S&P, or, if not rated,
have outstanding one or more issues of Municipal Bonds rated as set forth in
clause (a) above; (c) Municipal Commercial Paper which at the time of
purchase is rated P-1 by Moody's or A-1 by S&P; and (d) unrated securities
which at the time of purchase are judged by the Investment Manager to be of
comparable quality to the securities described in this paragraph. A
description of the ratings referred to above is contained in the Appendix to
the Statement of Additional Information. Certain of the tax-exempt securities
in which each Series may invest without limit may subject certain investors
to the federal alternative minimum tax or any applicable state alternative
minimum tax and, therefore, a substantial portion of the income produced by
each Series may be taxable to such investors under any federal or any
applicable state alternative minimum tax. The State Series, therefore, may
not be a suitable investment for investors who are subject to the alternative
minimum tax. The suitability of the State Series for these investors will
depend upon a comparison of the after-tax yield likely to be provided from
each designated Series to comparable tax- exempt investments not subject to
such tax and also to comparable fully taxable investments in light of each
investor's tax position. See "Dividends, Distributions and Taxes."
Up to 20% of the total assets of each Series may be invested in taxable
money market instruments, tax-exempt securities of other states and
municipalities and options and futures. With respect to tax-exempt securities
of other states, only investment grade securities which satisfy the standards
enumerated above for Municipal Bonds, Notes and Paper, will be purchased.
(This investment percentage is subject to applicable state laws and may be
limited further by specific requirements of certain states. It is the
intention of each Series to meet the applicable requirements of its
respective State. See "Dividends, Distributions and Taxes--State Taxation").
However, each Series may invest more than 20% of its total assets in taxable
money market instruments and the tax-exempt securities of other states and
municipalities in order to maintain a temporary "defensive" position, when,
in the opinion of the Investment Manager, prevailing market or financial
conditions (including unavailability of securities of requisite quality) so
warrant. (The types of investments in which each Series may invest when
maintaining a temporary "defensive" position may be limited by applicable
State requirements). With respect to the purchase of tax-exempt securities of
other states for defensive purposes, only the highest grade Municipal Bonds,
Notes and Paper, will be purchased. The types of taxable money market
instruments in which the State Series may invest are limited to the following
short-term fixed income securities (maturing in one year or less from the
time of purchase): (i) obligations of the United States Government, its
agencies, instrumentalities or authorities; (ii) commercial paper rated P-1
by Moody's or A-1 by S&P; (iii) certificates of deposit of domestic banks
with assets of $1 billion or more; and (iv) repurchase agreements with
respect to any of the securities in which each Series may invest.
9
<PAGE>
Municipal Bonds and Municipal Notes are debt obligations of a state, and
its agencies and 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 which may be issued at a discount and are
sometimes referred to as Short-Term Discount Notes. Any Municipal Bond or
Municipal Note which depends directly or indirectly on the credit of the
Federal Government, its agencies or instrumentalities shall be considered to
have a Moody's rating of Aaa. An obligation shall be considered a Municipal
Bond, Municipal Note or Municipal Commercial Paper only if, in the opinion of
bond counsel to the issuer at the time of issuance, the interest payable
therefrom is exempt from both regular federal income tax and the regular
personal income tax of a designated State.
The foregoing percentage and rating limitations apply at the time of
acquisition of a security based on the last previous determination of the net
asset value of each respective Series. Any subsequent change in any rating by
a rating service or change in percentages resulting from market fluctuations
or other changes in total assets of a Series will not require elimination of
any security from the portfolio of such Series. Therefore, each Series may
hold securities which have been downgraded to ratings of Ba or BB or lower by
Moody's or S&P. However such investments may not exceed 5% of the total
assets of any Series. Any investments which exceed this limitation will be
eliminated from the portfolio within a reasonable period of time (such time
as the Investment Manager determines that it is practicable to sell the
investment without undue market or tax consequences to a Series). Municipal
Obligations rated below investment grade by Moody's or S&P are considered to
be speculative investments, some of which may not be currently paying any
interest and may have extremely poor prospects of ever attaining any real
investment standing.
Investments in Municipal Bonds rated either BBB by S&P or Baa by Moody's
(investment grade bonds--the lowest rated permissible investments by the
Fund) 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.
The ratings assigned by Moody's and S&P represent their opinions as to the
quality of the securities which they undertake to rate (see the Appendix to
the Statement of Additional Information). It should be emphasized, however,
that the ratings are general and not absolute standards of quality.
There are no restrictions on the maturities of most of the tax-exempt
securities that may be purchased by each Series and therefore the average
portfolio maturity of each Series is not subject to any limit. As a general
matter, the longer the average portfolio maturity, the greater will be the
impact of fluctuations in interest rates on the values of the portfolio
securities of each Series and the respective net asset value per share of
that Series.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940 ("the Act") and as such is not limited by the
Act in the proportion of its assets that it may invest in the obligations of
a single issuer. However, each Series of the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code (the "Code"). See "Dividends,
Distributions and Taxes." In order to qualify, among other requirements, each
Series will limit its investments so that at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the total assets
of such Series will be invested in the securities of a single issuer, within
a single State, and (ii) with respect to 50% of the market value of its total
assets not more than 5% of the value of its total assets will be invested in
the securities of a single issuer within a single State, and each Series will
not own more than 10% of the outstanding voting securities of a single
issuer. (Since the types of securities ordinarily purchased
10
<PAGE>
by each Series are nonvoting securities, there is generally no limit on the
percentage of an issuer's obligations that a Series may own). To the extent
that these requirements permit a relatively high percentage of each Series'
assets to be invested in the obligations of a limited number of issuers
within a single State, the value of the portfolio securities of each Series
will be more susceptible to any single economic, political or regulatory
occurrence than the portfolio securities of a diversified investment company.
Additionally, each Series' net asset value will fluctuate to a greater extent
than that of a diversified investment company as a result of changes in the
financial condition or in the market's assessment of the various issuers. The
tax limitations described in this paragraph are not fundamental policies and
may be revised to the extent applicable Federal income tax requirements are
revised.
The Fund, on behalf of each Series, may invest more than 25% of the total
assets of each Series in Municipal Obligations known as private activity
bonds. Such Obligations include health facility obligations, housing
obligations, industrial revenue obligations (including pollution control
obligations), electric utility obligations and water and sewer obligations,
provided that the percentage of the total assets of any Series in private
activity bonds in any one category does not exceed 25% of the total assets of
that Series. The ability of issuers of such obligations to make timely
payments of principal and interest will be affected by events and conditions
affecting these projects such as cyclicality of revenues and earnings,
regulatory and environmental restrictions and economic downturns, which may
result generally in a lowered need for such facilities and a lowered ability
of such users to pay for the use of such facilities. The 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 two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds, notes or commercial paper. General
obligation bonds, notes or commercial paper are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Issuers of general obligation bonds, notes or commercial paper
include a state, its counties, cities, towns and other governmental units.
Revenue bonds, notes or commercial paper are payable from the revenues
derived from a particular facility or class of facilities or, in some cases,
from specific revenue sources. Revenue bonds, notes or commercial paper are
issued for a wide variety of purposes, including the financing of electric,
gas, water and sewer systems and other public utilities; industrial
development and pollution control facilities; single and multi-family housing
units; public buildings and facilities; air and marine ports, transportation
facilities such as toll roads, bridges and tunnels; and health and
educational facilities such as hospitals and dormitories. They rely primarily
on user fees to pay debt service, although the principal revenue source is
often supplemented by additional security features which are intended to
enhance the creditworthiness of the issuer's obligations.
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 agencies or
authorities issue lease obligations to acquire equipment and facilities.
Lease obligations may have risks not normally associated with general
obligation or other revenue bonds. Leases, and installment purchase or
conditional sale contracts (which may provide for title to the leased asset
to pass eventually to the issuer), have developed as a means for governmental
issuers to acquire property and equipment without the necessity of complying
with the constitutional and statutory requirements generally applicable for
the issuance of debt. Certain lease obligations contain "non-appropriation"
clauses that provide that the governmental issuer has no obligation to make
future payments under the lease or contract unless money is appropriated for
such purpose by the appropriate legislative body on an annual or other
periodic basis. Consequently, continued lease payments on those lease
obligations containing "non-
11
<PAGE>
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.
In addition, lease obligations represent a relatively new type of
financing that has not yet developed the depth of marketability associated
with more conventional municipal obligations, and, as a result, certain of
such lease obligations may be considered illiquid securities. To determine
whether or not the Fund will consider such securities to be illiquid (the
Fund may not invest more than ten percent of its net assets in illiquid
securities), the Trustees of the Fund have established guidelines to be
utilized by the Fund in determining the liquidity of a lease obligation. The
factors to be considered in making the determination include: 1) the
frequency of trades and quoted prices for the obligation; 2) the number of
dealers willing to purchase or sell the security and the number of other
potential purchasers; 3) the willingness of dealers to undertake to make a
market in the security; and 4) the nature of the marketplace trades,
including, the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of the transfer.
The Trust may also purchase "certificates of participation," which are
securities issued by a particular municipality or municipal authority to
evidence a proportionate interest in base rental or lease payments relating
to a specific project to be made by a municipality, agency or authority. The
risks and characteristics of investments in certificates of participation are
similar to the risks and characteristics of lease obligations discussed
above.
Since each Series concentrates its investments in Municipal Obligations of
a particular State and its authorities and municipalities, each Series is
affected by any political, economic or regulatory developments affecting the
ability of issuers in that particular State to make timely payments of
interest and principal. For a more detailed discussion of the risks
associated with investments in a particular State, see the Appendix at the
back of this Prospectus.
Variable Rate Obligations. The interest rates payable on certain Municipal
Bonds and Municipal Notes are not fixed and may fluctuate based upon changes
in market rates. Municipal obligations of this type are called "variable
rate" obligations. The interest rate payable on a variable rate obligation is
adjusted either at predesigned periodic intervals or whenever there is a
change in the market rate of interest on which the interest rate payable is
based.
When-Issued and Delayed Delivery Securities. Each Series may purchase
tax-exempt securities on a when-issued or delayed delivery basis; i.e., the
price is fixed at the time of commitment but 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 any Series makes the commitment to purchase such
securities, it will record the transaction and there- after reflect the value
each day of such security in determining its net asset value. There is no
overall limit on the percentage of the Fund's assets which may be committed
to the purchase of securities on a when-issued, delayed delivery or forward
commitment basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis may increase the volatility of the Fund's net asset
value.
Zero Coupon Securities. A portion of the fixed- income securities
purchased by the Fund may be zero coupon securities. Such securities are
purchased at a discount from their face amount, giving the purchaser the
right to receive their full value at maturity. The interest earned on such
securities is, implicitly, automatically compounded and paid out at maturity.
While such compounding at a constant rate eliminates the risk of receiving
lower yields upon reinvestment of interest if prevailing interest rates
decline, the owner of a zero coupon security will be unable to participate in
higher yields upon reinvestment of interest received on interest-paying
securities if prevailing interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the
12
<PAGE>
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.
HEDGING ACTIVITIES
Subject to applicable state law, the Fund, on behalf of each Series except
the New Jersey Series, may enter into financial futures contracts, options on
such futures and municipal bond index futures contracts for hedging purposes.
Financial Futures Contracts and Options on Futures. With respect to each
applicable Series, the Fund may invest in financial futures contracts and
related options thereon. Each Series may sell a financial futures contract or
purchase a put option on such futures contract, if the Investment Manager
anticipates interest rates to rise, as a hedge against a decrease in the
value of a particular Series' portfolio securities. If the Investment Manager
anticipates that interest rates will decline, a Series may purchase a
financial futures contract or a call option thereon to protect against an
increase in the price of the securities that Series intends to purchase.
These futures contracts and related options thereon will be used only as a
hedge against anticipated interest rate changes.
Unlike a financial futures contract, which requires the parties to buy and
sell a security on a set date, an option on such a futures contract entitles
its holder to decide on or before a future date whether to enter into such a
contract (a long position in the case of a call option and a short position
in the case of a put option). If the holder decides not to enter into the
contract, the premium paid for the option on the contract is lost. Since the
value of the option is fixed at the point of sale, there are no daily
payments of cash to reflect the change in the value of the underlying
contract as there is by a purchaser or seller of a futures contract. The
value of the option does change and is reflected in the net asset value of
the Series for which it was purchased.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject
to such futures contracts may correlate imperfectly with the behavior of the
cash prices of each Series' portfolio securities. The risk of imperfect
correlation will be increased by the fact that the financial futures
contracts in which a Series may invest are on taxable securities rather than
tax-exempt securities, and there is no guarantee that the prices of taxable
securities will move in a similar manner to the prices of tax-exempt
securities.
Another risk is that the Investment Manager could be incorrect in its
expectations as to the direction or extent of various interest rate movements
or the time span within which the movements take place. For example, if the
Fund, on behalf of any Series, sold financial futures contracts for the sale
of securities in anticipation of an increase in interest rates, and then
interest rates went down instead, causing bond prices to rise, that Series
would lose money on the sale.
In addition to the risks that apply to all options transactions (see the
Statement of Additional Information for a description of the characteristics
of, and the risks of investing in, options on debt securities), there are
several special risks relating to options on futures. In particular, the
ability to establish and close out positions on such options will be subject
to the development and maintenance of a liquid secondary market. It is not
certain that this market will develop or be maintained.
Municipal Bond Index Futures. Each applicable Series may utilize municipal
bond index futures contracts for hedging purposes. The strategies in
employing such contracts will be similar to that discussed above with respect
to financial futures and options thereon. A municipal bond index is a method
of reflecting in a single number the market
13
<PAGE>
value of many different municipal bonds and is designed to be representative
of the municipal bond market generally. The index fluctuates in response to
changes in the market values of the bonds included within the index. Unlike
futures contracts on particular financial instruments, transactions in
futures on a municipal bond index will be settled in cash, if held until the
close of trading in the contract. However, like any other futures contract, a
position in the contract may be closed out by a purchase or sale of an
offsetting contract for the same delivery month prior to expiration of the
contract.
No Series may enter into futures contracts or related options thereon if
immediately thereafter the amount committed to margin plus the amount paid
for option premiums exceeds 5% of the value of that Series' total assets. The
Fund, on behalf of any Series, may not purchase or sell futures contracts or
related options if immediately thereafter more than one-third of the net
assets of that Series would be hedged.
Options. The Fund on behalf of any applicable Series, may purchase or sell
(write) options on debt securities as a means of achieving additional return
or hedging the value of a Series of the Fund's portfolio. The Fund, on behalf
of a Series, would only buy options listed on national securities exchanges.
The Fund, will not purchase options on behalf of any Series if, as a result,
the aggregate cost of all outstanding options exceeds 10% of the Fund's total
assets.
PORTFOLIO MANAGEMENT
The portfolio of each Series is managed by the Investment Manager with a
view to achieving its investment objective. The Fund is managed within
InterCapital's Municipal Fixed Income Group, which manages 40 tax-exempt
municipal funds and fund portfolios, with approximately $11.2 billion in
assets as of January 31, 1996. James F. Willison, Senior Vice President of
InterCapital and Manager of InterCapital's Municipal Fixed Income Group, has
been the primary portfolio manager of the Fund since its inception and has
been a portfolio manager at InterCapital for over five years. Securities are
purchased and sold principally in response to the Investment Manager's
current evaluation of an issuer's ability to meet its debt obligations in the
future, and the Investment Manager's current assessment of future changes in
the levels of interest rates on tax-exempt securities of varying maturities.
There are a number of state tax restrictions which limit the ability of the
Investment Manager to trade the portfolio securities of a particular Series
and which affect the composition of the portfolio of such Series. It is the
policy of the Investment Manager to adhere to any restrictions affecting a
particular Series. See "Dividends, Distributions and Taxes--State Taxation."
Securities purchased by each Series are, generally, sold by dealers acting
as principal for their own accounts. (Pursuant to an order issued by the
Securities and Exchange Commission, the Fund may effect principal
transactions in certain taxable money market instruments with Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Investment Manager.
In addition, the Fund may incur brokerage commissions on transactions
conducted through DWR. Brokerage commissions are not normally charged on
purchases and sales of municipal obligations, but such transactions may
involve transaction costs in the form of spreads between bid and asked
prices. It is anticipated that the annual portfolio turnover rate of each
Series will not exceed 100%.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund, on behalf of each Series, as fundamental
policies. Under the Act, a fundamental policy may not be changed without the
vote of a majority of the outstanding voting securities of each Series, as
defined in the Act.
14
<PAGE>
For purposes of the investment policies and restrictions of the Fund: (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; (b) a "taxable security" is any security the interest on
which is subject to regular federal income tax; and (c) all percentage
limitations apply immediately after a purchase or initial investment, and any
subsequent change in any applicable percentage resulting from market
fluctuations or other changes in total assets does not require elimination of
any security from the portfolio.
Each Series may not:
1. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which each Series may invest consistent with its
investment objective and policies; (b) by investment in repurchase
agreements; and (c) by lending its portfolio securities.
2. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities or to municipal obligations, including those
issued by the designated State of each Series or its political
subdivisions.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor") an affiliate of the Investment Manager,
shares of each Series of the Fund are distributed by the Distributor and
offered by DWR and other dealers who have entered into selected dealer
agreements with the Distributor ("Selected Broker-Dealers"). The principal
executive office of the Distributor is located at Two World Trade Center, New
York, New York 10048.
The minimum initial purchase is $1,000. Minimum subsequent purchases of
$100 or more may be made by sending a check, payable to Dean Witter
Multi-State Municipal Series Trust, (name of Series), directly to Dean Witter
Trust Company (the "Transfer Agent") at P.O. Box 1040, Jersey City, NJ 07303
or by contacting an account executive of DWR or other Selected Broker-Dealer.
The minimum initial purchase in the case of investments through EasyInvestsm,
an automatic purchase plan (see "Shareholder Services") is $100, provided
that the schedule of automatic investments will result in investments
totalling at least $1,000 within the first twelve months.
In the case of purchases made pursuant to Systematic Payroll Deduction
plans, the Fund, in its discretion, may accept such purchases without regard
to any minimum amounts which would otherwise be required if the Fund has
reason to believe that additional investments will increase the investment in
all accounts under such plans to at least $1,000. Certificates for shares of
each Series purchased will not be issued unless a request is made by the
shareholder in writing to the Transfer Agent. The offering price for each
Series will be the net asset value per share of that Series next determined
following receipt of an order (see "Determination of Net Asset Value" below),
plus a sales charge (expressed as a percentage of the offering price) on a
single transaction as shown in the following table:
SALES CHARGE
-------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF PUBLIC PERCENTAGE OF
SINGLE TRANSACTION OFFERING PRICE AMOUNT INVESTED
- --------------------------------- -------------- ---------------
Less than $25,000 ................ 4.00% 4.17%
$25,000 but less than $50,000 ... 3.50 3.63
$50,000 but less than $100,000 .. 3.25 3.36
$100,000 but less than $250,000 . 2.75 2.83
$250,000 but less than $500,000 . 2.50 2.56
$500,000 but less than $1,000,000 1.75 1.78
$1,000,000 and over .............. 0.50 0.50
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or
her
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spouse and their children under the age of 21 purchasing shares for his or
her own accounts; (c) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified
under Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue
Code of a single employer or of employers who are "affiliated persons" of
each other within the meaning of Section 2(a)(3)(c) of the Act; or (g) any
other organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some
purpose other than the purchase of redeemable securities of a registered
investment company at a discount. Shares of each Series of the Fund may be
sold at their net asset value per share, without the imposition of a sales
charge, to employee benefit plans established by DWR and SPS Transaction
Services, Inc. (an affiliate of DWR) for their employees as qualified under
Section 401 (K) of the Internal Revenue Code.
Sales personnel are compensated for selling shares of the Fund at the time
of their sale by the Distributor and/or Selected Broker-Dealer. In addition,
some sales personnel of the Selected Broker- Dealer will receive various
types of non-cash com- pensation as special sales incentives, including
trips, educational and/or business seminars and merchandise.
Shares of each Series of the Fund are sold through the Distributor on a
normal three business day settlement basis; that is, payment is due on the
third business day (settlement date) after the order is placed with the
Distributor. Shares of each Series purchased through the Distributor are
entitled to dividends beginning on the next business day following settlement
date. Since DWR and other Selected Broker-Dealers forward investors' funds on
settlement date, they will benefit from the temporary use of the funds if
payment is made prior thereto. Shares purchased through the Transfer Agent
are entitled to dividends beginning on the next business day following
receipt of an order. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
capital gains distributions if their order is received by close of business
on the day prior to the record date for such distributions. The Fund and/or
the Distributor reserve the right to reject any purchase order.
Analogous Dean Witter Funds. The Distributor and the Investment Manager
serve in the same capacities for Dean Witter California Tax-Free Income Fund
and Dean Witter New York Tax-Free Income Fund, open-end investment companies
with investment objectives and policies similar to those of the Fund. Unlike
the Fund, however, shares of Dean Witter California Tax-Free Income Fund and
Dean Witter New York Tax-Free Income Fund are offered to the public at net
asset value, with a contingent deferred sales charge assessed upon
redemptions within six years of purchase rather than with a sales charge
imposed at the time of purchase. These three Dean Witter Funds have differing
fees and expenses, which will affect performance. Investors who would like to
receive a prospectus for Dean Witter California Tax-Free Income Fund and Dean
Witter New York Tax-Free Income Fund should call the telephone numbers listed
on the front cover of this Prospectus, or may call their account executive
for additional information.
REDUCED SALES CHARGES
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
shares of a Series of the Fund in single transactions with the purchase of
shares of another Series of the Fund. The sales charge payable on the
purchase of shares of a Series of the Fund and any other Series will be at
the respective rate applicable to the total amount of the combined concurrent
purchases.
Right of Accumulation. The above persons and entities may also benefit
from a reduction of the
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<PAGE>
sales charges in accordance with the above schedule if the cumulative net
asset value of shares of a Series purchased in a single transaction, together
with shares previously purchased (including shares of another Series) which
are held at the time of such transaction, amounts to $25,000 or more.
The Distributor must be notified by the shareholder at the time a purchase
order is placed that the purchase qualifies for the reduced charge under the
Right of Accumulation. Similar notification must be made in writing by the
shareholder when such an order is placed by mail. The reduced sales charge
will not be granted if: (a) such notification is not furnished at the time of
the order; or (b) a review of the records of the Distributor or the Transfer
Agent fails to confirm the investor's represented holdings.
Letter of Intent. The foregoing schedule of reduced sales charges will
also be available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of shares of any
Series of the Fund from the Distributor. The cost of shares of any Series of
the Fund which were previously purchased at a price including a front-end
sales charge during the 90-day period prior to the date of receipt by the
Distributor of the Letter of Intent, which are still owned by the
shareholder, may also be included in determining the applicable reduction.
For further information concerning purchases of the Fund's shares, contact
the Distributor or consult the Statement of Additional Information.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1
under the Act, whereby the expenses of certain activities and services by DWR
and others who engage in or support distributions of Fund Shares or who
service shareholder accounts, including overhead and telephone expenses
incurred in connection with the distribution of the Fund's shares, are
reimbursed. Reimbursements for these expenses will be made in monthly
payments by the Fund to the Distributor, which will in no event exceed an
amount equal to a payment at the annual rate of 0.15 of 1% of the average
daily net assets of each Series of the Fund. Expenses incurred by the
Distributor pursuant to the Plan in any fiscal year will not be reimbursed by
the Fund through payments accrued in any subsequent fiscal year. No interest
or other financing charges will be incurred on any distribution expense
incurred by the Distributor under the Plan or on any unreimbursed expenses
due to the Distributor pursuant to the Plan. The fee payable pursuant to the
Plan, equal to 0.15% of the Fund's average daily net assets, is characterized
as a service fee within the meaning of NASD guidelines. The service fee is a
payment made for personal service and/or the maintenance of shareholder
accounts. The Arizona Series, California Series, Florida Series,
Massachusetts Series, Michigan Series, Minnesota Series, New Jersey Series,
New York Series, Ohio Series and Pennsylvania Series accrued a total of
$71,184, $169,661, $103,070, $23,297, $28,610, $15,374, $66,078, $21,315,
$31,476 and $74,576, respectively under the Plan for the fiscal year ended
November 30, 1994. This accrual is an amount equal to 0.14% of the daily net
assets of each respective Series of the Fund (0.15% of the daily net assets
of the California Series, Massachusetts Series and the Pennsylvania Series).
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Series 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 by taking the value of all assets of each
Series of the Fund, subtracting all of their respective liabilities, dividing
by the number of shares of the respective Series outstanding and adjusting to
the nearest cent. The net asset value per share of each Series will not be
determined on Good Friday and on such other federal and non-federal holidays
as are observed by the New York Stock Exchange.
Portfolio securities (other than short-term taxable debt securities,
futures and options) are valued for the Fund by an outside independent
pricing
17
<PAGE>
service approved by the Fund's 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.
Short-term taxable debt securities with remaining maturities of sixty days
or less at the time of purchase are valued at amortized cost, unless the
Trustees determine such does not reflect the securities' market value, in
which case these securities will be valued at their fair value as determined
by the Trustees.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of each respective Series of the Fund, (or if specified by the
Shareholder, any other Series of the Fund or any other open-end investment
company for which InterCapital serves as Investment Manager (collectively
with the Fund, the "Dean Witter Funds")), unless the shareholder requests
they be paid in cash. Each purchase of shares of each Series of the Fund is
made upon the condition that the Transfer Agent is thereby automatically
appointed as agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and
distributions will be paid in shares of each respective Series of the Fund at
net asset value per share (or in cash if the shareholder so requests) on the
monthly payment date, which will be no later than the last business day of
the month for which the dividend or distribution is payable. Processing of
dividend checks begins immediately following the monthly payment date.
Shareholders who have requested to receive dividends in cash will normally
receive their monthly dividend check during the first ten days of the
following month.
EasyInvestsm. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund (see "Purchase of Fund Shares" and
"Redemptions and Repurchases--Involuntary Redemption").
Systematic Withdrawal Plan. A withdrawal plan is available for
shareholders who own or purchase shares of any Series of the Fund having a
minimum value of $10,000 based upon the then current offering price. The plan
provides for monthly or quarterly (March, June, September and December)
checks in any dollar amount, not less than $25, or in any whole percentage of
the account balance, on an annualized basis.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of a Series of the Fund for shares of any
other Series of the Fund, shares of other Dean Witter Funds sold with a
front-end (at time of purchase) sales charge ("FESC Funds"), for shares of
Dean Witter Funds sold with a contingent deferred sales charge ("CDSC
Funds"), and for shares of Dean Witter Short-Term U.S. Treasury Trust, Dean
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean
Witter Balanced Income Fund, Dean Witter Balanced Growth Fund, Dean Witter
Intermediate Term U.S. Treasury Trust and five Dean Witter Funds which are
money mar-
18
<PAGE>
ket funds (the foregoing eleven non-FESC and non-CDSC funds are hereinafter
referred to as the "Exchange Funds"). Exchanges may be made after the shares
of a Series of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment. However,
shares of CDSC funds, including shares acquired in exchange for shares of
FESC funds, may not be exchanged for shares of FESC funds. Thus, shareholders
who exchange their Fund shares for shares of CDSC funds may subsequently
exchange those shares for shares of other CDSC funds or Exchange Funds but
may not reacquire FESC fund shares by exchange.
An exchange to another FESC fund or to a CDSC fund or to an Exchange Fund
is on the basis of the next calculated net asset value per share of each fund
after the exchange order is received. When exchanging into a money market
fund from a Series of the Fund, shares of the Series are redeemed out of the
Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following business day. Subsequent exchanges
between any of the Exchange Funds, FESC and CDSC funds can be effected on the
same basis (except that CDSC fund shares may not be exchanged for shares of
FESC funds). Shares of a CDSC fund acquired in exchange for shares of an FESC
fund (or in exchange for shares of other Dean Witter Funds for which shares
of an FESC fund have been exchanged) are not subject to any contingent
deferred sales charge upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of a Series' other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of a Series and its other shareholders, investors should be
aware that the Fund and each of the other Dean Witter Funds may in their
discretion limit or otherwise restrict the number of times this Exchange
Privilege may be exercised by any investor. Any such restriction will be made
by the Fund on a prospective basis only, upon notice to the shareholder not
later than ten days following such shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Dean Witter Funds for which shares of a Series of the
Fund have been exchanged, upon such notice as may be required by applicable
regulatory agencies. Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their account executive
regarding restrictions on exchange of shares of any Series of the Fund
pledged in their margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated
for federal income tax purposes the same as a repurchase or redemption of
shares, on which the shareholder may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in
situations where there is an exchange of shares within ninety days after the
shares are purchased. The Exchange Privilege is only available in states
where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of a Series of the Fund for shares of any
other Series of the Fund or for Shares of any of the Dean Witter Funds (for
which the Exchange Privilege is available) pursuant
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<PAGE>
to this Exchange Privilege by contacting their DWR or other Selected
Broker-Dealer account executive (no Exchange Privilege Authorization Form is
required). Other shareholders (and those shareholders who are clients of DWR
or another Selected Broker-Dealer but who wish to make exchanges directly by
writing or telephoning the Transfer Agent) must complete and forward to the
Transfer Agent an Exchange Privilege Authorization Form, copies of which may
be obtained from the Transfer Agent, to initiate an exchange. If the
Authorization Form is used, exchanges may be made in writing or by contacting
the Transfer Agent at (800) 869-NEWS (toll free). The Fund will employ
reasonable procedures to confirm that exchange instructions communicated over
the telephone are genuine. Such procedures may include requiring various
forms of personal identification such as name, mailing address, social
security or other tax identification number and DWR or other Selected
Broker-Dealer account number (if any). Telephone instructions may also be
recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. Telephone exchange
instructions will be accepted if received by the Transfer Agent between 9:00
a.m. and 4:00 p.m. New York time, on any day the New York Stock Exchange is
open. Any shareholder wishing to make an exchange who has previously filed an
Exchange Privilege Authorization Form and who is unable to reach the Fund by
telephone should contact his or her DWR or other Selected Broker-Dealer
account executive, if appropriate, or make a written exchange request.
Shareholders are advised that during periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the Dean
Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. Shares of each Series of the Fund can be redeemed for cash at
any time at their respective current net asset value per share next
determined (without any redemption or other charge). If shares are held in a
shareholder's account without a share certificate, a written request for
redemption is required. If certificates are held by the shareholder(s), the
shares may be redeemed by surrendering the certificate(s) with a written
request for redemption along with any additional information required by the
Transfer Agent.
Repurchase. DWR and other Selected Broker- Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker- Dealers
upon the telephonic request of the shareholder. The repurchase price is the
net asset value next determined (see "Purchase of Fund Shares-- Determination
of Net Asset Value") after such repurchase order is received. Repurchase
orders received by DWR and other Selected Broker-Dealers by 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. Selected Broker-Dealers may charge
for their services in connection with the repurchase, but the Fund, DWR and
the Distributor do not charge a fee. Payment for shares repurchased may be
made by the Fund to DWR and other Selected Broker-Dealers for the account of
the shareholder. The offer by DWR and other Selected Broker-Dealers to
repurchase shares from dealers or shareholders may be suspended by them at
any time. In that event, shareholders may redeem their shares through the
Fund's Transfer Agent as set forth above under "Redemption."
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such
20
<PAGE>
payment may be postponed or the right of redemption suspended at times when
normal trading is not taking place on the New York Stock Exchange. If the
shares to be redeemed have recently been purchased by check, payment of the
redemption proceeds may be delayed for the minimum time needed to verify that
the check used for investment has been honored (not more than fifteen days
from the time of receipt of the check by the Transfer Agent). Shareholders
maintaining margin accounts with DWR or another Selected Broker-Dealer are
referred to their account executive regarding restrictions on redemption of
shares of the Fund pledged in the margin account.
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 the net asset value (without a sales
charge) next determined after a reinstatement request, together with the
proceeds, is received by the Transfer Agent.
Involuntary Redemption. The Fund reserves the right to redeem, on sixty
days' notice and at net asset value, the shares of any shareholder whose
shares due to redemptions by the shareholder have a value of less than $100
as a result of redemptions or repurchases, or such lesser amount as may be
fixed by the Trustees or, in the case of an account opened through
EasyInvest, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the
value of the shares is less than the applicable amount and allow the
shareholder sixty days in which to make an additional investment in an amount
which will increase the value of his or her account to at least the
applicable amount or more before the redemption is processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund declares, on behalf of each Series,
dividends from net investment income on each day the New York Stock Exchange
is open for business (see "Purchase of Fund Shares"). Such dividends are
payable monthly. Each Series intends to distribute substantially all of its
net investment income on an annual basis.
Each Series of the Fund will distribute at least once each year all net
short-term capital gains, if there are any, after utilization of any capital
loss carryovers. Each Series 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 capital gains distributions will be paid in
additional Series' shares (without sales charge) and automatically credited
to the shareholder's account without issuance of a share certificate unless
the shareholder requests in writing that all dividends and distributions be
paid in cash. (See "Shareholder Services--Automatic Investment of Dividends
and Distributions.") Taxable capital gains may be generated by transactions
in options and futures contracts engaged in by any Series of the Fund. Any
dividends or distributions declared in the last quarter of any calendar year
which are paid in the following year prior to February 1, will be deemed
received by shareholders of record in the prior quarter in the prior year.
Taxes. Because each Series of the Fund intends to distribute substantially
all of its net investment income and capital gains to shareholders and
intends to otherwise remain qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code as amended (the "Code"), it is not
expected that any Series will be required to pay any federal income tax (if
any Series 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 that Series as a credit against their individual
federal income tax).
The Code may subject interest received on certain otherwise tax-exempt
securities to an alter-
21
<PAGE>
native minimum tax. This alternative minimum tax may be incurred due to
interest received on "private activity bonds" (in general, bonds that benefit
non- government entities) issued after August 7, 1986 which, although
tax-exempt, are used for purposes other than those generally performed by
governmental units (e.g., bonds used for commercial or housing purposes).
Income received on such bonds is classified as a "tax preference item", under
the alternative minimum tax, for both individual and corporate investors. A
portion of each Series' investments may be made in such "private activity
bonds," with the result that a portion of the exempt-interest dividends paid
by each Series will be an item of tax preference to shareholders of that
Series subject to the alternative minimum tax. In addition, certain
corporations which are subject to the alternative minimum tax may have to
include a portion of exempt-interest dividends in calculating their
alternative minimum taxable income in situations where the "adjusted current
earnings" of the corporation exceeds its alternative minimum taxable income.
Under the Revenue Reconciliation Act of 1993, all or a portion of the
Fund's gain from the sale or redemption of tax-exempt obligations purchased
at a market discount after April 30, 1993 will be treated as ordinary income
rather than capital gain. This rule may increase the amount of ordinary
income dividends received by shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and any capital gains distributions including
information indicating the percentage of the dividend distributions for such
fiscal year which constitutes exempt- interest dividends and the percentage,
if any, that is taxable, and the percentage, if any, of the exempt- interest
dividends which constitutes an item of tax preference.
Shareholders who are required to pay taxes on their income will normally
be subject to federal and state income tax on dividends paid from interest
income derived from taxable securities and on distributions of net capital
gains they receive from the Fund. For federal income tax purposes,
distributions of long-term capital gains, if any, are taxable to shareholders
as long-term capital gains, regardless of how long a shareholder has held
shares of any Series of the Fund and regardless of whether the distribution
is received in additional shares or in cash. 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 to the extent of the capital gains distribution. To
avoid being subject to a 31% federal backup withholding tax on taxable
dividends and capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to accuracy.
The foregoing relates primarily to federal income taxation as in effect as
of the date of this Prospectus. Distributions from investment income and
capital gains, including exempt-interest dividends, may be subject to state
taxes in states other than the state of each designated Series, and also to
local taxes. Shareholders should consult their tax advisors as to the
applicability of the above to their own tax situation and as to the tax
consequences to them of an investment in any Series of the Fund.
STATE TAXATION. The following general considerations are relevant to
investors in each Series of the Fund indicated below. Shareholders of each
designated Series should consult their tax advisers about other state and
local tax consequences of their investments in such Series.
Arizona. Under a ruling issued by the Arizona Department of Revenue in
1984, distributions from the Arizona Series that are received by shareholders
that are Arizona taxpayers will not be subject to Arizona income tax to the
extent that those distributions are attributable to interest on tax-exempt
obligations of the State of Arizona or interest on obligations of the United
States. Distributions from the Arizona Series attributable to obligations of
the governments of Puerto Rico, the Virgin Islands and Guam should also be
excludible from Arizona income tax. Other distributions from the Arizona
Series, including those related to short-term and long-term capital gains,
generally will be taxable
22
<PAGE>
under Arizona law when received by Arizona taxpayers. Interest on
indebtedness incurred (directly or indirectly) by a shareholder to purchase
or carry shares of the Arizona Series should not be deductible for Arizona
income tax purposes to the extent that the Arizona Series holds tax-exempt
obligations of the State of Arizona, obligations of the United States, and
obligations of Puerto Rico, the Virgin Islands and Guam.
The foregoing discussion assumes that in each taxable year the Arizona
Series qualifies and elects to be taxed as a regulated investment company for
federal income tax purposes. In addition, the following discussion assumes
that in each taxable year the Arizona Series qualifies to pay exempt-interest
dividends by complying with the requirement of the Code that at least 50% of
its assets at the close of each quarter of its taxable year is invested in
state, municipal or other obligations, the interest on which is excluded from
gross income for federal income tax purposes pursuant to section 103(a) of
the Code.
California. In any year in which the Fund qualifies as a regulated
investment company under the Internal Revenue Code and is exempt from federal
income tax, (i) the California Series will also be exempt from the California
corporate income and franchise taxes to the extent it distributes its income
and (ii), provided 50% or more of the value of the total assets of the
California Series at the close of each quarter of its taxable year consists
of obligations the interest on which (when held by an individual) is exempt
from personal income taxation under California law. The California Series
will be qualified under California law to pay "exempt-interest" dividends
which will be exempt from the California personal income tax.
The portion of dividends constituting exempt-interest dividends is that
portion derived from interest on obligations which pay interest excludable
from California personal income under California law. The total amount of
California exempt-interest dividends paid by the California Series to all of
its shareholders with respect to any taxable year cannot exceed the amount of
interest received by the California Series during such year on such
obligations less any expenses and expenditures (including dividends paid to
corporate shareholders) deemed to have been paid from such interest. Any
dividends paid to corporate shareholders subject to the California franchise
or corporate income tax will be taxed as ordinary dividends to such
shareholders.
Individual shareholders of the California Series who reside in California
will not be subject to California personal income tax on distributions
received from the California Series to the extent such distributions are
attributable to interest received by the California Series during its taxable
year on obligations, the interest on which (when held by an individual) is
exempt from taxation under California law.
Because, unlike federal law, California law does not impose personal
income tax on an individual's Social Security benefits, the receipt of
California exempt-interest dividends will have no effect on an individual's
California personal income tax.
Individual shareholders will normally be subject to federal and California
personal income tax on dividends paid from interest income derived from
taxable securities and distributions of net capital gains. In addition,
distributions other than exempt-interest dividends to such shareholders are
includable in income subject to the California alternative minimum tax. For
federal income tax and California personal income tax purposes, distributions
of long-term capital gains, if any, are taxable to shareholders as long-term
capital gains, regardless of how long a shareholder has held shares of the
California Series and regardless of whether the distribution is received in
additional shares or in cash. In addition, unlike federal law, the
shareholders of the California Series will not be subject to tax, or receive
a credit for tax paid by the California Series, on undistributed capital
gains, if any.
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 California Series, generally will
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not be deductible by the investor for federal or state personal income tax
purposes. In addition, as a result of California's incorporation of certain
provisions of the Code, a loss realized by a shareholder upon the sale of
shares held for six months or less may be disallowed to the extent of any
exempt-interest dividends received with respect to such shares. Moreover,
any loss realized upon the redemption of shares within six months from the
date of purchase of such shares and following receipt of a long-term capital
gains distribution will be treated as long-term capital loss to the extent of
such long-term capital gains distribution. Finally, any loss realized upon
the redemption of shares within 30 days before or after the acquisition of
other shares of the Trust may be disallowed under the "wash sale" rules.
Distributions from investment income and long-term and short-term capital
gains will not be excludable from taxable income in determining the
California corporate franchise tax for corporate shareholders. Such
distributions may also be includable in income subject to the alternative
minimum tax. In addition, distributions from investment income and long-term
and short-term capital gains may be subject to state taxes in states other
than California, and to local taxes.
Florida. Under existing Florida law, neither the State of Florida nor any
of its political subdivisions or other governmental authorities may impose an
income tax on individuals. Accordingly, individual shareholders of the
Florida Series will not be subject to any Florida state or local income taxes
on income derived from investments in the Florida Series. However, such
income may be subject to state or local income taxation under applicable
state or local laws in jurisdictions other than Florida. In addition, the
income received from the Florida Series may be subject to estate taxes under
present Florida law and certain corporations may be subject to the taxes
imposed by Chapter 220, Florida Statutes, on interest, income or profits on
debt obligations owned by corporations as defined in said Chapter 220.
The State of Florida also imposes an annual tax of 2 mills on each dollar
($2.00 per $1,000) of the just valuation of all intangible personal property
that has a taxable situs within the State. However, the entire value of a
shareholder's interest in the Florida Series will be exempt from Florida's
intangible personal property tax if, as is intended, all of the investments
and other assets held by the Florida Series on the applicable assessment date
are exempt individually from the intangible personal property tax. It
presently is the policy and intention of the Fund and the Investment Manager
to manage the Florida Series in such a manner as to ensure that on each
annual assessment date the Florida Series will consist of only those
investments and other assets which are exempt from the Florida intangible
personal property tax. Accordingly, it is unlikely that any shareholder of
the Florida Series will ever be subject to such tax. In the event that the
Florida Series includes investments or other assets on the annual assessment
date which may subject shareholders to the Florida intangible personal
property tax, the Fund shall so notify the Shareholders.
Massachusetts. Under existing Massachusetts law, provided the
Massachusetts Series qualifies as a "regulated investment company" under the
Code, the Massachusetts Series will not be subject to Massachusetts income or
excise taxation. Shareholders of the Massachusetts Series that are
individuals, estates or trusts and are subject to the Massachusetts personal
income tax will not be subject to such tax on distributions of the
Massachusetts Series that qualify as "exempt-interest dividends" under
Section 852(b)(5) of the Code and are attributable to interest received by
the Massachusetts Series on obligations issued by The Commonwealth of
Massachusetts and its municipalities, political subdivisions and governmental
agencies and instrumentalities, or by Puerto Rico, the U.S. Virgin Islands or
Guam, which pay interest excludable from gross income under the Code and
exempt from Massachusetts personal income taxation. Other distributions to
such shareholders will generally be included in income subject to the
Massachusetts personal income tax, except for (1) distributions, if any,
attributable to interest received by the Massachusetts Series on direct
obligations of the United
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States and (2) distributions, if any, attributable to gain realized by the
Massachusetts Series on the sale of certain Massachusetts obligations issued
pursuant to Massachusetts statutes that specifically exempt such gain from
Massachusetts taxation. Dividends from the Massachusetts Series that qualify
as capital gain dividends under Section 852(b)(3)(C) of the Code, other than
such dividends described in the second clause of the preceding sentence, will
be treated as long-term capital gains for Massachusetts personal income tax
purposes.
As a result of a change in the Massachusetts tax laws, applicable to
taxable years beginning on or after January 1, 1996, gain income from the
sale or exchange of shares of the Massachusetts Series will be taxed at a
stepped down rate depending on the number of years such shares have been
held. For purposes of determining the holding period, shares acquired prior
to 1/1/96 shall be deemed to have been acquired on 1/1/95, or on the date of
actual acquisition, whichever is later.
In determining the Massachusetts excise tax on corporations subject to
Massachusetts taxation, distributions from the Massachusetts Series, whether
attributable to taxable or tax-exempt income or gain realized by the
Massachusetts Series, will not be excluded from a corporate shareholder's net
income and, in the case of a shareholder that is an intangible property
corporation, shares of the Massachusetts Series will not be excluded from net
worth.
Michigan. Under existing Michigan law, to the extent that the
distributions from the Michigan Series qualify as "exempt-interest dividends"
of a regulated investment company under Section 852(b)(5) of the Code which
are attributable to interest on tax-exempt obligations of the State of
Michigan, its political or governmental subdivisions, or its governmental
agencies or instrumentalities ("Michigan Obligations"), or obligations of the
United States or its agencies or possessions that are exempt from state
taxation, such distributions will also not be subject to Michigan income tax
or Michigan single business tax. Under existing Michigan law, an owner of a
share of an investment company (such as the Michigan Series) will be
considered the owner of a pro rata share of the assets of the investment
company. As such, yield from such shares, for intangibles tax purposes, will
not include the interest or dividends received from Michigan Obligations or
obligations of the United States or its agencies or possessions. In addition,
Michigan Series shares owned by certain financial institutions or by certain
other persons subject to the Michigan single business tax are exempt from the
Michigan intangibles tax.
To the extent that distributions of the Michigan Series are derived from
other income, including long- or short-term capital gains, the distributions
will not be exempt from Michigan income tax or Michigan single business tax.
Certain Michigan cities have adopted Michigan's uniform city income tax
ordinance, which under the Michigan city income tax act is the only income
tax ordinance that may be adopted by cities in Michigan. To the extent the
distributions on the Michigan Series are not subject to Michigan income tax,
they are not subject to any Michigan city's income tax.
Minnesota. Under existing Minnesota law, provided the Minnesota Series
qualifies as a "regulated investment company" under the Code, and subject to
the discussion in the paragraph below, individual shareholders of the
Minnesota Series resident in Minnesota who are subject to the regular
Minnesota personal income tax will not be subject to such regular Minnesota
tax on Minnesota Series dividends to the extent that such distributions
qualify as exempt-interest dividends of a regulated investment company under
Section 852(b)(5) of the Code which are derived from interest income on
tax-exempt obligations of the State of Minnesota, or its political or
governmental subdivisions, municipalities, governmental agencies or
instrumentalities ("Minnesota Sources"). The foregoing will apply, however,
only if the portion of the exempt-interest dividends from such Minnesota
Sources that is paid to all shareholders represents 95% or more of the
exempt-interest dividends that are paid by the Minnesota
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Series. If the 95% test is not met, all exempt-interest dividends that are
paid by the Minnesota Series will be subject to the regular Minnesota
personal income tax. Even if the 95% test is met, to the extent that
exempt-interest dividends that are paid by the Minnesota Series are not
derived from the Minnesota Sources described in the first sentence of this
paragraph, such dividends will be subject to the regular Minnesota personal
income tax. Other distributions of the Minnesota Series, including
distributions from net short-term and long-term capital gains, are generally
not exempt from the regular Minnesota personal income tax.
Legislation enacted in 1995 provides that it is the intent of the
Minnesota legislature that interest income on obligations of Minnesota
governmental units, including obligations of the Minnesota Sources described
above, and exempt-interest dividends that are derived from interest income on
such obligations, be included for Minnesota income tax purposes in the net
income of resident individuals, among others, if it is judicially determined
that the exemption by Minnesota of such interest or such exempt-interest
dividends unlawfully discriminates against interstate commerce because
interest income on obligations of governmental issuers located in other
states, or exempt-interest dividends derived from such obligations, is so
included. This provision applies to taxable years that begin during or after
the calendar year in which such judicial decision becomes final, regardless
of the date on which the obligations were issued, and other remedies apply
for previous taxable years. The United States Supreme Court recently denied
certiorari in an Ohio case which upheld an exemption for interest income on
obligations of Ohio governmental issuers, even though interest income on
obligations of non-Ohio governmental issuers was subject to tax. However, it
cannot be predicted whether a similar case will be brought in Minnesota or
elsewhere, or what the outcome of such case would be.
Minnesota presently imposes an alternative minimum tax on resident
individuals that is based, in part, on their federal alternative minimum
taxable income, which includes federal tax preference items. The Code
provides that interest on specified private activity bonds is a federal tax
preference item, and that an exempt-interest dividend of a regulated
investment company constitutes a federal tax preference item to the extent of
its proportionate share of the interest on such private activity bonds.
Accordingly, exempt-interest dividends that are attributable to such private
activity bond interest, even though they are derived from the Minnesota
Sources described above, will be included in the base upon which such
Minnesota alternative minimum tax is computed. In addition, the entire
portion of exempt-interest dividends that is derived from sources other than
the Minnesota Sources described above is subject to the Minnesota alternative
minimum tax. Further, should the 95% test that is described above fail to be
met, all of the exempt-interest dividends that are paid by the Minnesota
Series, including all of those that are derived from the Minnesota Sources
described above, will be subject to the Minnesota alternative minimum tax.
Subject to certain limitations that are set forth in the Minnesota rules,
Minnesota Series dividends, if any, that are derived from interest on certain
United States obligations are not subject to the regular Minnesota personal
income tax or the Minnesota alternative minimum tax, in the case of
individual shareholders of the Minnesota Series who are resident in
Minnesota.
Minnesota Series distributions, including exempt-interest dividends, are
not excluded in determining the Minnesota franchise tax on corporations that
is measured by taxable income and alternative minimum taxable income.
Minnesota Series distributions may also be taken into account in certain
cases in determining the minimum fee that is imposed on corporations, S
corporations and partnerships.
Interest on indebtedness incurred or continued by a shareholder of the
Minnesota Series to purchase or carry shares of the Minnesota Series will
generally not be deductible for regular Minnesota personal income tax
purposes or Minnesota alternative minimum tax purposes, in the case of
individual shareholders of the Minnesota Series who are resident in
Minnesota.
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<PAGE>
Shares of the Minnesota Series will not be subject to the Minnesota
personal property tax.
New Jersey. Under existing New Jersey law, as long as the New Jersey
Series qualifies as a "qualified investment fund," shareholders of the New
Jersey Series will not be required to include in their New Jersey gross
income distributions from the New Jersey investment fund to the extent that
such distributions are attributable to interest or gain from obligations (1)
issued by or on behalf of New Jersey or any county, municipality, school or
other district, agency, authority, commission, instrumentality, public
corporation, body corporate and politic or political subdivision of New
Jersey, or (2) statutorily free from New Jersey or local taxation under other
acts of New Jersey or under the laws of the United States.
A "qualified investment fund" is any investment company or trust
registered with the Securities Exchange Commission, or any series of such
investment company or trust, which, for the calendar year in which the
distribution is paid, (a) has no investments other than interest-bearing
obligations, obligations issued at a discount, and cash and cash items,
including receivables; and (b) has not less than 80% of the aggregate
principal amount of all its investments, excluding cash and cash items
(including receivables), in obligations of the types described in the
preceding paragraph.
The foregoing exclusion applies only to shareholders who are individuals,
estates, and trusts, subject to the New Jersey gross income tax. That tax
does not apply to corporations, and while certain qualifying distributions
are exempt from corporation income tax, all distributions will be reflected
in the net income tax base for purposes of computing the corporation business
tax. Gains resulting from the redemption or sale of shares of the New Jersey
Series will also be exempt from the New Jersey gross income tax.
At this time, the New Jersey Division of Taxation has taken the position
that financial futures contracts, options on futures contracts and municipal
bond index futures contracts do not constitute interest-bearing obligations,
obligations issued at a discount, or cash and cash items, including
receivables. Accordingly, the inclusion of such investments would cause all
distributions from the New Jersey Series for the taxable year to become
taxable. The Fund reserves the right to make such investments on behalf of
the New Jersey Series at such time as permitted under New Jersey law.
The regulations require that 80% of the aggregate principal amount of all
investments, excluding cash and cash items, must be in tax-exempt obligations
free from federal and New Jersey income taxes at the end of each quarter of
the taxable year. Failure to meet the New Jersey 80% aggregate principal
amount test, even if necessary to maintain a "defensive" position would cause
all distributions from the New Jersey Series for the taxable year to become
taxable.
The New Jersey Series will notify shareholders by February 15 of each
calendar year as to the portion of its distributions for the preceding
calendar year that is exempt from federal income and New Jersey income taxes.
New York. Under existing New York law, individual shareholders who are New
York residents will not incur any federal, New York State or New York City
income tax on the amount of exempt-interest dividends received by them from
the Series which represents a distribution of income from New York tax-exempt
securities 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.
Interest on indebtedness incurred or continued to purchase or carry shares
of an investment company paying exempt-interest dividends, such as the Fund,
may not be deductible by the investor for State or City personal income tax
purposes.
Shareholders will normally be subject to federal, New York State or New
York City income tax on dividends paid from interest income derived from
taxable securities and on distributions of net capital gains. For federal and
New York State or New York City income tax purposes, distributions of net
long-term capital gains, if any, are taxable to shareholders 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. Distributions from investment income and capital gains,
including
27
<PAGE>
exempt-interest dividends, may be subject to New York franchise taxes if
received by a corporation doing business in New York, to state taxes in
states other then New York and to local taxes.
Ohio. Under existing Ohio law, provided the Ohio Series qualifies as a
"regulated investment company" under the Code, the Ohio Series will not be
subject to the Ohio personal income tax, the Ohio corporation franchise tax,
or to income taxes imposed by municipalities and other political subdivisions
in Ohio. Individual shareholders of the Ohio Series who are subject to the
Ohio personal income taxes will not be subject to such taxes on distributions
with respect to shares of the Ohio Series to the extent that such
distributions are directly attributable to interest on obligations issued by
the State of Ohio, its counties and municipalities, authorities,
instrumentalities or other political subdivisions ("Ohio Obligations").
Corporate shareholders of the Ohio Series that are subject to the Ohio
corporation franchise tax computed on the net income basis will not be
subject to such tax on distributions with respect to shares of the Ohio
Series to the extent that such distributions either (a) are attributable to
interest on Ohio obligations, or (b) represent "exempt-interest dividends" as
defined in Section 852 of the Code. Shares of the Ohio Series will, however,
be included in a corporate shareholder's tax base for purposes of computing
the Ohio corporation franchise tax on the net worth basis.
Distributions with respect to the Ohio Series that are attributable to
interest on obligations of the United States or its territories or
possessions (including the Governments of Puerto Rico, the Virgin Islands,
and Guam), or of any authority, commission or instrumentality of the United
States that is exempt from state income taxes under the laws of the United
States, will not be subject to the Ohio personal income tax, the Ohio
corporation franchise tax (to the extent computed on the net income basis),
or to taxes imposed by municipalities and other political subdivisions in
Ohio.
Capital gains distributed by the Ohio Series attributable to any profits
made on the sale, exchange, or other disposition by the Ohio Series of Ohio
Obligations will not be subject to the Ohio personal income tax, the Ohio
corporation franchise tax (to the extent computed on the net income basis),
or to taxes imposed by municipalities and other political subdivisions in
Ohio.
Interest on indebtedness incurred or continued (directly or indirectly) by
a shareholder of the Ohio Series to purchase or carry shares of the Ohio
Series will not be deductible for Ohio personal income tax purposes.
Pennsylvania. Individual shareholders of the Pennsylvania Series resident
in the Commonwealth of Pennsylvania ("Commonwealth"/"Pennsylvania") will not
be subject to Pennsylvania personal income tax on distributions received from
the Pennsylvania Series to the extent such distributions are attributable to
interest on tax-exempt obligations of the Commonwealth, its agencies,
authorities and political subdivisions or obligations of the United States or
of the Governments of Puerto Rico, the Virgin Islands and Guam. Other
distributions from the Pennsylvania Series, including capital gains generally
and interest on securities not described in the preceding sentence, generally
will not be exempt from Pennsylvania Personal Income Tax.
Other than the School District of Philadelphia, political subdivisions of
the Commonwealth have not been authorized to impose an unearned income tax
upon resident individuals. Individual shareholders who reside in the
Philadelphia School District will not be subject to the School District
Unearned Income Tax on (i) distributions received from the Pennsylvania
Series to the extent that such distributions are exempt from Pennsylvania
Personal Income Tax, or (ii) distributions of capital gains income by the
Pennsylvania Series.
Corporate shareholders who are subject to the Pennsylvania Corporate Net
Income Tax will not be subject to that tax on distributions by the
Pennsylvania Series that qualify as "exempt-interest dividends" under Section
852(b)(5) of the U.S. Internal Revenue Code or are attributable to interest
on obligations of the United States or agencies or instrumentalities thereof.
For Capital Stock/Foreign
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<PAGE>
Franchise Tax purposes, corporate shareholders must normally reflect their
investment in the Pennsylvania Series and the dividends received thereon in
the determination of the taxable value of their capital stock.
The Pennsylvania Series will not be subject to Corporate Net Income Tax or
other corporate taxation in Pennsylvania.
Most Pennsylvania counties are authorized to impose a tax on intangible
personal property of their residents, and many do so. Shares in the
Pennsylvania Series constitute intangible personal property. However, shares
in the Pennsylvania Series will not be subject to intangible personal
property taxation to the extent that the intangible personal property owned
in the portfolio of the Pennsylvania Series would not be subject to such
taxation if owned directly by a resident of Pennsylvania. The Pennsylvania
Series will invest predominantly in obligations of the Commonwealth, its
agencies, authorities and political subdivisions, or obligations of the
United States or the Governments of Puerto Rico, the Virgin Islands or Guam,
which obligations are not subject to intangible personal property taxation in
Pennsylvania. Only the fraction, if any, of the value of the Pennsylvania
Series' portfolio not invested in securities described in the preceding
sentence would be subject to any applicable intangible personal property tax.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time each Series of the Fund may quote its "yield" and/or its
"total return" in advertisements and sales literature. Both the yield and the
total return of each Series of the Fund are based on historical earnings and
are not intended to indicate future performance. The yield of each Series of
the Fund is computed by dividing the net investment income of that Series
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 yield of that Series. Each Series 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 each Series of the Fund refers to a
figure reflecting the average annualized percentage increase (or decrease) in
the value of an initial investment in a Series of the Fund of $1,000 over
periods of one, five and ten years or over the life of such Series of the
Fund, if less than any of the foregoing. Average annual total return reflects
all income earned by such Series, any appreciation or depreciation of the
assets of such Series, all expenses incurred by such Series and all sales
charges incurred by shareholders redeeming shares, for the stated periods. It
also assumes reinvestment of all dividends and distributions paid by such
Series.
In addition to the foregoing, each Series of the Fund may advertise its
total return over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the imposition of the front-end sales charge which, if
reflected, would reduce the performance quoted. Each Series may also
advertise the growth of hypothetical investments of $10,000, $50,000 and
$100,000 in shares of that Series by adding 1 to that Series' aggregate total
return to date and multiplying by $9,600, $48,375 and $97,250 ($10,000,
$50,000 and $100,000 adjusted for 4.00%, 3.25% and 2.75% sales charges,
respectively). Each Series of the Fund from time to time may also advertise
its performance relative to certain performance rankings and indexes compiled
by independent organizations (such as Lipper Analytical Services Inc.)
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<PAGE>
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of a Series of the Fund
are of $0.01 par value and are equal as to earnings, assets and voting
privileges with respect to such Series.
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.
Presently, there are ten Series of the Fund. The Declaration of Trust
permits the Trustees to authorize the creation of additional series 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).
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 and requires that notice of such disclaimer be given in each instrument
entered into or executed by the Fund and provides for indemnification 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, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within 60 days of a sale or a sale
within 60 days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within 30 days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute
Advisory Group on Personal Investing.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
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APPENDIX
SPECIAL INVESTMENT CONSIDERATIONS OF EACH STATE SERIES
- -----------------------------------------------------------------------------
ARIZONA SERIES
The Arizona Series will invest principally in securities of political
subdivisions and other issuers of the State of Arizona the interest on which
is exempt from federal and Arizona income taxes. As a result, the ability of
such Arizona issuers to meet their obligations with respect to such
securities generally will be influenced by the political, economic and
regulatory developments affecting the state of Arizona and the particular
revenue streams supporting such issuers' obligations. If any of such
political subdivisions are unable to meet their financial obligations, the
income derived by the Arizona Series, the ability to preserve or realize
appreciation of the Arizona Series' capital, and the liquidity of the Arizona
Series could be adversely affected. The following summary respecting the
State of Arizona is only general in nature and does not purport to be a
description of the investment considerations and factors which may have an
effect on the obligations of a particular issuer in which the Arizona Series
may invest.
Arizona's population increased by approximately 35% during the 10-year
period from 1980 to 1990, ranking Arizona as the third fastest growing state
in the country for the period. The rate of growth, however, peaked in 1987
and the State has maintained a steady but slower rate of growth from 1990 to
1995. Although slowed, Arizona's rate of growth remains above the national
average. This growth in population will require corresponding increases in
revenues of Arizona issuers to meet increased demands for infrastructure
development and various services, and the performance of the State's economy
will be critical to providing such increased revenues.
The State's principal economic sectors include services, manufacturing
dominated by electrical, transportation and military equipment, government,
tourism and the military. State unemployment rates have remained generally
comparable to the national average in recent years. During 1994, Arizona's
economy recovered from the difficulties caused in the late eighties by the
severe drop in real estate values and the lack of stability of Arizona-based
financial institutions which caused many of such institutions to be placed
under control of the Resolution Trust Corporation. However, the border
counties and especially the city of Tucson were adversely affected by the
drop in the value of the peso and the subsequent instability in the Mexican
economy. Arizona's economy is continuing to expand at a moderate but
consistent rate. Restrictive government spending, weak export markets,
resizing of the defense industry and layoffs in the private sector are
expected to continue to restrain the pace of expansion.
Arizona is required by law to maintain a balanced budget. To achieve this
objective, the State has, in the past, utilized a combination of spending
reductions and tax increases. The condition of the national economy will
continue to be a significant factor influencing Arizona's budget during the
upcoming fiscal year.
For additional information relating to State imposed restrictions on
indebtedness of certain Arizona issuers, see the Statement of Additional
Information.
CALIFORNIA SERIES
Because the California Series will concentrate its investments in
California tax-exempt securities, it will be affected by any political,
economic or regulatory developments affecting the ability of California
issuers to pay interest or repay principal. Various developments regarding
the California Constitution and State statutes which limit the taxing and
spending authority of California governmental entities may impair the ability
of
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California issuers to maintain debt service on their obligations. The
following information constitutes only a brief summary and is not intended as
a complete description. See the Statement of Additional Information for a
more detailed discussion.
California is the most populous state in the nation with a total
population at the 1990 census of 29,976,000. Growth has been incessant since
World War II, with population gains in each decade since 1950 of between 18%
and 49%. During the last decade, the population rose 20%. The State now
comprises 12% of the nation's population and 12.9% of its total personal
income. Its economy is broad and diversified with major concentrations in
high technology research and manufacturing, aerospace and defense-related
manufacturing, trade, real estate, and financial services. After experiencing
strong growth throughout much of the 1980s, the State was adversely affected
by both the national recession and the cutbacks in aerospace and defense
spending which had a severe impact on the economy in Southern California.
California is still experiencing some effects of the recession. Unemployment
has remained above the national average since 1990. Substantial contraction
in California's defense related industries, overbuilding in commercial real
estate and consolidation and decline in the State's financial services
industry will likely produce slower overall growth for several years.
Economists predict that the State's economy will experience modest growth in
1996.
These economic difficulties have exacerbated the structural budget
imbalance which has been evident since fiscal year 1985-1986. Since that
time, budget shortfalls have become increasingly more difficult to solve and
the State has recorded General Fund operating deficits in several fiscal
years. Many of these problems have been attributable to the fact that the
great population influx has produced increased demand for education and
social services at a far greater pace than the growth in the State's tax
revenues. Despite substantial tax increases, expenditure reductions and the
shift of some expenditure responsibilities to local government, the budget
condition remains problematic.
On August 3, 1995, the Governor signed into law a new $57.5 billion budget
which, among other things, reduces welfare payments and increases education
spending from the previous fiscal year. The fiscal 1995-96 budget calls for
$44.1 billion in revenues and $43.4 billion in spending, an increase of over
3.5% and 4.0%, respectively, from the fiscal 1994-95 budget. Although the
State's budget projects an operating surplus of approximately $600 million,
it continues to rely on federal actions, both to fund programs relating to
MediCal and incarceration costs associated with illegal immigrants and to
relieve the State from federally mandated spending, which are not certain of
occurring. Accordingly, the surplus may not be realized unless the economy
outperforms expectations or spending falls below planned levels.
Because of the State of California's continuing budget problems, the
State's General Obligation bonds were downgraded in July 1994 from A1 to Aa
by Moody's, from A+ to A by Standard & Poor's, and from AA to A by Fitch
Investors Service, Inc. All three rating agencies expressed uncertainty in
the State's ability to balance its budget by 1996.
The effect of these various constitutional and statutory amendments and
budget developments upon the ability of California issuers to pay interest
and principal on their obligations remains unclear and in any event may
depend upon whether a particular California tax-exempt security is a general
or limited obligation bond and on the type of security provided for the bond.
It is possible that other measures affecting the taxing or spending authority
of California or its political subdivisions may be approved or enacted in the
future.
For a more detailed discussion of the State of California economic
factors, see the Statement of Additional Information.
FLORIDA SERIES
The following information is provided only for general information
purposes and is not intended to be a description or summary of the investment
considerations and factors which may have an affect on the Florida
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Series or the obligations of the issuers in which the Florida Series may
invest. Prospective investors must read the entire prospectus to obtain
information essential to the making of an informed investment decision.
The Florida Series invests primarily in municipal securities and
obligations of counties, cities, school districts, special districts, and
other government authorities and issuers of the State of Florida, the
interest on which is excludable from gross income for federal income tax
purposes. The municipal securities market of Florida is very diverse and
includes obligations that are issued by a number of different issuers and
which are payable from a variety of revenue sources. Accordingly, the ability
of Florida issuers to meet their obligations with respect to such municipal
securities is influenced by various political, legal, economic and regulatory
factors affecting such issuers, the State of Florida and the repayment
sources supporting municipal obligations. If any of such issuers cannot
satisfy their repayment obligations, for any reason, the income, value and
liquidity of the Florida Series may be adversely affected.
Florida presently is the fourth largest state in the United States and
continues to be one of the most rapidly growing states. Between 1980 and
1990, Florida's population increased by approximately 3.2 million people, the
second largest population increase for any state during the decade
(California was first). During such period of time, Florida's total
percentage growth in population was 32.7%, the fourth largest percentage
increase among states. Florida's population has continued to grow since 1990,
but at a slower pace than during the 1980s and prior decades. As of April 1,
1995, Florida's population had grown approximately 9.4 percent since April 1,
1990 to a total population of 14,149,317.
Florida's principal economic sectors include services and tourism, retail,
light manufacturing, particularly in the electronic, chemical and
transportation areas, finance and insurance, real estate, transportation and
communications, agriculture, government and the military. Florida's
unemployment figures continue to be slightly higher than the national
average. As the national economy continues to gain strength, so should
Florida's economy. Most of Florida's economic sectors are expected to grow in
the future and in light of Florida's geographic location and diverse
population, it is anticipated that Florida will benefit greatly from the
expanding world markets, especially Latin America.
The State of Florida and its political subdivisions are each required by
law to maintain balanced budgets. In order to satisfy this requirement,
Florida government entities have utilized a combination of spending
reductions and revenue enhancements. From time to time, tax and/or spending
limitation initiatives are introduced by the Florida Legislature or are
proposed by the citizens of the State in the form of amendments to the
Florida Constitution. Two such amendments are now effective and are generally
described below.
By voter referendum held on November 2, 1992, the Florida Constitution was
amended by adding a subsection which, in effect, limits the annual increases
in assessed just value of homestead property to the lesser of (1) three
percent of the assessment for the prior year, or (2) the percentage change in
the Consumer Price Index, as described and calculated in such amendment. The
amendment further provides that (1) no assessment shall exceed just value,
(2) after any change of ownership of homestead property or upon termination
of homestead status, such property shall be reassessed at just value as of
January 1 of the year following the year of sale or change of status, (3) new
homestead property shall be assessed at just value as of January 1 of the
year following the establishment of the homestead, and (4) changes,
additions, reductions or improvements to homestead property shall initially
be assessed as provided for by general law, and thereafter as provided in the
amendment. On January 12, 1994, the Florida Supreme Court ruled that the
effective date of the amendment shall be January 1, 1995 and, thus, will
affect homestead property valuations commencing in 1995.
At the November 8, 1994, general election, Florida voters approved an
amendment to the Florida Constitution, which is commonly referred to as the
"Limitation On State Revenues Amendment." This
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amendment provides that state revenues collected for any fiscal year shall be
limited to state revenues allowed under the amendment for the prior fiscal
year plus an adjustment for growth. Growth is defined as an amount equal to
the average annual rate of growth in Florida personal income over the most
recent twenty quarters times the state revenues allowed under the amendment
for the prior fiscal year. State revenues collected for any fiscal year in
excess of this limitation are required to be transferred to the budget
stabilization fund until the fund reaches the maximum balance specified in
the amendment to the Florida Constitution, and thereafter is required to be
refunded to taxpayers as provided by general law. The limitation on state
revenues imposed by the amendment may be increased by the Legislature, by a
two-thirds vote in each house. This amendment took effect on January 1, 1995,
and will be first applicable to the State's fiscal year 1995-96.
The impact of these constitutional amendments, if any, cannot be
determined or estimated with any certainty at this time but may have some
effect on the various issuers of municipal securities in the State of
Florida.
MASSACHUSETTS SERIES
Between 1982 and 1988 The Commonwealth of Massachusetts had a strong
economy which was evidenced by low unemployment and high personal income
growth as compared to national trends. The Commonwealth experienced a
significant economic slowdown from 1988 through 1992, with particular
deterioration in the construction, real estate, insurance, financial and
manufacturing sectors, including certain high technology areas. Economic
activity has since improved and led to improvements in the housing industry
and employment rates. Unemployment had risen to 8.5% in 1992, as compared to
a national average of 7.4%; but in the last quarter of 1993 decreased to 6.6%
as compared to the national rate of 6.4%, and further decreased to 6.4% at
the end of fiscal 1994. The Massachusetts unemployment rate, currently 5.1%,
remains below the national rate of 5.6%.
The recent economic growth has resulted in the growth of state tax
revenues in 1993 and in 1994. Tax revenues for fiscal year 1996 are currently
projected to be approximately 4% above fiscal year 1995. The Commonwealth had
a budgetary deficit for fiscal year 1989 and 1990 of $466.4 million and
$1,362.7 billion respectively. Deficits were avoided in fiscal 1991 and 1992,
and a surplus was achieved both in 1993 and in 1994 and 1995. In 1992,
Standard & Poor's and Moody's raised their ratings of the Commonwealth's
general obligation bonds from BBB and Baa1, respectively, to A and A,
respectively and Standard & Poor's further raised such ratings to A+ in 1993.
Currently, the Commonwealth's general obligation bonds are rated Aaa and A+
by Moody's and Standard & Poor's, respectively. From time to time, the rating
agencies may further change their ratings in response to budgetary matters or
other economic indicators. Growth of tax revenues in the Commonwealth is
limited by law. Effective July 1, 1990, limitations were placed on the amount
of direct bonds the Commonwealth could have outstanding in a fiscal year, and
the amount of the total appropriation in any fiscal year that may be expended
for debt service on general obligation debt of the Commonwealth (other than
certain debt incurred to pay the fiscal 1990 deficit and certain Medicaid
reimbursement payments for prior fiscal years) was limited to ten percent.
Moreover, Massachusetts local governmental entities are subject to certain
limitations on their taxing power that could affect their ability or the
ability of the Commonwealth to meet their respective financial obligations.
If either Massachusetts or any of its local governmental entities is
unable to meet its financial obligations, the income derived by the
Massachusetts Series, the Series' net asset value, the Series' ability to
preserve or realize capital appreciation or the Series' liquidity could be
adversely affected.
For a more detailed discussion of the Commonwealth of Massachusetts
economic factors, see the Statement of Additional Information.
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MICHIGAN SERIES
The information set forth below is derived from official statements
prepared in connection with the issuance of obligations of the State of
Michigan and other sources that are generally available to investors. The
information is provided as general information intended to give a recent
historical description and is not intended to indicate further or continuing
trends in the financial or other positions of the State of Michigan. Such
information constitutes only a brief summary, relates primarily to the State
of Michigan, does not purport to include details relating to all potential
issuers within the State of Michigan whose securities may be purchased by the
Michigan Series and does not purport to be a complete description.
The principal sectors of Michigan's economy are durable goods
manufacturing (including automobile and office equipment manufacturing),
tourism and agriculture. Employment of Michigan's labor force in durable
goods manufacturing has dropped from 33% in 1960 to 14.9% in 1994. However,
manufacturing (including auto-related manufacturing) continues to be an
important part of Michigan's economy. Those industries are highly cyclical
and are expected to operate at somewhat less than full capacity in 1996.
Historically, during periods of economic decline or slow economic growth, the
cyclical nature of those industries has adversely affected the revenue
streams of Michigan and its political subdivisions because it has adversely
impacted certain tax sources, particularly sales taxes, income taxes and
single business taxes.
The State reports its financial condition using generally accepted
accounting principles. Michigan's fiscal year begins on October 1 and ends on
September 30 of the following year.
Michigan ended fiscal years 1989-90 and 1990-91 with negative General Fund
balances of $310.3 million and $169.4 million, respectively. As required by
the Michigan Constitution, each of those deficits were included in the
succeeding year's General Fund budget. Michigan ended fiscal years 1991-92,
1992-93 and 1993-94 with General Fund surpluses of $24 million, $280.1
million and $602.9 million, respectively. During fiscal years 1990-91 and
1991-92, Michigan utilized $230 million and $170.1 million, respectively,
from its Counter-Cyclical Budget and Economic Stabilization Fund (BSF) to add
to the General Fund balances in those years. In fiscal year 1992-93, the
State of Michigan made a deposit of $312.2 million into the BSF, the first
since 1986. In fiscal year 1993-94, the State of Michigan made another
deposit into the BSF, this one being in the amount of $460.2 million. The
unreserved balance for the BSF as of the end of fiscal years 1990-91, 1991-92
and 1992-93 were $182.2 million, $20.1 million and $303.4 million,
respectively.
As of July 20, 1995, the State of Michigan projected a fiscal year 1994-95
General Fund surplus of approximately $85 million. The final amount of the
General Fund surplus, however, will not be known until the State closes its
books for fiscal year 1994-95 in late January 1996. In June 1995, the
Michigan Legislature adopted the budget for fiscal year 1995-96, in advance
of the beginning of that fiscal year.
As of January 25, 1996, general obligation bonds of the State of Michigan
were rated "AA" by Standard and Poor's Ratings Services, "Aa" by Moody's
Investors Service and "AA" by Fitch Investors Service. To the extent that the
portfolio of the Michigan Series is comprised of revenue obligations of the
State of Michigan or revenue or general obligations of local governments or
State or local authorities, rather than general obligations of the State of
Michigan, ratings on such components of the Michigan Series will be different
from those given to the general obligations of the State of Michigan and
their value may be independently affected by economic factors not directly
impacting the State.
For a more detailed discussion of the State of Michigan economic factors,
see the Statement of Additional Information.
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MINNESOTA SERIES
The information set forth below is derived from official statements
prepared in connection with the issuance of obligations of the State of
Minnesota and other sources that are generally available to investors. The
information is provided as general information intended to give a recent
historical description and is not intended to indicate further or continuing
trends in the financial or other positions of the State of Minnesota. Such
information constitutes only a brief summary, relates primarily to the State
of Minnesota, does not purport to include details relating to all potential
issuers within the State of Minnesota whose securities may be purchased by
the Minnesota Series, and does not purport to be a complete description.
The State of Minnesota has experienced certain budgeting and financial
problems since 1980.
The State Accounting General Fund balance at June 30, 1987, was positive
$168.5 million. The Commissioner of Finance, in his November 1986 forecast,
estimated an Accounting General Fund balance at June 30, 1989, of negative
$800 million. The Legislature in May 1987 enacted measures expected to yield
approximately $700 million in additional revenues for the 1987-1989 biennium
by broadening the bases of corporate income and sales taxes and raising the
rate of the cigarette excise tax to 38 cents a pack from 23 cents. The
corporate tax rate was lowered to 9.5% from 12%, and a minimum tax was
imposed.
Accounting General Fund appropriations for the 1987-1989 biennium were
$11.35 billion, an increase of 9.4%. A $250 million budget reserve also was
approved.
The 1988 Legislature increased 1987-1989 expenditures a total of $223.8
million and increased revenues a total of $125.5 million.
The Accounting General Fund balance, at June 30, 1989, was positive $360
million.
The 1989 Legislature authorized $13.35 billion in spending for the
1989-1991 biennium, a 16.2% increase over the previous biennium, after
excluding intergovernmental fund transfers. In addition, the Legislature
approved a $550 million budget reserve.
The 1989 Legislature passed an omnibus tax bill that included $272 million
in property tax relief and a $72 million increase in tax revenues. The
Governor vetoed the omnibus tax bill, demanding that a larger share of
property tax relief go to business and that the state-subsidized property tax
system be reformed. At a special session in the fall of 1989, a bill was
enacted that included $267 million in property tax relief and a $79 million
increase in tax revenues.
The Commissioner of Finance, in his November 1989 forecast, estimated the
Accounting General Fund balance at June 30, 1991, at negative $161 million.
The Commissioner forecast an $89 million decline in revenues, a $60 million
increase in human services expenditures and a net $29 million decrease due to
other fiscal changes.
The 1990 Legislature enacted budget changes that resulted in a $127
million net savings for the 1989-1991 biennium. A total of $178 million in
spending reductions were enacted, and increased fees and other revenue
changes accounted for a $12 million gain. New spending totaling $63 million
was approved.
A November 1990 forecast estimated a $197 million shortfall for the
biennium ending June 30, 1991, and a $1.2 billion shortfall for the biennium
ending June 30, 1993 due to spending pressures and reduced revenues. A March
1991 forecast reduced the estimated shortfall for the biennium ending June
30, 1993, to $1.1 billion.
In January 1991 the Legislature made $197 million in spending reductions
for the biennium ended June 30, 1991. The State Accounting General Fund
balance at June 30, 1991, was $31 million.
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The 1991 Legislature authorized $13.886 billion in spending for the
1991-1993 biennium. Giving effect to inclusion in the Accounting General Fund
of $70 million in dedicated revenues previously budgeted in other funds and
dedication of 1.5 percent of existing sales tax as well as a new .5 percent
local option sales tax to a Local Government Trust Fund, the total increase
in authorized spending was 9.2 percent.
Tax law changes enacted by the 1991 Legislature were expected to yield
$590 million in additional revenues for the 1991-1993 biennium. Federal
conformity on individual and corporate income taxes was expected to raise $82
million; changes in top individual income tax rates and elimination of some
deductions and exemptions were expected to yield an additional $89 million;
extension of the sales tax to kennel services, telephone paging services and
some business-to-business phone services $38 million; a 5 cents a pack
cigarette tax increase to 43 cents $37.2 million; and the .5 percent sales
tax increase $370 million.
After the Legislature adjourned in May 1991, the Commissioner of Finance
estimated that at June 30, 1993, the State would have a $400 million budget
reserve, the amount approved by the 1991 Legislature, and a $103.2 million
Accounting General Fund balance.
In February 1992 the Commissioner of Finance estimated the Accounting
General Fund balance at June 30, 1993, at negative $569 million. The balance
at June 30, 1995, was projected at negative $1.75 billion.
The 1992 Legislature reduced expenditures by $262 million for the biennium
ending June 30, 1993, enacted revenue measures expected to increase revenue
by $149 million, and reduced the budget reserve by $160 million to $240
million.
After the Legislature adjourned in April 1992, the Commissioner of Finance
estimated the Accounting General Fund balance at June 30, 1993, at $2.4
million, and projected the balance at June 30, 1995, at negative $837
million. A November 1992 forecast estimated the balance at June 30, 1993, at
positive $217 million and projected the balance at June 30, 1995, at negative
$769 million.
A March 1993 forecast projected an Accounting General Fund balance at June
30, 1995, at negative $163 million out of a budget for the biennium of
approximately $16.7 billion, and estimated a balance at June 30, 1997, at
negative $1.6 billion out of a budget of approximately $18.7 billion.
The 1993 Legislature authorized $16.519 billion in spending for the
1993-1995 biennium, an increase of 13.0 percent from 1991-1993 expenditures.
Resources for the 1993-1995 biennium were projected to be $16.895 billion,
including $657 million carried forward from the previous biennium. The
$16.238 billion in projected non-dedicated and dedicated revenues was 10.3
percent greater than in the previous biennium and included $175 million from
revenue measures enacted by the 1993 Legislature. The Legislature increased
the health care provider tax to raise $79 million, transferred $39 million
into the Accounting General Fund and improved collection of accounts
receivable to generate $41 million.
After the Legislature adjourned in May 1993, the Commissioner of Finance
estimated that at June 30, 1995, the Accounting General Fund balance would be
$16 million and the budget reserve, as approved by the 1993 Legislature,
would be $360 million. The Accounting General Fund balance at June 30, 1993,
was $463 million.
The Commissioner of Finance, in a November 1993 forecast, estimated the
Accounting General Fund balance at June 30, 1995, at $430 million, due to
projected increases in revenues and reductions in expenditures, and the
balance at June 30, 1997, at $389 million. The Commissioner recommended that
the budget reserve be increased to $500 million. He estimated that if current
laws and policies continued unchanged, revenue would grow 7.7 percent and
expenditures 6.0 percent in the 1995-1997 biennium.
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A March 1994 forecast projected an Accounting General Fund balance at June
30, 1995, at $623 million, principally due to a projected $235 million
increase in revenues to $16.6 billion for the biennium. The balance at June
30, 1997, was estimated to be $247 million.
The 1994 Legislature provided for a $500 million budget reserve;
appropriated to school districts $172 million to allow the districts, for
purposes of state aid calculations, to reduce the portion of property tax
collections that the school districts must recognize in the fiscal year
during which they receive the property taxes; increased expenditures $184
million; and increased expected revenues $4 million.
Of the $184 million in increased expenditures, criminal justice
initiatives totaled $45 million, elementary and higher education $31 million,
environment and flood relief $18 million, property tax relief $55 million,
and transit $11 million. A six-year strategic capital budget plan was adopted
with $450 million in projects financed by bonds supported by the Accounting
General Fund. Other expenditure increases total $16.5 million.
Included in the expected revenue increase of $4 million were comformity
with federal tax changes to increase revenues $27.5 million, a sales tax
phasedown on replacement capital equipment and miscellaneous sales tax
exemptions decreasing revenues $17.3 million, and other measures decreasing
revenues $6.2 million.
After the Legislature adjourned in May 1994, the Commissioner of Finance
estimated the Accounting General Fund balance at June 30, 1995, at $130
million.
The Commissioner of Finance, in a November 1994 forecast, estimated the
Accounting General Fund balance at June 30, 1995, at $268 million, due to
projected increases in revenues and decreases in expenditures, and the
balance at June 30, 1997, at $190 million.
A February 1995 forecast projected an Accounting General Fund balance at
June 30, 1995, at $383 million, due to a $93.5 million increase in projected
revenues and a $21.0 million decrease in expenditures. The balance at June
30, 1997, was projected at $250 million.
The 1995 Legislature authorized $18.220 billion in spending for the
1995-1997 biennium, an increase of $1.395 billion, 8.3 percent, from
1993-1995 expenditures. Resources for the 1995-1997 biennium were projected
to be $18.774 billion, including $921 million carried forward from the
previous biennium.
The Legislature authorized 7.1 percent more spending for elementary and
secondary education in the 1995-1997 biennium than in 1993-1995, 0.9 percent
more in local government aids, 14.2 percent more for health and human
services, 2.3 percent more for higher education, and 25.1 percent more for
corrections. The Legislature set the budget reserve at $350 million and
established a supplementary reserve of $204 million in view of predicted
federal cutbacks.
After the Legislature adjourned in May 1995, the Commissioner of Finance
estimated that at June 30, 1997, the Accounting General Fund balance would be
zero. The Accounting General Fund balance at June 30, 1995, was $481 million.
The Commissioner of Finance, in a November 1995 forecast, estimated the
Accounting General Fund balance at June 30, 1997, at $824 million, due to a
$490 million increase in revenues from those projected in May 1995, a $199
million reduction in projected expenditures, and a $135 million increase in
the amount carried forward from the 1993-1995 biennium. An improved national
economic outlook increased projected net sales tax revenue $257 million and
reduced projected human services expenditures $231 million. The Commissioner
estimated the Accounting General Fund balance at June 30, 1999, at negative
$28 million.
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Only $15 million of the $824 million projected 1995-1997 surplus was
available for spending. The statute requires that an additional $15 million
be placed in the supplementary budget reserve, and an additional $794 million
must be appropriated to school districts to allow the districts, for purposes
of state aid calculations, to eliminate the 48 percent of property tax
collections that the school districts must recognize in the fiscal year
during which they receive the property taxes.
A February 1996 forecast projected an Accounting General Fund balance at
June 30, 1997, at $873 million, due to a $104 million increase in projected
revenues, a $19 million increase in expenditures, and a $36 million reduction
in the June 30, 1995, ending balance. The amount available for spending
increased from $15 million to $64 million.
In February 1996, the Commissioner of Finance estimated the Accounting
General Fund balance at June 30, 1999, at $54 million.
The State of Minnesota has no obligation to pay any bonds of its political
or governmental subdivisions, municipalities, governmental agencies, or
instrumentalities. The creditworthiness of local general obligation bonds is
dependent upon the financial condition of the local government issuer, and
the creditworthiness of revenue bonds is dependent upon the availability of
particular designated revenue sources or the financial conditions of the
underlying obligors. Although most of the bonds owned by the Minnesota Series
are expected to be obligations other than general obligations of the State of
Minnesota itself, there can be no assurance that the same factors that
adversely affect the economy of the State generally will not also affect
adversely the market value or marketability of such other obligations, or the
ability of the obligors to pay the principal of or interest on such
obligations.
At the local level, the property tax base has recovered after its growth
was slowed in many communities in the early 1990s by an overcapacity in
certain segments of the commercial real estate market. Local finances are
also affected by the amount of State aid that is made available. Further,
various of the issuers within the State of Minnesota, as well as the State of
Minnesota itself, whose securities may be purchased by the Minnesota Series,
may now or in the future be subject to lawsuits involving material amounts.
It is impossible to predict the outcome of these lawsuits. Any losses with
respect to these lawsuits may have an adverse impact on the ability of these
issuers to meet their obligations.
Legislation enacted in 1995 provides that it is the intent of the
Minnesota Legislature that interest income on obligations of Minnesota
governmental units, and exempt-interest dividends that are derived from
interest income on such obligations, be included for Minnesota income tax
purposes in the net income of resident individuals, among others, if it is
judicially determined that the exemption by Minnesota of such interest or
such exempt-interest dividends unlawfully discriminates against interstate
commerce because interest income on obligations of governmental issuers
located in other states, or exempt-interest dividends derived from such
obligations, is so included. This provision applies to taxable years that
begin during or after the calendar year in which such judicial decision
becomes final, regardless of the date on which the obligations were issued,
and other remedies apply for previous taxable years. The United States
Supreme Court recently denied certiorari in an Ohio case which upheld an
exemption for interest income on obligations of Ohio governmental issuers,
even though interest income on obligations of non-Ohio governmental issuers
was subject to tax. However, it cannot be predicted whether a similar case
will be brought in Minnesota or elsewhere, or what the outcome of such case
would be. Should an adverse decision be rendered, the value of the securities
purchased by the Minnesota Series might be adversely affected, and the value
of the shares of the Minnesota Series might also be adversely affected.
The State's bond ratings in August, 1995 were Aa1 by Moody's and AA+ by
S&P and AAA by Fitch's. Economic difficulties and the resultant impact on
State and local government finances may adversely affect
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the market value of obligations in the portfolio of the Minnesota Series or
the ability of respective obligors to make timely payment of the principal
and interest on such obligations.
NEW JERSEY SERIES
The portfolio of the New Jersey Series contains different issues of debt
obligations issued by or on behalf of the State of New Jersey (the "State")
and counties, municipalities and other political subdivisions and other
public authorities thereof or by the Government of Puerto Rico or the
Government of Guam or by their respective authorities. Investment in the New
Jersey Series should be made with an understanding that the value of the
underlying Portfolio may decline with increases in interest rates.
Prospective investors should consider the recent financial difficulties and
pressures which the State of New Jersey and certain of its public authorities
have undergone.
The New Jersey State Constitution prohibits the legislature from making
appropriations in any fiscal year in excess of the total revenue on hand and
anticipated. A debt or liability that exceeds 1% of total appropriations for
the year is also prohibited, unless it is in connection with a refinancing to
produce a debt service savings or it is approved at a general election. Such
debt must be authorized by law and applied to a single specified object or
work. These Constitutional provisions do not apply to debt incurred because
of war, insurrection or emergencies caused by disaster.
Pursuant to Article VIII, Section II, par. 2 of the New Jersey
Constitution, no monies may be drawn from the State Treasury except for
appropriations made by law. In addition, the monies for the support of State
government and all State purposes, as far as can be ascertained, must be
provided for in one general appropriation law covering one and the same
fiscal year.
In addition to the Constitutional provisions, the New Jersey statutes
contain provisions concerning the budget and appropriation system. Under
these provisions, each unit of the State requests an appropriation from the
Director of the Division of Budget and Accounting, who reviews the budget
requests and forwards them with her recommendations to the Governor. The
Governor then transmits her recommended expenditures and sources of
anticipated revenue to the legislature, which reviews the Governor's Budget
Message and submits an appropriation bill to the Governor for his signature
by July 1 of each year. At the time of signing the bill, the Governor may
revise appropriations or anticipated revenues. That action can be reversed by
a two-thirds vote of each House. No supplemental appropriation may be enacted
after adoption of the act, except where there are sufficient revenues on hand
or anticipated, as certified by the Governor, to meet the appropriation.
Finally, the Governor may, during the course of the year, prevent the
expenditure of various appropriations when revenues are below those
anticipated or when she determines that such expenditure is not in the best
interest of the State.
Reflecting the downturn, the rate of unemployment in the State rose from a
low of 3.6 percent during the first quarter of 1989 to a recessionary peak of
8.4% during 1992 computed on an average annual basis. Subsequently, then, the
unemployment rate fell to 6.9% during the first quarter of 1995. Although the
jobless rate continued to drop after the first quarter of 1995, it rose again
throughout the fourth quarter, climbing from 6.1% in October to 6.5% in
December. These figures do not reflect the impact of the layoff of 7,000 AT&T
workers in New Jersey announced in January, 1996.
Economic recovery is anticipated to be slow and uneven in New Jersey and
may lag behind such recovery in other parts of the nation. Some sectors, like
commercial and industrial construction, will lag because of continued excess
capacity. Employers in rebounding sectors may be expected to remain cautious
about hiring until they become convinced that improved business will be
sustained. Mergers or continued downsizing to
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increase profitability are a factor to be considered. As a result,
unemployment should be anticipated to recede at a correspondingly slow pace.
Additional factors with potentially negative impacts include pending Federal
changes to health and welfare entitlement programs and the implementation in
New Jersey of significant State income tax reductions. School funding reforms
mandated as a result of State constitutional litigation to compel equality of
funding treatment at the local level could also contribute to financial
vulnerability.
One of the major reasons for cautious optimism is found in the
construction industry. Total construction contracts awarded in New Jersey
rose by 11.8% in 1995 compared with the first two months of 1994. The largest
increase came from residential construction awards, which increased by 32.8%
for this time period. This increase contrasts with a decline in total
construction from 1993 to 1994 of 4.7%.
The State's 1996 Fiscal Year budget became law on June 30, 1995. For
Fiscal Year 1996, the Governor has recommended appropriations of $466.3
million for principal and interest payments for general obligation bonds. Of
the $16,005.9 million appropriated in Fiscal Year 1996 from the General Fund,
the Property Tax Relief Fund, the Gubernatorial Elections Fund, the Casino
Control Fund and the Casino Revenue Fund, $6,424.2 million (40.2%) is
appropriated for State Aid to Local Governments, $3,711.1 million (23.2%) is
appropriated for Grants-in-Aid, $5,187.2 million (32.4%) for Direct State
Services, $466.3 million (2.9%) for Debt Service on State general obligation
bonds and $217.1 million (1.3%) for Capital Construction.
State Aid to Local Governments was the largest portion of Fiscal Year 1996
appropriations. In Fiscal Year 1996, $6,424.2 million of the State's
appropriations consisted of funds which are distributed to municipalities,
counties and school districts. The largest State Aid appropriation, in the
amount of $4,750.8 million, is provided for local elementary and secondary
education programs. Of this amount, $2,713.1 million is provided as
foundation aid to school districts by formula based upon the number of
students and the ability of a school district to raise taxes from its own
base. In addition, the State provides $601.0 million for special education
programs for children with disabilities. A $292.9 million program is also
funded for pupils at risk of educational failure, including basic skills
improvement. The State appropriated is $249.4 million to pay for the cost of
pupil transportation, $38.2 million for transition aid, which guaranteed
school districts a 6.5% increase over the aid received in Fiscal Year 1991
and is being phased out over six years, $69.9 million for debt on school
district obligations and $69.6 million for aid to non-public schools. In
addition, $612.9 million is appropriated on behalf of school districts as the
employer shares of the teachers' pensions and benefits programs.
Appropriations to the State Department of Community Affairs (DCA) total
$840.2 million in State Aid monies for Fiscal Year 1996. Many of the DCA
State Aid programs and many Treasury State Aid programs are consolidated into
a single appropriation made pursuant to the Consolidated Municipal Property
Tax Relief Act in the amount of $857.6 million. In addition, $16.7 million is
appropriated for housing programs, $33.0 million for a block grant program,
$30 million for discretionary aid and $3.6 million for other aid. These
amounts are offset by $103.0 million in pension fund savings.
Appropriations to the State Department of the Treasury total $85.1 million
in State Aid monies for Fiscal Year 1996. The principal programs funded by
these appropriations include property tax deductions and exemptions for
senior citizens, the disabled and veterans ($57.9 million) and aid to densely
populated municipalities (17.0 million).
Other appropriations of State Aid in Fiscal Year 1996 include welfare
programs ($467.6 million); aid to county colleges ($128.0 million); and aid
to county mental hospitals ($78.3 million).
The second largest portion of appropriations in Fiscal Year 1995 is
applied to Direct State Services: the operation of State government's 17
departments, the Executive Office, several commissions, the State Legislature
and the Judiciary. In Fiscal Year 1996, appropriations for Direct State
Services aggregate to $5,187.2 million.
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At any given time, there are various numbers of claims and cases pending
against the State. State agencies and employees, seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the Tort
Claims Act, N.J.S.A. 59:1-1 et seq. In addition, at any given time there are
various contract claims against the State and State agencies seeking recovery
of monetary damages. The State is unable to estimate its exposure for these
claims and cases. An independent study estimated an aggregate potential
exposure of $66.5 million for tort claims pending, as of December 31, 1994.
This estimate excludes exposure attributable to litigation filed against the
State and the New Jersy Transit Corporation in late February, 1996 to
determine their liability, if any, with respect to a collision of two Transit
Corporation commuter trains earlier that month. Moreover, New Jersey is
involved in a number of other lawsuits in which adverse decisions could
materially affect revenue or expenditures. Such cases include challenges to
the pensions law amendments enacted June 30, 1994 (P.L. 1994, Chapter 62)
concerning the funding of certain pension funds for teachers and other State
employees and to the adequacy of certain Medicaid reimbursements paid by the
State compared with requirements set by applicable Federal standards.
Other lawsuits, that could materially affect revenue or expenditures
include a suit alleging unfair taxation on interstate commerce, a suit filed
on behalf of fifteen counties seeking a share of moneys paid to the State by
the Federal government to reimburse certain State payments to psychiatric
hospitals from July 1, 1988 through July 1, 1991, and a suit challenging both
the imposition of premium tax surcharges on insurers doing business in New
Jersey and assessments made upon property and casualty liability insurers
pursuant to the Fair Automobile Insurance Reform Act. Two separate suits were
filed by a public interest group alleging violation of environmental laws
resulting from alleged contamination at the State-owned Liberty State Park
and a suit alleging that the State violated the Federal Commerce Clause and
the Contract Clause by its issuance of certain orders and permits related to
waste disposal.
As of February, 1996, the State's bond ratings were AA+ by S&P and Fitch
and Aa1 by Moody's. In December, 1995, however, S&P and Moody's lowered the
ratings on bonds of the New Jersey Turnpike Authority from A to BBB+ and from
A to Baa1, respectively. In January, 1996, Fitch lowered its rating on New
Jersey Turnpike Authority bonds from A to A-. Factors cited supporting these
downgrades included a high debt service burden coupled with reduced traffic
following toll increases in 1991 and a 3 year financial plan issued in
December, 1994 that dedicated substantial amounts of capital funds to
operating purposes each plan year.
NEW YORK SERIES
Since the New York Series concentrates its investments in New York
tax-exempt securities, the Fund is affected by any political, economic or
regulatory developments affecting the ability of New York tax-exempt issuers
to pay interest or repay principal. Investors should be aware that certain
issuers of New York tax-exempt securities have experienced serious financial
difficulties in recent years. A reoccurrence of these difficulties may impair
the ability of certain New York issuers to maintain debt service on their
obligations.
The fiscal stability of New York State (the "State") is related to the
fiscal stability of the State's municipalities, its Agencies and Authorities
(which generally finance, construct and operate revenue-producing public
benefit facilities). This is due in part to the fact that Agencies,
Authorities and local governments in financial trouble often seek State
financial assistance. The experience has been that if New York City (the
"City") or any of the Agencies or Authorities suffers serious financial
difficulty, both the ability of the State, the City, the State's political
subdivisions, the Agencies and the Authorities to obtain financing in the
public credit markets and the market price of outstanding New York tax-exempt
securities are adversely affected.
Over the long term, the State and City face potential economic problems.
The City accounts for a large portion of the State's population and personal
income, and the City's financial health affects the State in
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numerous ways. The State has historically been one of the wealthiest states
in the nation. For decades, however, the State has grown more slowly than the
nation as a whole, gradually eroding its relative economic position.
Statewide, urban centers have experienced significant changes involving
migration of the more affluent to the suburbs and an influx of generally less
affluent residents. Regionally, the older Northeast cities have suffered
because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
The State has the second highest combined state and local tax burden in
the United States. The burden of State and local taxation, in combination
with the many other causes of regional economic dislocation, may have
contributed to the decisions of some businesses and individuals to relocate
outside, or not locate within, the State. To stimulate economic growth, the
State has developed programs, including the provision of direct financial
assistance, designed to assist businesses to expand existing operations
located within the State and to attract new businesses to the State. In
addition, the State has provided various tax incentives to encourage business
relocation and expansion. These programs include direct tax abatements from
local property taxes for new facilities (subject to locality approval) and
investment tax credits that are applied against the State corporation
franchise tax.
On January 13, 1992, Standard & Poor's reduced its ratings on the State's
general obligation bonds from A to A- and, in addition, reduced its ratings
on the State's moral obligation, lease purchase, guaranteed and contractual
obligation debt. Standard & Poor's also continued its negative rating outlook
assessment on State general obligation debt. On April 26, 1993, Standard &
Poor's revised the rating outlook assessment to stable. On February 14, 1994,
Standard & Poor's raised its outlook to positive and, on July 13, 1995,
confirmed its A- rating. On January 6, 1992, Moody's reduced its ratings on
outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On July 3, 1995, Moody's reconfirmed its A rating
on the State's general obligation long-term indebtedness.
For a more detailed discussion of New York economic factors, see the
Statement of Additional Information.
The summary information furnished above and in the Statement of Additional
Information is based on official statements prepared by the State of New York
and the City of New York and their authorities in connection with their
borrowings and contains such information as the Fund deems relevant in
considering an investment in the Fund. It does not purport to be a complete
description of the considerations contained therein.
OHIO SERIES
Although manufacturing (including auto-related manufacturing) in Ohio
remains an important part of the State's economy, the greatest growth in
employment in Ohio in recent years, consistent with national trends, has been
in the non-manufacturing area. Ohio ranked fourth in the nation in 1991 gross
state product derived from manufacturing. Manufacturing was 26.3% of Ohio's
gross state product compared to 17.1% of that total being from "services". As
a result, economic activity in Ohio, as in many other industrially developed
states, tends to be more cyclical than in some other states and in the nation
as a whole. Agriculture also is an important segment of the economy in the
State. With 14.2 million acres (of a total land area of 26.4 million acres)
in farm land and an estimated 75,000 individual farms, it is by many measures
Ohio's leading industry, contributing nearly $5.7 billion to the State's
economy each year. This represents 13.5% of the total output, 15.9% of the
total employment (approximately 750,000 jobs) and 10.1% of the value-added
products
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produced in the State. Farm income alone amounted in 1993 to just over $4.5
billion. In 1993, Ohio exported over $1.2 billion in farm products (primarily
soybeans and related soy products, and feed grains). The State has instituted
several programs to provide financial assistance to farmers.
Ohio continues as a major "headquarters" state. Of the top 500 individual
corporations (industrial, commercial and service) based on 1994 sales as
reported in 1995 by Fortune magazine, 48 had headquarters in Ohio, placing
Ohio fifth as a "headquarters" state.
Payroll employment in Ohio, in the diversifying employment base, showed a
steady upward trend until 1979, then decreased until 1982. It reached a high
in the summer of 1993 after a slight decrease in 1992, then decreased
slightly but is currently near a new high reached in the summer of 1995.
Growth in recent years has been concentrated among non-manufacturing
industries, with manufacturing employment tapering off since its 1969 peak.
Non-manufacturing industries now employ approximately 78.9% of all
non-agricultural payroll workers in Ohio.
Consistent with the Ohio constitutional provision that no appropriation
may be made for a period longer than two years, the State operates on the
basis of a fiscal biennium for its appropriations and expenditures. Under
current law that biennium for operating purposes runs from July 1 in an
odd-numbered year to June 30 in the next odd-numbered year; for example, the
current fiscal biennium began July 1, 1995 and ends June 30, 1997.
The Ohio Constitution imposes a duty on the General Assembly to "provide
for raising revenue, sufficient to defray the expenses of the state, for each
year, and also a sufficient sum to pay the principal and interest as they
become due on the state debt." The State is effectively precluded by law from
ending a Fiscal Year or a biennium in a "deficit" position. State borrowing
to meet casual deficits or failures in revenues or to meet expenses not
otherwise provided for is limited by the Ohio Constitution to $750,000. As
discussed below, the Ohio General Assembly is considering proposing to the
voters amendments to the Ohio Constitution that would increase the authority
of the General Assembly to authorize the issuance of general obligation debt
of the State without further voter approval.
Most State operations are financed through the general revenue fund (GRF),
with personal income and sales-use taxes being the major GRF sources,
totalling $5.4 billion and $4.7 billion in 1995, respectively. An amendment
to the Ohio Constitution, approved in November, 1994, added express
exclusions from sales or other excise taxes upon food; the estimated effect
of that amendment is a reduction in GRF revenues of $67 million annually.
The Ohio Revised Code provides that if the Governor ascertains that the
available revenue receipts and balances for the GRF or other funds for the
then current Fiscal Year will in all probability be less than the
appropriations for the year, he shall issue such orders to State agencies as
will prevent their expenditures and incurred obligations from exceeding those
revenue receipts and balances. The Governor implemented this directive in
some prior years, including Fiscal Years 1992 and 1993. There is no present
constitutional limit on the rates of State-levied taxes and excises, except
for taxes on intangible property. Resolutions are currently pending in the
General Assembly that would propose to the voters a constitutional amendment
which would authorize the General Assembly to approve the issuance of general
obligations of the State for capital improvements (or for the refunding of
obligations issued for capital improvements) without further voter approval,
subject to a requirement that the debt service on State obligations to be
paid from GRF resources not exceed 5% of GRF annual expenditures. At present
the State itself does not levy any ad valorem taxes on real or tangible
personal property. Those taxes are levied by local political subdivisions.
The Ohio Constitution
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limits the amount of ad valorem property taxes that may be levied by local
political subdivisions in the aggregate, without a vote of the electors or a
municipal charter provision, to 1% of the true value, and statutes further
limit the amount of the aggregate levy, without a vote or charter provision,
to 10 mills per $1 of assessed valuation.
The GRF ending (June 30) fund balance is typically reduced during less
favorable national economic periods and then increases during more favorable
economic periods. For example, following the 1974-75 nationwide recession the
1977 GRF ending fund balance was $21,600,000. The balance (without assistance
from any significant tax rate increases) was $245,700,000 in 1979, and then,
paralleling the national economic situation, was at the significantly lower
amount of $200,000 in 1981. Aided by tax increases and other actions, the
1983 GRF ending fund balance was $43,600,000. Recent biennium GRF ending fund
balances were $475,100,000 in 1989, $135,365,000 in 1991, and $111,013,000 in
1993. For the Biennium ended June 30, 1995, the GRF fund balance was
$928,000,000.
The GRF appropriations bill for the 1994-1995 biennium was passed on June
28, 1995, and promptly signed, with selective vetoes, by the Governor. The
act provides for total GRF biennial expenditures of approximately $33.5
billion, an increase over those for the 1994-95 fiscal biennium. The
following are examples of higher authorized GRF biennial expenditures in
major programs: mental health and mental retardation 4.8%; primary and
secondary education 15.4%; human service 9.5%; justice and corrections 28%;
and higher education 13.1%.
Necessary GRF debt service and lease-rental appropriations for the entire
biennium were requested in the Governor's budget proposal and incorporated in
the related appropriations bill as introduced, and in the bill's versions as
passed by the House and the Senate and in the act as passed and signed. The
same is true for the separate Department of Transportation, Department of
Public Safety, and Bureau of Workers' Compensation appropriations acts,
containing lease-rental appropriations for certain DOT, DPS and BWC projects
financed by the Ohio Building Authority.
Although revenue obligations of the State or its political subdivisions
may be payable from a specific project or source, including lease rentals,
there can be no assurance that, as in any state, future economic difficulties
and the resulting impact on State and local government finances will not
adversely affect the market value of the Bonds in the portfolio of the Ohio
Series or the ability of the respective obligors to make timely payments of
principal and interest on such Bonds.
In 1981, a Budget Stabilization Fund (BSF) was created for purposes of
cash and budgetary management. In 1992, the entire balance of the BSF was
transferred to the GRF. In 1993, $21 million was deposited to the BSF, and an
additional $260.3 million was deposited in 1994, and $535.2 in 1995, giving
the BSF a current balance of approximately $828.3 million.
Litigation contesting the Ohio system of school funding for violation of
various provisions of the Ohio Constitution is pending. In these proceedings,
the trial court has adopted findings of fact and conclusions of law,
including conclusions that certain provisions of current Ohio law violate the
Ohio Constitution. In August, 1995, a court of appeals reversed these
findings and the case is now pending on appeal to the Ohio Supreme Court.
The summary information furnished above is based on official statements
prepared by the State of Ohio in connection with its borrowings and contains
such information as the Fund deems relevant in considering an investment in
the Fund. It does not purport to be a complete description of the
considerations contained therein.
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PENNSYLVANIA SERIES
Presented below and in the Statement of Additional Information is
information concerning the Commonwealth of Pennsylvania (the "Commonwealth")
and certain issuers within the Commonwealth. Such information is based
principally on information drawn from recent official statements relating to
securities offerings by the Commonwealth and does not purport to be a
complete description of such issuers or factors that could adversely affect
them. The Investment Manager has not independently verified such information;
however, it has no reason to believe that such information is not correct in
all material respects. This information does not cover all municipal issuers
within the Commonwealth whose securities may be purchased by the Fund.
Investment Securities
The Pennsylvania Series will invest principally in Commonwealth and
Commonwealth-related obligations and obligations of local government units in
the Commonwealth and obligations of related authorities. Some additional
information regarding such issuers is set forth in the Statement of
Additional Information. The market value and marketability of the obligations
of the Commonwealth and, though generally to a lesser extent, the
Commonwealth-related obligations and the local governmental unit and related
authority obligations generally will be affected by economic conditions
affecting the Commonwealth and litigation matters which may adversely affect
the Commonwealth. The market value and marketability of obligations of
issuers other than the Commonwealth may also be affected by more localized
economic changes, changes affecting the particular revenue stream supporting
such obligations and related litigation matters.
The City of Philadelphia has been experiencing financial difficulties in
recent years, as a result of which Moody's and S&P lowered their ratings of
City of Philadelphia general obligations below investment grade. City of
Philadelphia general obligations will not be purchased as an investment
security for the Pennsylvania Series until the ratings of such obligations
meet the criteria for the Pennsylvania Series.
General Socio-Economic and Economic Information Regarding the Commonwealth
The Commonwealth is the fifth most populous state (ranking behind
California, New York, Texas and Florida) with a population of approximately
12 million for the last ten years. The Commonwealth is the headquarters for
60 major corporations and the home for more than 272,000 businesses. It has
been historically identified as a heavy industry state although that
reputation has changed recently as the industrial composition of the
Commonwealth diversified when the coal, steel and railroad industries began
to decline. The major new sources of growth in the Commonwealth are in the
service sector, including trade, medical and health services, education and
financial institutions. Manufacturing employment has fallen from 23.0% of
non-agricultural employment in 1985 to 18.2% in 1994, while service sector
employment has increased from 24.6% of non-agricultural employment in 1985 to
30.1% in 1994. From 1983 to 1990, the Commonwealth's annual average
unemployment rate dropped from 11.8% to 5.4% (below the national average for
each of the years from 1986). In 1993 and 1994, the average annual
unemployment rates for the Commonwealth were 7.1% and 6.2%, respectively,
compared to rates of 6.8% and 6.1% for the United States for such years.
The Commonwealth utilizes the fund method of accounting. For purposes of
governmental accounting, a "fund" is defined as an independent fiscal and
accounting entity with a self-balancing set of accounts, for the purpose of
carrying on specific activities or attaining certain objectives in accordance
with the fund's special regulations, restrictions or limitations. In the
Commonwealth, funds are established by legislative enactment or in certain
cases by administrative action.
The General Fund, the Commonwealth's largest fund, receives all tax
revenues, non-tax revenues and federal grants and entitlements that are not
specified by law to be deposited elsewhere. The majority of the
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Commonwealth's operating and administrative expenses are payable from the
General Fund. Debt service on all Commonwealth obligations, except those
issued for highway purposes or for the benefit of other special revenue
funds, is payable from the General Fund.
Revenues in the General Fund include all tax receipts, license and fee
payments, fines, penalties, interest and other revenues of the Commonwealth
not specified to be deposited elsewhere or not restricted to a specific
program or expenditure and federal revenues. Taxes levied by the Commonwealth
are the most significant source of revenues in the General Fund. The major
tax sources for the General Fund are the sales tax, which accounted for $5.5
billion or 34.1% of General Fund revenues in fiscal 1995, the personal income
tax, which accounted for $5.1 billion or 31.3% of General Fund revenues, and
the corporate net income tax which accounted for $1.9 billion or 11.7% of tax
revenues. Federal revenues are those federal receipts which pay or reimburse
the Commonwealth for funds disbursed for federally assisted programs.
The primary expenditures of the General Fund are for education ($6.7
billion in fiscal 1995) and public health and welfare ($5.4 billion).
The Constitution and laws of the Commonwealth require all payments from
the General Fund, with the exception of refunds of taxes, licenses, fees and
other charges, to be made only by duly enacted appropriations. Amounts
appropriated from the General Fund may not exceed its actual and estimated
revenues for the fiscal year plus any surplus available. Appropriations are
generally made for one fiscal year and are returned to the unappropriated
surplus of the fund (a lapse) if not spent or encumbered by the end of the
fiscal year. The Commonwealth's fiscal year begins July 1 and ends June 30.
(Fiscal 1995 refers to the fiscal year ending June 30, 1995.)
The five year period from fiscal 1990 through fiscal 1994 was marked by
public health and welfare costs growing at a rate double the growth rate for
all state expenditures. Rising caseloads, increased utilization of services
and rising prices joined to produce the rapid rise of public health and
welfare costs at a time when a national recession caused tax revenues to
stagnate and even decline. During the period from fiscal 1990 through fiscal
1994, public health and welfare costs rose by an average annual rate of 9.4%
while tax revenues were growing at an average annual rate of 5.8%.
Consequently, spending on other budget programs was restrained to a growth
rate below 5.0% and sources of revenues other than taxes became larger
components of fund revenues. Among those sources were transfers from other
funds and hospital and nursing home pooling of contributions to use as
federal matching funds.
Tax revenues declined in fiscal 1991 as a result of the recession in the
economy. A $2.7 billion tax increase enacted for fiscal 1992 brought
financial stability to the General Fund. That tax increase included several
taxes with retroactive effective dates which generated some one-time revenues
during fiscal 1992. The absence of those revenues in fiscal 1993 contributed
to the decline in tax revenues for fiscal 1993. Fiscal 1994 tax revenues
increased by 4.1%, but a decline in other revenues held total revenues to a
1.8% gain. Expenditures for fiscal 1994 rose by 4.3%. Commonwealth revenues
for fiscal 1995 were above estimate and exceeded fiscal year expenditures and
encumbrances. Prior to reserves for transfer to the Tax Stabilization Reserve
Fund, the fiscal 1995 closing unappropriated surplus was $540 million.
The Constitution requires tax and fee revenues relating to motor fuels and
vehicles to be used for highway purposes, and the tax revenues relating to
aviation fuels to be used for aviation purposes. Accordingly, all such
revenues, except the revenues from one-half cent per gallon of the liquid
fuels tax which are deposited in the Liquid Fuels Tax Fund for distribution
to local municipalities, are placed in the Motor License Fund, as are most
federal aid revenues designated for transportation programs. Operating and
administrative costs for the
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Department of Transportation and other Commonwealth departments conducting
transportation related programs, including the highway patrol activities of
the Pennsylvania State Police, are also paid from the Motor License Fund.
Debt service on bonds issued by the Commonwealth for highway purposes is
payable from the Motor License Fund.
Other special revenue funds have been established by law to receive
specified revenues that are appropriated to specific departments, boards
and/or commissions for payment of their operating and administrative costs.
Such funds include the Game, Fish, Boating, Banking Department, Milk
Marketing, State Farm Products Show, State Racing and State Lottery Funds.
Some of these special revenue funds are required to transfer excess revenues
to the General Fund and some receive funding, in addition to their specified
revenues, through appropriations from the General Fund. The Fish Fund
annually pays debt service on Commonwealth bonds issued for projects
constructed for the benefit of that fund.
In 1986, the General Assembly created the Tax Stabilization Reserve Fund
and the Sunny Day Fund and provided for their initial funding from General
Fund appropriations. Income for both of these funds comes from annual
appropriations of money from other Commonwealth funds and investment
earnings. The Tax Stabilization Reserve Fund is to be used for emergencies
threatening the health, safety or welfare of citizens or to offset
unanticipated revenue shortfalls due to economic downturns. The Sunny Day
Fund is available to attract new business enterprises to the Commonwealth.
Assets of each fund may be used upon recommendation by the Governor and an
approving vote by two-thirds of the members of each house of the General
Assembly.
The State Lottery Fund is a special revenue fund for the receipt of
lottery ticket sales and lottery licenses and fees. Its revenues, after
payment of prizes, are dedicated to paying the operational and administrative
costs of the lottery and the costs of programs benefiting the elderly in
Pennsylvania.
The Commonwealth maintains trust and agency funds which are used to
administer funds received pursuant to a specific bequest or as an agent for
other governmental units or individuals.
Enterprise funds are maintained for departments or programs operated like
private enterprises. The largest of these funds is the State Stores Fund
which is used for the receipts and disbursements of the Commonwealth's liquor
store system. Sale and distribution of all liquor within Pennsylvania is a
government enterprise.
Information regarding certain Pennsylvania issuers of investment
securities may be found in the Statement of Additional Information.
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THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
Dean Witter Liquid Asset Fund Inc.
Dean Witter Tax-Free Daily Income Trust
Dean Witter U.S. Government Money Market Trust
Dean Witter California Tax-Free Daily Income Trust
Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Natural Resource Development Securities Inc.
Dean Witter Dividend Growth Securities Inc.
Dean Witter Developing Growth Securities Trust
Dean Witter World Wide Investment Trust
Dean Witter Value-Added Market Series
Dean Witter Utilities Fund
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 Health Sciences Trust
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter International Small Cap Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
Dean Witter Japan Fund
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
Dean Witter National Municipal Trust
Dean Witter High Income Securities
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Intermediate Term
U.S. Treasury Trust
DEAN WITTER RETIREMENT SERIES
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Valued-Added Market Series
Global Equity Series
ASSET ALLOCATION FUNDS
Dean Witter Strategist Fund
Dean Witter Global Asset Allocation Fund
ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
<PAGE>
Dean Witter
Multi-State Municipal Series Trust
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Dean Witter
Multi-State
Municipal
Series Trust
Prospectus
March 19, 1996
<PAGE>
DEAN WITTER
MULTI-STATE
MUNICIPAL SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
MARCH 19, 1996
- -----------------------------------------------------------------------------
Dean Witter Multi-State Municipal Series Trust (the "Fund") is an
open-end, non-diversified management investment company currently consisting
of ten separate series: the Arizona Series, the California Series, the
Florida Series, the Massachusetts Series, the Michigan Series, the Minnesota
Series, the New Jersey Series, the New York Series, the Ohio Series and the
Pennsylvania Series (the "State Series"). The investment objective of each
Series is to provide a high level of current income exempt from both federal
and the designated State income taxes consistent with the preservation of
capital. Each Series seeks to achieve its investment objective by investing
principally in investment grade tax-exempt securities of municipal issuers in
the designated State. See "Investment Practices and Policies."
A Prospectus for the Fund dated March 19, 1996, 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
or from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean
Witter Reynolds Inc. at any of its branch offices. This Statement of
Additional Information is not a Prospectus. It contains information in
addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the
Prospectus.
Dean Witter
Multi-State Municipal Series Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management .............. 3
Trustees and Officers .................... 6
Investment Practices and Policies ....... 12
Investment Restrictions .................. 35
Portfolio Transactions and Brokerage .... 36
Purchase of Fund Shares .................. 38
Shareholder Services ..................... 42
Redemptions and Repurchases .............. 44
Dividends, Distributions and Taxes ...... 45
Performance Information .................. 47
Shares of the Fund ....................... 49
Custodian and Transfer Agent ............. 50
Independent Accountants .................. 50
Reports to Shareholders .................. 50
Validity of Shares of Beneficial Interest 50
Legal Counsel ............................ 51
Experts .................................. 51
Registration Statement ................... 51
Appendix ................................. 52
Financial Statements--November 30, 1995 . 56
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on October 29, 1990.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or
"InterCapital"), whose address is Two World Trade Center, New York, New York
10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation.
In an internal reorganization which took place in January, 1993, InterCapital
assumed the investment advisory, administrative and management activities
previously performed by the InterCapital Division of Dean Witter Reynolds
Inc. ("DWR"), a broker-dealer affiliate of InterCapital. (As hereinafter used
in this Statement of Additional Information, the terms "InterCapital" and
"Investment Manager" refer to DWR's InterCapital Division prior to the
internal reorganization and to Dean Witter InterCapital Inc. thereafter. The
daily management of the Fund is conducted by or under the direction of
officers of the Fund and of the Investment Manager, subject to review of
investments by the Fund's Trustees. In addition, Trustees of the Fund provide
guidance on economic factors and interest rate trends. Information as to
these Trustees and Officers is contained under the caption "Trustees and
Officers".
The Investment Manager is also the investment manager of the following
management investment companies: Active Assets Money Trust, Active Assets
Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, Dean Witter Liquid Asset Fund Inc., InterCapital
Income Securities Inc., Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Developing Growth Securities Trust,
Dean Witter Tax-Exempt Securities Trust, Dean Witter Natural Resource
Development Securities Inc., Dean Witter Dividend Growth Securities Inc.,
Dean Witter American Value Fund, Dean Witter U.S. Government Money Market
Trust, Dean Witter Variable Investment Series, Dean Witter World Wide
Investment Trust, Dean Witter Select Municipal Reinvestment Fund, Dean Witter
U.S. Government Securities Trust, Dean Witter California Tax-Free Income
Fund, Dean Witter New York Tax-Free Income Fund, Dean Witter Convertible
Securities Trust, Dean Witter Federal Securities Trust, Dean Witter
Value-Added Market Series, High Income Advantage Trust, High Income Advantage
Trust II, High Income Advantage Trust III, Dean Witter Government Income
Trust, InterCapital Insured Municipal Bond Trust, InterCapital Quality
Municipal Investment Trust, 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 Precious Metals and Minerals Trust, Dean Witter New York
Municipal Money Market Trust, Dean Witter Global Short-Term Income Fund Inc.,
Dean Witter Pacific Growth Fund Inc., Dean Witter Premier Income Trust, Dean
Witter Short-Term U.S. Treasury Trust, InterCapital Insured Municipal Trust,
InterCapital Quality Municipal Income Trust, InterCapital Insured Municipal
Income Trust, InterCapital California Insured Municipal Income Trust,
InterCapital Insured Municipal Securities, InterCapital Insured California
Municipal Securities, Dean Witter Diversified Income Trust, Dean Witter
Health Sciences Trust, Dean Witter Retirement Series, InterCapital Quality
Municipal Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, Dean Witter Global
Dividend Growth Securities, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter
National Municipal Trust, Dean Witter High Income Securities, Dean Witter
International Small Cap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter
Select Dimensions Investment Series, Dean Witter Global Asset Allocation
Fund, Dean Witter Balanced Income Fund, Dean Witter Balanced Growth 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, Municipal Income Trust, Municipal Income
Trust II, Municipal Income Trust III, Municipal Income Opportunities Trust,
Municipal Income Opportunities Trust II, Municipal Income Opportunities
Trust III, Prime Income Trust and Municipal Premium Income Trust. The
foregoing investment companies, together with the Fund, are collectively
referred to as the Dean Witter Funds. In addition, Dean Witter Services
Company
3
<PAGE>
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 Balance Fund, TCW/DW Total
Return Trust, TCW/DW Mid-Cap Equity 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) sub-administrator of MassMutual
Participation Investors and Templeton Global Governments Income Trust,
closed-end investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective.
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 and bookkeeping and certain legal services as the
Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, statements of additional information, 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.
Each Series pays all expenses incurred in its operation and a portion of
the Fund's general administration expenses allocated on the basis of asset
size of the respective Series. Expenses not expressly assumed by the
Investment Manager under the Agreement or by the distributor of the Fund's
shares, Dean Witter Distributors Inc. ("Distributors" or the "Distributor")
(see "Purchase of Fund Shares"), will be paid by the Fund or each respective
Series depending upon the nature of the expense. The expenses borne directly
by each Series include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1 (see "Purchase of Fund Shares"); charges
and expenses of any registrar; custodian, stock transfer and dividend
disbursing agent; brokerage commissions; taxes; engraving and printing of
share certificates; registration costs of the Series 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 Series and supplements thereto to the Series'
shareholders; all expenses of shareholders' and trustees' meetings and of
preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any
outside service used for pricing of the Fund's shares; fees and expenses of
legal counsel, including counsel to the trustees who are not interested
persons of the 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 Series' 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
(depending upon the nature of the legal claim, liability or lawsuit, the
costs of litigation, payment of legal claims or liabilities or
indemnification relating thereto may be directly applicable to a particular
Series or may be proportionately allocated on the basis of the size of each
Series. The Trustees have determined that this is an appropriate method of
allocation of such expenses); and all other costs of the Fund's operations
properly payable by the Fund and allocable on the basis of size of the
respective Series.
4
<PAGE>
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, each Series of
the Fund pays the Investment Manager monthly compensation calculated daily by
applying the annual rate of 0.35% to the daily net assets of that Series.
During the fiscal years ended November 30, 1991 and 1992, the Investment
Manager had undertaken to assume all expenses (except the 12b-1 fee and
brokerage fees) with respect to each Series of the Fund. During the fiscal
year ended November 30, 1993, and during a portion of the fiscal year ended
November 30, 1994 (December 1, 1993 to January 1, 1994) the Investment
Manager continued to waive management fees and assume expenses, with respect
to each Series of the Fund, to the extent they exceeded 0.50% of the daily
net assets of each respective Series. Additionally, during the fiscal years
ended November 30, 1994 and 1995, the Investment Manager continued to waive
management fees and assume expenses until January 1, 1996 with respect to the
Massachusetts Series, Michigan Series, Minnesota Series, New York Series and
Ohio Series to the extent they exceeded 0.50% of the daily net assets of each
respective Series. The Investment Manager has undertaken, until December 31,
1996, to continue to assume expenses and waive management fees with respect
to each aforementioned Series to the extent that such expenses and
compensation on an annualized basis exceed 0.50% of the average daily net
assets of each respective Series. During the fiscal year ended November 30,
1993, the Arizona Series, California Series, Florida Series, Massachusetts
Series, Michigan Series, Minnesota Series, New Jersey Series, New York
Series, Ohio Series and Pennsylvania Series accrued to the Investment Manager
under the Agreement total compensation in the amounts of $94,559, $284,875,
$147,221, $2,458, $9,191, $0, $72,074, $2,933, $13,156 and $69,372,
respectively. During the fiscal year ended November 30, 1994, the Arizona
Series, California Series, Florida Series, Massachusetts Series, Michigan
Series, Minnesota Series, New Jersey Series, New York Series, Ohio Series and
Pennsylvania Series accrued to the Investment Manager under the Agreement
total compensation in the amounts of $198,139, $457,543, $287,107, $62,634,
$75,569, $40,379, $181,438, $54,392, $87,759 and $184,131, respectively.
During the fiscal year ended November 30, 1995, the Arizona Series,
California Series, Florida Series, Massachusetts Series, Michigan Series,
Minnesota Series, New Jersey Series, New York Series, Ohio Series and
Pennsylvania Series accrued to the Investment Manager under the Agreement
total compensation in the amounts of $173,132, $405,705, $253,653, $57,633,
$73,104, $37,712, $165,599, $52,047, $76,895 and $178,837, respectively.
Pursuant to the Agreement, total operating expenses of each Series of the
Fund are subject to applicable limitations under rules and regulations of
states where a particular Series is authorized to sell its shares. Therefore,
operating expenses of a particular Series are effectively subject to such
limitations as the same may be amended from time to time. Presently, the most
restrictive limitation, applicable only to shares of any Series of the Fund
registered to be sold in California, is as follows: If, in any fiscal year,
the total operating expenses of a fund or series, exclusive of taxes,
interest, brokerage fees, distribution fees and extraordinary expenses (to
the extent permitted by applicable state securities laws and regulations),
exceed 2 1/2 % of the first $30,000,000 of average daily net assets, 2% of
the next $70,000,000 and 1 1/2 % of any excess over $100,000,000, the
Investment Manager will reimburse such fund or series for the amount of such
excess. Such amount, if any, will be calculated daily and credited on a
monthly basis. During the fiscal years ended November 30, 1993, 1994 and 1995
the expenses of each Series of the Fund did not exceed the expense
limitation.
The Investment Manager has paid the organizational expenses of the Fund
incurred prior to the offering of the Fund's shares. The Fund agreed to bear
and reimburse the Investment Manager for such expenses, in an amount of up to
a maximum of $150,000. The Fund has deferred and is amortizing the reimbursed
expenses on the straight line method over a period not to exceed five years
from the date of commencement of the Fund's operations.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
5
<PAGE>
The Agreement was initially approved by the Board of Trustees on October
30, 1992 and by the shareholders of each Series of the Fund at a Special
Meeting of Shareholders on January 12, 1993. The Agreement is substantially
identical to a prior investment management agreement which was initially
approved by the Trustees on December 11, 1990 (April 16, 1991 for the Arizona
Series), by DWR as the then sole shareholder on December 26, 1990 (April 17,
1991 for the Arizona Series) and by the Shareholders of each Series of the
Fund at a Special Meeting of Shareholders held on June 24, 1992. The
Agreement took effect on June 30, 1993 upon the spin-off by Sears, Roebuck &
Co. of its remaining shares of DWDC.
The Agreement may be terminated with respect to any Series, at any time,
without penalty, on thirty days' notice by the Trustees of the Fund, by the
holders of a majority of the outstanding shares of that Series, as defined in
the Investment Company Act of 1940, as amended (the "Act"), 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 will continue in effect until April 30,
1994, and will continue from year to year thereafter with respect to each
Series, provided continuance of the Agreement is approved at least annually
by the vote of the holders of a majority of the outstanding shares of that
Series, as defined in the Act, 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 8, 1994 the Fund's Trustees, including all of the Independent Trustees,
approved the continuation of the Agreement until April 30, 1995.
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.
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use, or at any
time permit others to use, the name "Dean Witter". The Fund has also agreed
that in the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent is terminated, the Fund will eliminate the name
"Dean Witter" from its name if DWR or its parent company shall so request.
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 80 Dean Witter Funds and the 12 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 (55) Chairman and Chief Executive Officer of Levitz Furniture Corporation
Trustee (since November, 1995); Director or Trustee of the Dean Witter Funds;
c/o Levitz Furniture Corporation formerly President and Chief Executive Officer of Hills Department Stores
6111 Broken Sound Parkway, N.W. (May, 1991-July, 1995); formerly Chairman and Chief Executive Officer
Boca Raton, Florida (January, 1987-August, 1990) and President and Chief Operating Officer
(August, 1990-February, 1991) of the Sears Merchandise Group of Sears,
Roebuck and Co.; Director of Eaglemark Financial Services, Inc., the
United Negro College Fund, Weirton Steel Corporation and Domain Inc.
(home decor retailer).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -------------------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (62) Chairman, Chief Executive Officer and Director of InterCapital, Dean
Chairman of the Board, President, Witter Distributors Inc. ("Distributors") and DWSC; Executive Vice
Chief Executive Officer and Trustee President and Director of DWR; Chairman, Director or Trustee, President
Two World Trade Center and Chief Executive Officer of the Dean Witter Funds; Chairman, Chief
New York, New York Executive Officers 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 (63) Director or Trustee of the Dean Witter Funds; formerly United States
Trustee Senator (R-Utah) (1974-1992) and Chairman, Senate Banking Committee
c/o Huntsman Chemical Corporation (1980-1986); formerly Mayor of Salt Lake City, Utah (1971-1974); formerly
500 Huntsman Way Astronaut, Space Shuttle Discovery (April 12-19, 1985); Vice Chairman,
Salt Lake City, Utah Huntsman Chemical Corporation (since January, 1993); Director of Franklin
Quest (time management systems) and John Alden Financial Corp.; Member
of the board of various civic and charitable organizations.
John R. Haire (71) Chairman of the Audit Committee and Chairman of the Committee of the
Trustee Independent Directors or Trustees and Director or Trustee of the Dean
Two World Trade Center Witter Funds; Trustee of the TCW/DW Funds; formerly President, Council
New York, New York for Aid to Education (1978-1989), Chairman and Chief Executive Officer
of Anchor Corporation, an Investment Adviser (1964-1978); Director of
Washington National Corporation (insurance).
Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc., a consulting firm;
Trustee Koch Professor of International Economics and Director of the Center
c/o Johnson Smick International, Inc. for Global Market Studies at George Mason University (since September,
1133 Connecticut Avenue, N.W. 1990); Co-Chairman and a founder of the Group of Seven Council (G7C),
Washington, D.C. an international economic commission (since September, 1990); Director
or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds; Director
of NASDAQ (since June, 1995); Director of Greenwich Capital Markets Inc.
(broker-dealer); formerly Vice Chairman of the Board of Governors of
the Federal Reserve System (February, 1986-August, 1990) and Assistant
Secretary of the U.S. Treasury (1982-1986).
Paul Kolton (72) Director or Trustee of the Dean Witter Funds; Chairman of the Audit Committee
Trustee and the Committee of the Independent Trustees and Trustee of the TCW/DW
c/o Gordon Altman Butowsky Funds; formerly Chairman of the Financial Accounting Standards Advisory
Weitzen Shalov & Wein Council and Chairman and Chief Executive Officer of the American Stock
Counsel to the Independent Trustees Exchange; Director of UCC Investors Holding Inc. (Uniroyal Chemical Company,
114 West 47th Street Inc.); director or trustee of various not-for profit organizations.
New York, New York
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -------------------------------------------------------------------
<S> <C>
Michael E. Nugent (59) General Partner, Triumph Capital, L.P., a private investment partnership
Trustee (since April, 1988); Director or Trustee of the Dean Witter Funds; Trustee
c/o Triumph Capital, L.P. of the TCW/DW Funds; formerly Vice President, Bankers Trust Company and
237 Park Avenue BT Capital Corporation (1984-1988); Director of various business
New York, New York organizations.
Philip J. Purcell* (52) Chairman of the Board of Directors and Chief Executive Officer of DWDC,
Trustee DWR and Novus Credit Services Inc.; Director of InterCapital, DWSC and
Two World Trade Center Distributors; Director or Trustee of the Dean Witter Funds; Director
New York, New York and/or officer of various DWDC subsidiaries.
John L. Schroeder (65) Retired; Director or Trustee of the Dean Witter Funds; Trustee of the
Trustee TCW/DW Funds; Director of Citizens Utility Company; formerly Executive
c/o Gordon Altman Butowsky Vice President and Chief Investment Officer of the Home Insurance Company
Weitzen Shalov & Wein (August, 1991-September, 1995); formerly Chairman and Chief Investment
Counsel to the Independent Trustees Officer of Axe-Houghton Management and the Axe-Houghton Funds (April,
114 West 47th Street 1983-June, 1991) and President of USF&G Financial Services, Inc. (June,
New York, New York 1990-June, 1991).
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel of InterCapital
Vice President, Secretary and DWSC; Assistant Secretary of DWR; Senior Vice President, Assistant
and General Counsel Secretary and Assistant General Counsel of Distributors; Senior Vice
Two World Trade Center President and Secretary of DWTC; and Vice President, Secretary and General
New York, New York Counsel of the Dean Witter Funds and the TCW/DW Funds.
James F. Willison (52) Senior Vice President of InterCapital; Vice President of various Dean
Vice President Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (50) First Vice President (since May, 1991) and Assistant Treasurer (since
Treasurer January, 1993) of InterCapital; First Vice President and Assistant Treasurer
Two World Trade Center of DWSC and Treasurer of the Dean Witter Funds and the TCW/DW Funds;
New York, New York previously Vice President of InterCapital.
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined
in the Act.
In addition, Robert M. Scanlan, President of InterCapital and Chief
Operating Officer of InterCapital and DWSC, Executive Vice President of
Distributors and DWTC and Director of DWTC, David A. Hughey, Executive Vice
President and Chief Administrative Officer of InterCapital, DWSC,
Distributors and DWTC and Director of DWTC and Edmund C. Puckhaber, Executive
Vice Presidents of InterCapital and Robert S. Giambrone, Senior Vice
Presidents of InterCapital, DWSC, Distributors and DWTC, and Joseph J.
McAlinden, Jonathan R. Page, Senior Vice President of InterCapital, are Vice
Presidents of the Fund and Barry Fink and Marilyn K. Cranney, First Vice
Presidents and Assistant General Counsels of InterCapital and DWSC, and Lou
Anne D. McInnis and Ruth Rossi, Vice Presidents and Assistant General
Counsels of InterCapital and DWSC, and Carsten Otto, a Staff Attorney with
InterCapital, are Assistant Secretaries of the Fund.
8
<PAGE>
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of
this Statement of Additional Information, there are a total of 80 Dean Witter
Funds, comprised of 120 portfolios. As of January 31, 1996, the Dean Witter
Funds had total net assets of approximately $73.5 billion and more than five
million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, DWDC.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Five
of the seven independent Trustees are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1995, the three Committees held a combined total of fifteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Most of the Dean Witter Funds
have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees 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
9
<PAGE>
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 all three 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 Committees 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 of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 ($1,200
prior to September 30, 1995) 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 $2,400, in each case inclusive of the Committee
meeting fees). 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 Fund has adopted a retirement program under which an Independent
Trustee who retires after serving for at least five years (or such lesser
period as may be determined by the Board) as an Independent Director or
Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund referred to as an "Adopting Fund" and each such Trustee referred to
as an "Eligible Trustee") is entitled to retirement payments upon reaching
the eligible retirement age (normally, after attaining age 72). Annual
payments are based upon length of service. Currently, upon retirement, each
Eligible Trustee is entitled to receive from the 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 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 Fund. As of the date of this
Statement of Additional Information, 57 Dean Witter Funds have adopted the
retirement program.
10
<PAGE>
The following table illustrates the compensation paid and the retirement
benefits accrued to the Fund's Independent Trustees by the Fund for the
fiscal year ended November 30, 1995 and the estimated retirement benefits for
the Fund's Independent Trustees as of November 30, 1995.
<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
-------------------------------- --------------------------------------------------------------
ESTIMATED ESTIMATED
RETIREMENT CREDIT YEARS OF ESTIMATED ANNUAL
AGGREGATE BENEFITS SERVICE AT PERCENTAGE OF ESTIMATED BENEFITS
NAME OF INDEPENDENT COMPENSATION ACCRUED AS FUND RETIREMENT ELIGIBLE ELIGIBLE UPON
TRUSTEE FROM THE FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION RETIREMENT
- -------------------------- --------------- --------------- --------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic ............. $1,850 $ 417 10 57.5% $1,950 $1,121
Edwin J. Garn ............. 2,000 761 10 57.5% 1,950 1,121
John R. Haire ............. 4,550(4) 5,982 10 57.5% 4,193 2,411
Dr. Manuel H. Johnson .... 2,000 298 10 57.5% 1,950 1,121
Paul Kolton ............... 2,000 2,355 10 57.0% 1,435 818
Michael E. Nugent ......... 1,850 567 10 57.5% 1,950 1,121
John L. Schroeder ......... 2,000 819 8 47.9% 1,950 934
</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.
(3) Based on current levels of compensation. Amount of annual benefits
also varies depending on the Trustee's elections described in Footnote (1)
above.
(4) Of Mr. Haire's compensation from the Fund, $3,150 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($750).
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for
services to the 79 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Kolton and Nugent, the 11 TCW/DW Funds that were in operation at
December 31, 1995. With respect to Messrs. Haire, Johnson, Kolton and Nugent,
the TCW/DW Funds are included solely because of a limited exchange privilege
between those Funds and five Dean Witter Money Market Funds. Mr. Schroeder
was elected as a Trustee of the TCW/DW Funds on April 20, 1995.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
FOR SERVICE AS CHAIRMAN OF TOTAL CASH
DIRECTOR OR FOR SERVICE AS COMMITTEES OF COMPENSATION
TRUSTEE AND TRUSTEE AND INDEPENDENT FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER DIRECTORS/ 79 DEAN WITTER
NAME OF INDEPENDENT OF 79 DEAN WITTER OF 11 TCW/DW TRUSTEES AND FUNDS AND 11
TRUSTEE FUNDS FUNDS AUDIT COMMITTEES TCW/DW FUNDS
- -------------------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Michael Bozic ............. $126,050 -- -- $126,050
Edwin J. Garn ............. 136,450 -- -- 136,450
John R. Haire ............. 98,450 $82,038 $217,350(1) 397,838
Dr. Manuel H. Johnson .... 136,450 82,038 -- 218,488
Paul Kolton ............... 136,450 54,788 36,900(6) 228,138
Michael E. Nugent ......... 124,200 75,038 -- 199,238
John L. Schroeder ......... 136,450 46,964 -- 183,414
</TABLE>
- ---------------
(5) For the 79 Dean Witter Funds in operation at December 31, 1995.
(6) For the 11 TCW/DW Funds in operation at December 31, 1995.
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.
11
<PAGE>
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
PORTFOLIO SECURITIES
Taxable Securities. As discussed in the Prospectus, each Series of the
Fund may invest up to 20% of its total assets in taxable money market
instruments, tax-exempt securities of other states and municipalities and
futures and options. (This investment percentage is subject to applicable
state laws and may be limited further by specific requirements of certain
states. It is the intention of each Series to meet the applicable
requirements of the respective States. See "Dividends, Distributions and
Taxes-- State Taxation" in the Prospectus.) Investments in taxable money
market instruments would generally be made under any one of the following
circumstances: (a) pending investment of proceeds of the sale of each Series'
shares or of portfolio securities, (b) pending settlement of purchases of
portfolio securities and (c) to maintain liquidity for the purpose of meeting
anticipated redemptions. Only those tax-exempt securities of other states
which satisfy the standards established for the tax-exempt securities of the
State Series may be purchased by each Series.
In addition, each Series may temporarily invest more than 20% of its total
assets in tax-exempt securities of other states and municipalities and
taxable money market instruments, in order to maintain a temporary
"defensive" posture when, in the opinion of the Investment Manager, it is
advisable to do so because of market conditions (the types of investments in
which each Series may invest when maintaining a temporary "defensive"
position may be limited by applicable State requirements). The types of
taxable money market instruments in which each Series may invest are limited
to the following short-term fixed-income securities (maturing in one year or
less from the time of purchase): (i) obligations of the United States
Government, its agencies, instrumentalities or authorities; (ii) commercial
paper rated P-1 by Moody's Investors Service, Inc. ("Moody's") or A-1 by
Standard & Poor's Corporation ("S&P"); (iii) certificates of deposit of
domestic banks with assets of $1 billion or more; and (iv) repurchase
agreements with respect to portfolio securities.
Tax-Exempt Securities. As discussed in the Prospectus, under normal
conditions, at least 80% of the total assets of each Series will be invested
in securities, the interest on which is exempt from federal income taxes and
the income taxes of the designated State. The tax-exempt securities in which
each Series will invest include Municipal Bonds, Municipal Notes and
Municipal Commercial Paper. 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 Bond, Municipal Note and Municipal
Commercial Paper ratings by Moody's and S&P, see the Appendix to this
Statement of Additional Information.
The percentage and rating policies in the Prospectus apply at the time of
acquisition of a security based upon the last previous determination of the
Fund's net asset value; any subsequent change in any ratings by a rating
service or change in percentages resulting from market fluctuations or other
changes in the amount of total assets will not require elimination of any
security from the Fund's portfolio until such time as the Investment Manager
determines that it is practicable to sell the security without undue market
or tax consequences to the Fund. Therefore, the Fund may hold securities
which have been downgraded to ratings of Ba or BB or lower by Moody's or S&P.
Such securities are considered to be speculative investments.
Although certain quality standards are applicable at the time of purchase,
the Fund does not have any minimum quality rating standard for its downgraded
investments. As such, the Fund may continue to hold securities rated as low
as Caa, Ca or C by Moody's or CCC, CC, C or CI by S&P. However, such
investments may not exceed more than 5% of the total assets of any Series.
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.
12
<PAGE>
The payment of principal and interest by issuers of certain Municipal
Obligations purchased by each Series 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 investment quality requirements of each Series. In
addition, some issues may contain provisions which permit the Fund, on behalf
of a Series, 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 to the issuer at time
of original issuance, exempt from regular federal income tax. In addition to
these requirements, the interest from Municipal Bonds of the designated State
of each Series must be, in the opinion of bond counsel to the issuer at time
of original issuance, exempt from the regular personal income tax of that
State. These obligations 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 to the issuer at time of original issuance, exempt from regular
federal income tax. In addition to those requirements, the interest from
Municipal Notes of the designated State of each Series must be, in the
opinion of bond counsel to the issuer at time of original issuance, exempt
from the regular personal income tax of that State. The principal types of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes, although there are other types
of Municipal Notes, in which each Series 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.
Municipal Commercial Paper. Municipal Commercial Paper refers to
short-term obligations of municipalities the interest from which is, in the
opinion of bond counsel to the issuer at time of original issuance, exempt
from regular federal income tax. In addition to those requirements, the
interest from the Municipal Commercial Paper of the designated State of each
Series must be, in the opinion of bond counsel to the issuer at time of
original issuance, exempt from the regular personal income tax of that State.
Municipal Commercial Paper 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.
The two principal classifications of Municipal Bonds, Notes and Commercial
Paper are "general obligation" and "revenue" bonds, notes or commercial
paper. General obligation bonds, notes or commercial paper are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Issuers of general obligation bonds, notes or
commercial paper include a state, its counties, cities, towns and other
governmental units. Revenue bonds, notes or commercial paper are payable from
the revenues derived from a particular facility or class of facilities or, in
some cases, from specific revenue sources. Revenue bonds, notes or commercial
paper are issued for a wide variety of purposes, including the financing of
electric, gas, water and sewer systems and other public utilities; industrial
development and pollution control facilities; single and multi-family housing
units; public buildings and facilities; air and marine ports; transportation
facilities such as toll roads, bridges and tunnels; and health and
educational facilities such as hospitals and dormitories. They rely primarily
on user fees to pay debt service, although the principal revenue source is
often supplemented by additional
13
<PAGE>
security features which are intended to enhance the credit worthiness 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.
Issuers of Municipal Obligations 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 into account 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 each Series of 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 any Series defaults, the Series 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 per share of a
particular Series of the Fund. Moreover, the market prices of certain of the
portfolio securities of each Series 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 investment 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 could make it difficult for a Series 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 per
share of a Series of the Fund.
Variable Rate Obligations. As stated in the Prospectus, each Series of 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
14
<PAGE>
in the market value of the obligation. The principal benefit to each Series
of the Fund of purchasing obligations with a demand feature is that
liquidity, and the ability of each Series of the Fund to obtain repayment of
the full principal amount of the obligation prior to maturity, is enhanced.
Lending of Portfolio Securities. The Fund, on behalf of any Series, may
lend portfolio securities to brokers, dealers and financial institutions
provided that cash equal to at least 100% of the market value of the
securities loaned is deposited by the borrower with the Fund and is
maintained each business day in a segregated account pursuant to applicable
regulations. The collateral value of the loaned securities will be
marked-to-market daily. While such securities are on loan, the borrower will
pay the Series any income accruing thereon, and the Fund may invest on behalf
of the Series, the cash collateral in portfolio securities, thereby earning
additional income. The Fund will not lend the portfolio securities of any
Series if such loans are not permitted by the laws or regulations of any
state in which its shares are qualified for sale and will not lend more than
25% of the value of the total assets of any Series. Loans will be subject to
termination by the Fund on behalf of any Series, in the normal settlement
time, currently five business days after notice, or by the borrower on one
day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Series and its
shareholders. The Fund may pay reasonable finders, borrowers, administrative,
and custodial fees in connection with a loan. The creditworthiness of firms
to which the Fund lends its portfolio securities will be monitored on an
ongoing basis. During the fiscal year ended November 30, 1995, the Fund did
not lend any portfolio securities of any Series.
When-Issued and Delayed Delivery Securities. As stated in the Prospectus,
the Fund may, on behalf of any Series, 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, on behalf of each Series, 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. During the
fiscal year ended November 30, 1995, investments in when-issued and delayed
delivery securities by any Series of the Fund did not exceed 5% of the total
net assets of any such Series.
Repurchase Agreements. When cash may be available for only a few days, it
may be invested by the Fund, on behalf of any Series, in repurchase
agreements until such time as it may otherwise be invested or used for
payments of obligations of the Fund. These agreements, which may be viewed as
a type of secured lending by the Fund, typically involve the acquisition by
the Fund, on behalf of a Series, of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer.
The agreement provides that the Fund will, on behalf of a Series, sell back
to the institution, and that the institution will repurchase, the underlying
security ("collateral"), which is held by the Fund's Custodian at a specified
price and at a fixed time in the future which is usually not more than seven
days from the date of purchase. The Fund, on behalf of that Series, will
receive interest from the institution until the time when the repurchase is
to occur. Although such date is deemed by the Fund to be the maturity date of
a repurchase agreement, the maturities of securities subject to repurchase
agreements are not subject to any limits and may exceed one year. While
repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase
transactions only with large well-capitalized and well-established financial
institutions, whose financial condition will be continually monitored. In
addition, the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling financial institution, the Fund,
15
<PAGE>
on behalf of a Series, will seek to liquidate such collateral. However, the
exercising of the Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase were less than the repurchase price,
a particular Series could suffer a loss. It is the current policy of each
Series of the Fund not to invest in repurchase agreements that do not mature
within seven days if any such investment, together with any other illiquid
assets held by a particular Series, amounts to more than 10% of the total
assets of that Series. During the fiscal year ended November 30, 1995, the
Fund did not enter into any repurchase agreements with respect to any Series.
HEDGING ACTIVITIES
The Fund, on behalf of each Series except the New Jersey Series, may enter
into financial futures contracts, options on such futures and municipal bond
index futures contracts for hedging purposes.
FUTURES CONTRACT AND OPTIONS ON FUTURES
As discussed in the Prospectus, the Fund, on behalf of any applicable
Series, may invest in financial futures contracts ("futures contracts") and
related options thereon. These futures contracts and related options thereon
will be used only as a hedge against anticipated interest rate changes. A
futures contract sale creates an obligation by the Fund, as seller, on behalf
of a Series, to deliver the specific type of instrument called for in the
contract at a specified future time for a specified price. A futures contract
purchase would create an obligation by the Fund, as purchaser, on behalf of
that Series, to take delivery of the specific type of financial instrument at
a specified future time at a specified price. The specific securities
delivered or taken, respectively, at settlement date, would not be determined
until or near that date. The determination would be in accordance with the
rules of the exchange on which the futures contract sale or purchase was
effected.
Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is usually effected by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale
is effected by the Fund, on behalf of a Series, entering into a futures
contract purchase for the same aggregate amount of the specific type of
financial instrument at the same delivery date. If the price in the sale
exceeds the price in the offsetting purchase, the Fund is immediately paid
the difference and thus, on behalf of that Series, realizes a gain. If the
offsetting purchase price exceeds the sale price, the Fund pays the
difference and, on behalf of that Series, realizes the loss. Similarly, the
closing out of a futures contract purchase is effected, on behalf of a
Series, by the Fund entering into a futures contract sale. If the offsetting
sale price exceeds the purchase price, the Fund, on behalf of that Series,
realizes a gain, and if the offsetting sale price is less than the purchase
price, the Fund, on behalf of that Series, realizes a loss.
Unlike a futures contract which requires the parties to buy and sell a
security on a set date, an option on a futures contract entitles its holder
to decide on or before a future date whether to enter into such a contract.
If the holder decides not to enter into the contract, the premium paid for
the option is lost. Since the value of the option is fixed at the point of
sale, there are no daily payments of cash to reflect the change in the value
of the underlying contract, as discussed below for futures contracts. The
value of the option changes and is reflected in the net asset value of the
particular Series holding the option.
The Fund, on behalf of each applicable Series, is required to maintain
margin deposits with brokerage firms through which it effects futures
contracts and options thereon. The initial margin requirements vary according
to the type of the underlying security. In addition, due to current industry
practice daily variations in gains and losses on open contracts are required
to be reflected in cash in the form of variation margin payments. The Fund,
on behalf of any Series, may be required to make additional margin payments
during the term of the contract.
Currently, futures contracts can be purchased on debt securities such as
U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6
1/2 and 10 years, Certificates of the Government National Mortgage
Association and Bank Certificates of Deposit. The Fund may invest in interest
rate futures contracts covering these types of financial instruments as well
as in new types of contracts that become available in the future.
16
<PAGE>
Financial futures contracts are traded in an auction environment on the
floors of several Exchanges--principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. Each Exchange
guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the Exchange membership
which is also responsible for handling daily accounting of deposits or
withdrawals of margin.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject
to futures contracts may correlate imperfectly with the behavior of the cash
prices of each Series' portfolio securities. The correlation may be distorted
by the fact that the futures market is dominated by short-term traders
seeking to profit from the difference between a contract or security price
objective and their cost of borrowed funds. This would reduce their value for
hedging purposes over a short time period. The correlation may be further
distorted since the futures contracts that are being used to hedge are not
based on municipal obligations.
Another risk is that the Fund's manager could be incorrect in its
expectations as to the direction or extent of various interest rate movements
or the time span within which the movements take place. For example, if the
Fund, on behalf of a Series, sold futures contracts for the sale of
securities in anticipation of an increase in interest rates, and then
interest rates went down instead, causing bond prices to rise, that Series
would lose money on the sale.
Put and call options on financial futures have similar characteristics as
Exchange-traded options. See below for a further description of options.
In addition to the risks associated in investing in options on securities,
there are particular risks associated with investing in options on futures.
In particular, the ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid
secondary market. It is not certain that this market will develop.
In order to assure that the Fund is utilizing futures transactions for
hedging purposes only, a substantial majority (i.e., approximately 75%) of
all anticipatory hedge transactions of each Series (transactions in which the
Fund, on behalf of a Series, does not own at the time of the transaction, but
expects to acquire, the securities underlying the relevant futures contract)
involving the purchase of futures contracts or call options thereon will be
completed by the purchase of securities which are the subject of the hedge.
The Fund, on behalf of any applicable Series, may not enter into futures
contracts or related options thereon if immediately thereafter the amount
committed to margin of all the Series' futures contracts plus the amount paid
for option premiums exceeds 5% of the value of the Fund's total assets. In
instances involving the purchase of futures contracts by the Fund, on behalf
of a Series, the market value of the futures contract will be deposited in a
segregated account containing cash and cash equivalents to collateralize the
position and thereby ensure that the use of such futures is unleveraged. The
Fund, on behalf of any Series, may not purchase or sell futures contracts or
related options thereon if immediately thereafter more than one-third of the
Series' net assets would be hedged.
Municipal Bond Index Futures. The Fund, on behalf of any applicable
Series, may utilize municipal bond index futures contracts for hedging
purposes. The Fund's strategies in employing such contracts will be similar
to that discussed above with respect to financial futures and options
thereon. A municipal bond index is a method of reflecting in a single number
the market value of many different municipal bonds and is designed to be
representative of the municipal bond market generally. The index fluctuates
in response to changes in the market values of the bonds included within the
index. Unlike futures contracts on particular financial instruments,
transactions in futures on a municipal bond index will be settled in cash if
held until the close of trading in the contract. However, like any other
futures contract, a position in the contract may be closed out by purchase or
sale of an offsetting contract for the same delivery month prior to
expiration of the contract. Because trading in municipal bond index futures
contracts commenced only recently, the Fund's ability to utilize such
contracts on behalf of a Series will be dependent upon the development and
maintenance of a liquid secondary market for such contracts.
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Options. The Fund, on behalf of any applicable Series, may purchase or
sell (write) options on debt securities as a means of achieving additional
return or hedging the value of a Series of the Fund's portfolio. The Fund, on
behalf of a Series, would only buy options listed on national securities
exchanges. The Fund, will not purchase options on behalf of any Series if, as
a result, the aggregate cost of all outstanding options exceeds 10% of the
Fund's total assets.
A call option is a contract that gives the holder of the option the right
to buy from the writer of the call option, in return for a premium, the
security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option has the
obligation upon exercise of the option to deliver the underlying security
upon payment of the exercise price during the option period. A put option is
a contract that gives the holder of the option the right to sell to the
writer, in return for a premium, the underlying security at a specified price
during the term of the option. The writer of the put has the obligation to
buy the underlying security upon exercise, at the exercise price during the
option period.
The Fund, on behalf of any applicable Series, will only write covered call
or covered put options. The Fund may not write covered options on behalf of a
Series in an amount exceeding 20% of the value of the total assets of that
Series. A call option is "covered" if the Fund, on behalf of a Series, owns
the underlying security subject to the option or has an absolute and
immediate right to acquire that security or futures contract without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Fund,
on behalf of a Series, holds a call on the same security or futures contract
as the call written where the exercise price of the call held is (i) equal to
or less than the exercise price of the call written or (ii) greater than the
exercise price of the call written if the difference is maintained by the
Fund, on behalf of a Series, in cash, Treasury bills or other high grade
short-term debt obligations in a segregated account with its custodian. A put
option is "covered" if the Fund, on behalf of a Series, maintains cash,
Treasury bills or other high grade short-term obligations with a value equal
to the exercise price in a segregated account with its custodian, or else
holds a put on the same security or futures contract as the put written where
the exercise price of the put held is equal to or greater than the exercise
price of the put written.
If the Fund has written an option on behalf of a Series, it may terminate
its obligation by effecting a closing purchase transaction. This is
accomplished by purchasing an option of the same series as the option
previously written. However, once the Fund has been assigned an exercise
notice, the Fund, on behalf of that Series, will be unable to effect a
closing purchase transaction. Similarly, if the Fund, on behalf of a Series,
is the holder of an option it may liquidate its position by effecting a
closing sale transaction. This is accomplished by selling an option of the
same series as the option previously purchased. There can be no assurance
that either a closing purchase or sale transaction on behalf of any Series
can be effected when the Fund so desires.
A Series will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; a Series will realize a
loss from a closing transaction if the price of the transaction is more than
the premium received from writing the option or is less than the premium paid
to purchase the option. Since call option prices generally reflect increases
in the price of the underlying security, any loss resulting from the
repurchase of a call option may also be wholly or partially offset by
unrealized appreciation of the underlying security. Other principal factors
affecting the market value of a put or a call option include supply and
demand, interest rates, the current market price and price volatility of the
underlying security and the time remaining until the expiration date.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Fund will
generally purchase or write, on behalf of a Series, only those options for
which there appears to be an active secondary market, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
option. In such event it might not be possible to effect closing transactions
in particular options, so that the Fund, on behalf of that Series, would have
to exercise its options in order to realize any profit and would incur
brokerage commissions
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upon the exercise of call options and upon the subsequent disposition of
underlying securities for the exercise of put options. If the Fund as a
covered call option writer is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon
exercise.
PORTFOLIO MANAGEMENT
Each Series of 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 does not generally intend to invest more than 25% of the total
assets of any Series in securities of any one governmental unit. Subject to
investment restriction number 2 in the Prospectus, the Fund may invest more
than 25% of the total assets of any Series in private activity bonds (a
certain type of tax-exempt Municipal Obligation).
Each Series of the Fund may invest up to 10% of its total assets in
obligations customarily sold to institutional investors in private
transactions with the issuers thereof and other securities which may be
deemed to be illiquid. Due to the limited market for certain of these
securities, a Series may be unable to dispose of such securities promptly at
reasonable prices. It is the current intention of each Series not to invest
in such obligations.
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO ARIZONA OBLIGATIONS
Arizona's constitution limits the amount of debt payable from general tax
revenues that may be contracted by the State to $350,000. However, certain
other issuers have the statutory power to issue obligations payable from
other sources of revenue which affect the whole or large portions of the
State. For example, the Transportation Board of the State of Arizona
Department of Transportation may issue obligations for highways which are
paid from revenues generated from, among other sources, gasoline taxes.
Arizona's constitution also restricts debt payable from general tax
revenues of certain other issuers of the State. Most importantly, no county,
city, town, school district, or other municipal corporation of the State may
for any purpose become indebted in any manner in an amount exceeding 6% of
the taxable property in such county, city, town, school district, or other
municipal corporation without the assent of a majority of the qualified
electors thereof voting at an election provided by law to be held for that
purpose; provided, however, that (i) under no circumstances may any county or
school district of the State become indebted in an amount exceeding 15% (or
30% in the case of a unified school district) of such taxable property and
(ii) any incorporated city or town of the State with such assent may be
allowed to become indebted in up to a 20% additional amount for (a) supplying
such city or town with water, artificial light, or sewers when the works for
supplying such water, light, or sewers are or shall be owned and controlled
by the municipality and (b) the acquisition and development by such city or
town of land or interests therein for open space preserves, parks,
playgrounds and recreational facilities. Annual property tax levies for the
payment of such debt, which pursuant to applicable statutes may only be
issued for limited purposes, are unlimited as to rate or amount. Other
obligations may be issued by counties, cities, towns, school districts and
other municipal corporations, sometimes without an election. Such obligations
are
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payable from, among other revenue sources, project revenues, special
assessments, annual budget appropriations and excise, transaction privilege
and use taxes.
In 1994, the Supreme Court of Arizona ruled that the State of Arizona's
statutory financing scheme for public education was not in compliance with
the Arizona Constitution and directed the Arizona legislature to revise the
statutory financing scheme for public education to bring it into compliance.
The Supreme Court further ordered that its ruling would have prospective
application only, that the public school system should continue under
existing statutes, and that bonded indebtedness incurred under existing
statutes, as long as they are in effect, are valid and enforceable. The
Arizona legislature concluded its 1995 regular legislative session as well as
its 1996 first special legislative session without adopting legislation
revising the statutory financing scheme for public education. The effect of
any such legislation or of further judicial action cannot be determined at
this time, but such action may have a material adverse effect on the
financial operation of public school districts within the State of Arizona.
Notwithstanding the Supreme Court's order that its ruling would have
prospective application only, a lawsuit has been brought alleging that the
holding of a school bond election subsequent to the Court's ruling was
unlawful. While this lawsuit was dismissed, the Plaintiff has filed a
petition for review of the dismissal with the Supreme Court of Arizona.
Furthermore, certain taxpayers have filed a complaint against a school
district in Maricopa County concerning the manner in which constitutional and
debt limits applicable to school districts are calculated. Specifically,
these citizens argue that the school district's outstanding principal amount
of capital appreciation bonds, together with premium received in connection
with the issuance of such bonds, should be used in such calculations. If the
court were to decide in favor of the taxpayers, certain obligations of
Arizona school districts may be deemed to exceed constitutional debt limits
and would therefore be invalid. In either case, should the courts find in
favor of the plaintiffs, such a decision could have potential adverse
consequences including an adverse impact on the secondary market for the debt
securities. In addition, a school district may be prevented from levying
taxes to pay principal and interest payments and the bonds may be declared
invalid. Invalidity of such debt securities may also effect the tax exempt
status of the interest paid on such debt securities.
Irrigation, power, electrical, agricultural improvement, drainage, flood
control and tax levying public improvement districts are exempt specifically
from the above-noted restrictions of the constitution and may issue
obligations for limited purposes, payable from a variety of revenue sources.
For example, Salt River Project Agricultural & Improvement District, an
agricultural improvement district that operates the Salt River Project (a
federal reclamation project and an electric system which generates,
purchases, and distributes electric power to residential, commercial,
industrial, and agricultural power users in a 2,900 square-mile service area
around Phoenix), may issue obligations payable from a number of sources.
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO CALIFORNIA MUNICIPAL
OBLIGATIONS
The California Series will be affected by any political, economic or
regulatory developments affecting the ability of California issuers to pay
interest or repay principal. Various developments regarding the California
Constitution and State statutes which limit the taxing and spending authority
of California governmental entities may impair the ability of California
issuers to maintain debt service on their obligations.
In 1978, Proposition 13, an amendment to the California Constitution, was
approved, limiting real property valuation for property tax purposes and the
power of local governments to increase real property tax revenues and
revenues from other sources. Legislation adopted after Proposition 13
provided for assistance to local governments, including the redistribution of
the then-existing surplus in the General Fund, reallocation of revenues to
local governments, and assumption by the State of certain local government
obligations. However, more recent legislation reduced such state assistance.
There can be no assurance that any particular level of State aid to local
governments will be maintained in future years. In Nordlinger v. Hahn, the
United States Supreme Court upheld certain provisions of Proposition 13
against claims that it violated the equal protection clause of the
Constitution.
In 1979, an amendment was passed adding Article XIIIB to the State
Constitution. As amended in 1990, Article XIIIB imposes an "appropriations
limit" on the spending authority of state and local government entities. In
general, the appropriations limit is based on certain 1978-1979 expenditures,
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adjusted annually to reflect changes in the cost of living, population and
certain services provided by State and local government entities.
"Appropriations limit" does not include appropriations for qualified capital
outlay projects, certain increases in transportation-related taxes, and
certain emergency appropriations.
If a government entity raises revenues beyond its "appropriations limit"
in any year, a portion of the excess which cannot be appropriated within the
following year's limit must be returned to the entity's taxpayers within two
subsequent fiscal years, generally by a tax credit, refund or temporary
suspension of tax rates or fee schedules. "Debt service" is excluded from
these limitations, and is defined as "appropriations required to pay the cost
of interest and redemption charges, including the funding of any reserve or
sinking fund required in connection therewith, on indebtedness existing or
legally authorized as of January 1, 1979 or on bonded indebtedness thereafter
approved [by the voters]." In addition, Article XIIIB requires the State
Legislature to establish a prudent State reserve, and to require the transfer
of 50% of excess revenue to the State School Fund; any amounts allocated to
the State School Fund will increase the appropriations limit.
In June 1982, the voters of California passed two initiative measures to
repeal the California gift and inheritance tax laws and to enact, in lieu
thereof, California death taxes. California voters also passed an initiative
measure to increase, for taxable years commencing on or after January 1,
1982, the amount by account for the effects of inflation. Decreases in State
and local revenues in future fiscal years as a consequence of these
initiatives may result in reductions in allocations of state revenues to
California issuers or in the ability of California issuers to pay their
obligations.
In 1986, California voters approved an initiative statute known as
Proposition 62. This initiative (i) requires that any tax for general
governmental purposes imposed by local governments be approved by resolution
or ordinance adopted by a two-thirds vote of the governmental entity's
legislative body and by a majority vote of the electorate of the governmental
entity, (ii) requires that any special tax (defined as tax levied for other
than general governmental purposes) imposed by a local governmental entity be
approved by a two-thirds vote of the voters within that jurisdiction, (iii)
restricts the use of revenues from a special tax to the purposes or for the
service for which the special tax was imposed, (iv) prohibits the imposition
of ad valorem taxes on real property by local governmental entities except as
permitted by the Proposition 13 amendment, (v) prohibits the imposition of
transaction taxes and sales taxes on the sale of real property by local
governments, (vi) requires that any tax imposed by a local government on or
after August 1, 1985, be ratified by a majority vote of the electorate within
two years of the adoption of the initiative or be terminated by November 15,
1989, (vii) requires that, in the event a local government fails to comply
with the provisions of this measure, a reduction of the amount of property
tax revenue allocated to such local government occurs in an amount equal to
the revenues received by such entity attributable to the tax levied in
violation of the initiative, and (viii) permits these provisions to be
amended exclusively by the voters of the State of California.
In September 1995, the California Supreme Court upheld the
constitutionality of Proposition 62, creating uncertainty as to the legality
of certain local taxes enacted by non-charter cities in California without
voter approval. It is not possible to predict the impact of the decision.
In 1988, State voters approved Proposition 87, which amended Article XVI
of the State Constitution to authorize the State Legislature to prohibit
redevelopment agencies from receiving any property tax revenues raised by
increased property taxes to repay bonded indebtedness of local government
which is not approved by voters on or before January 1, 1989. It is not
possible to predict whether the State Legislature will enact such a
prohibition, nor is it possible to predict the impact of Proposition 87 on
redevelopment agencies and their ability to make payments on outstanding debt
obligations.
In November 1988, California voters approved Proposition 98. This
initiative requires that revenues in excess of amounts permitted to be spent
and which would otherwise be returned by revision of tax rates or fee
schedules, be transferred and allocated (up to a maximum of 40%) to the State
School Fund and be expended solely for purposes of instructional improvement
and accountability. No such transfer or allocation of funds will be required
if certain designated state officials determine that annual student
expenditures and class size meet certain criteria as set forth in Proposition
98. Any funds allocated to the
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State School Fund shall cause the appropriation limits to be annually
increased for any such allocation made in the prior year. Proposition 98 also
requires the State of California to provide a minimum level of funding for
public schools and community colleges. The initiative permits the enactment
of legislation, by a two-thirds vote, to suspend the minimum funding
requirement for one year.
The State is a party to numerous legal proceedings, many of which normally
occur in governmental operations and, if decided against the State, might
require the State to make significant future expenditures or impair future
revenue sources.
Since 1990, California has faced the worst economic, fiscal and budget
conditions since the 1930s. After experiencing strong growth throughout much
of the 1980s, the State was adversely affected by the national recession and
cutbacks in aerospace and defense spending, both of which had a severe impact
on the economy in Southern California. California is still experiencing some
effects of the recession. However, economic data indicate that the State's
economy grew at a modest rate in 1995, and continued growth is expected in
1996.
On August 3, 1995, the Governor signed into law a new $57.5 billion budget
which, among other things, reduces welfare payments and increases education
spending from the previous fiscal year. The fiscal 1995-96 budget calls for
$44.1 billion in revenues and $43.4 billion in spending, an increase of over
3.5% and 4.0%, respectively, from the fiscal 1994-95 budget. Although the
State's budget projects an operating surplus of approximately $600 million,
it continues to rely on federal actions, both to fund programs relating to
MediCal and incarceration costs associated with illegal immigrants and to
relieve the State from federally mandated spending, which are not certain of
occurring. Accordingly, the surplus may not be realized unless the economy
outperforms expectations or spending falls below planned levels.
Because of the State of California's continuing budget problems, the
State's General Obligation bonds were downgraded in July 1994 from Aa to A1
by Moody's, from A+ to A by Standard & Poor's, and from AA to A by Fitch
Investors Service, Inc. All three rating agencies expressed uncertainty in
the State's ability to balance its budget by 1996.
On December 6, 1994, Orange County (California) became the largest
municipality in the United States to file for protection under the Federal
bankruptcy laws. The filing stemmed from approximately $1.7 billion in losses
suffered by the County's investment pool due to investments in high risk
"derivative" securities. In September 1995 the state legislature approved
legislation permitting Orange County to use for bankruptcy recovery $820
million over 20 years in sales taxes previously earmarked for highways,
transit and development. Such legislation also permits the Governor to
appoint a trustee to take over Orange County's financial affairs if the
county does not have a full recovery plan filed with the Bankruptcy Court by
May 1996.
Los Angeles County, the nation's largest county, is also experiencing
financial difficulty. In August 1995 the credit rating of the county's
long-term bonds was downgraded for the third time since 1992 as a result of,
among other things, severe operating deficits for the county's health care
system. In September 1995, federal and state aid to Los Angeles County
totalling $514 million was pledged, providing a short-term solution to the
County's budget problems. Despite such efforts, the County is facing a
potential budget gap of $1.0 billion in the 1996-97 fiscal year.
The effect of these various constitutional and statutory amendments and
budget developments upon the ability of California issuers to pay interest
and principal on their obligations remains unclear and in any event may
depend upon whether a particular California tax-exempt security is a general
or limited obligation bond and on the type of security provided for the bond.
It is possible that other measures affecting the taxing or spending authority
of California or its political subdivisions may be approved or enacted in the
future.
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO MASSACHUSETTS MUNICIPAL
OBLIGATIONS
Between 1982 and 1988 The Commonwealth of Massachusetts had a strong
economy which was evidenced by low unemployment and high personal income
growth as compared to national trends.
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Economic growth in the Commonwealth slowed from 1988 to 1992, however, as the
Commonwealth experienced a significant economic slowdown, with particular
deterioration in the construction, real estate, financial, insurance and
manufacturing sectors, including certain high technology areas. Economic
activity began to improve in 1993 and continued to improve in 1994,
particularly in the construction and service sectors as well as in housing
sales. In 1995, the services and wholesale and retail trade industries were
the two largest industries by number of employees. A low rate of inflation is
expected to keep wage growth low and allow for slow-paced positive growth in
Massachusetts in 1996. Unemployment (which rose to approximately 8.5% at the
end of 1992) fell to 6.6% at the end of 1993 as compared to the national
averages of 7.4% at the end of 1992 and 6.4% at the end of 1993. Unemployment
fell an additional 2% to 6.4% at the end of fiscal 1994 as compared to the
national average of 5.8%. By the end of fiscal 1995, unemployment fell even
with the national average of 5.6%. The Massachusetts employment rate as of
year end 1995 was 5.1%, 0.5% below the national rate of 5.6%.
Growth of state tax revenues in the Commonwealth slowed considerably in
fiscal 1988, fiscal 1989 and fiscal 1990, while expenditures for state
programs and services increased. Fiscal 1989 and 1990 ended with budgetary
deficits of $466.4 million and $1.362 billion, respectively. The Commonwealth
achieved budget surpluses in each of fiscal 1991, 1992, 1993 and 1994. In
fiscal 1995 year end, revenues are expected to exceed expenditures by a
significant amount for the fourth consecutive year. In 1991, Standard &
Poor's and Moody's lowered their ratings of the Commonwealth's general
obligation bonds from AA and Aa, respectively, to BBB and Baa, respectively,
but in 1992 each raised such ratings to A and in 1993, Standard & Poor's
further increased such rating to A+. From time to time, the rating agencies
may further change their ratings.
The Commonwealth's fiscal 1991 budget achieved a small surplus principally
as a result of a one time reimbursement claim for Federal funds available
under Medicaid reimbursement programs. In fiscal 1992 and 1993, budget
surpluses were achieved through appropriation and spending reductions and a
significant increase in revenues attributable to tax increases and enhanced
revenue collections. Fiscal 1993 and 1994 tax revenues increased to account
for approximately 45% of all revenues and financing sources. Fiscal 1995 tax
revenues increased to account for approximately 49% of all revenues and
financing sources. Tax revenues for 1996 are estimated to be 4.0% above
fiscal 1995.
Growth of tax revenues in the Commonwealth is limited by law. In addition,
effective July 1, 1990, limitations were placed on the amount of direct bonds
(other than Fiscal Recovery Bonds and certain other limited exceptions) the
Commonwealth may have outstanding in a fiscal year, and the amount of the
total appropriation in any fiscal year that may be expended for payment of
principal of and interest on general obligation debt (other than Fiscal
Recovery Bonds) of the Commonwealth was limited to10 percent of such
appropriation.
Furthermore, certain of the Commonwealth's cities and towns have at times
experienced serious financial difficulties which have adversely affected
their credit standing. The recurrence of such financial difficulties, or
financial difficulties of the Commonwealth, could adversely effect the market
values and marketability of, or result in default in payment on, outstanding
obligations issued by the Commonwealth or its public authorities or
municipalities. In addition, the Massachusetts statutes which limit the
taxing authority of the Commonwealth or certain Massachusetts governmental
entities may impair the ability of issuers of some Massachusetts obligations
to pay debt service on their obligations.
In Massachusetts the tax on personal property and real estate is virtually
the only source of tax revenues available to cities and towns to meet local
costs. "Proposition 2 1/2 ," an initiative petition adopted by the voters of
the Commonwealth of Massachusetts on November 4, 1980, limits the power of
Massachusetts cities and towns and certain tax-supported districts and public
agencies to raise revenue from property taxes to support their operations,
including the payment of certain debt service. Proposition 2 1/2 required
many cities and towns to reduce their property tax levels to a stated
percentage of the full and fair cash value of their taxable real estate and
personal property and limited the amount by which the total property taxes
assessed by a city or town might increase from year to year.
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To offset shortfalls experienced by local governments as a result of the
implementation of Proposition 2 1/2 , the state government increased direct
local aid from the 1981 level of $1.632 billion to the fiscal 1989 level of
$2.9 billion; however, direct local aid dropped in fiscal 1991 and 1992 to
approximately $2.6 billion and $2.3 billion, respectively. Fiscal 1993 and
1994 direct local aid increased to $2.5 billion and $2.7 billion,
respectively. In fiscal 1995, direct local aid increased to $3.0 billion.
No assurance can be given that amounts appropriated for local aid in the
fiscal 1994 budget or subsequent budgets will be funded or paid when due. The
Commonwealth's fiscal circumstances have led to delays in the distribution of
Local Aid in prior last two fiscal years.
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO MICHIGAN OBLIGATIONS
The information set forth below is derived from official statements
prepared in connection with the issuance of obligations of the State of
Michigan and other sources that are generally available to investors. The
information is provided as general information intended to give a recent
historical description and is not intended to indicate further or continuing
trends in the financial or other positions of the State of Michigan. Such
information constitutes only a brief summary, relates primarily to the State
of Michigan, does not purport to include details relating to all potential
issuers within the State of Michigan whose securities may be purchased by the
Michigan Series and does not purport to be a complete description.
Economy. The principal sectors of Michigan's economy are durable goods
manufacturing (including automobile and office equipment manufacturing),
tourism and agriculture. As reflected in historical employment figures,
Michigan's economy has lessened its dependence upon durable goods
manufacturing. In 1960, employment in such industry accounted for 33% of
Michigan's workforce. This figure fell to 14.9% in 1994. However,
manufacturing (including auto-related manufacturing) continues to be an
important part of Michigan's economy. Those industries are highly cyclical
and are expected to operate at substantially less than full capacity in 1996.
Historically, during periods of economic decline or slow economic growth, the
cyclical nature of those industries has adversely affected the revenue
streams of Michigan and its political subdivisions because it has adversely
impacted certain tax sources, particularly sales taxes, income taxes and
single business taxes. Income per capita in Michigan is approximately two
percent less than the national average. For the second consecutive year,
contrary to the historical trend, the average annual unemployment rate for
1995 in Michigan was slightly lower than the average rate for the United
States.
Budget. The budget of Michigan is a complete financial plan and
encompasses the revenues and expenditures, both operating and capital outlay,
of the General Fund and special revenue funds. The budget is prepared on a
basis consistent with generally accepted accounting principles. Michigan's
Fiscal Year begins on October 1 and ends September 30 of the following year.
Under Michigan law, the executive budget recommendations for any fund may not
exceed the estimated revenue thereof, and an itemized statement of estimated
revenues in each operating fund must be contained in an appropriation bill as
passed by the Legislature, the total of which may not be less than the total
of all appropriations made from the fund for that fiscal year. The Michigan
Constitution provides that proposed expenditures from and revenues of any
fund must be in balance and that any prior year's surplus or deficit in any
fund must be included in the succeeding year's budget for that fund.
Michigan's Constitution limits the amount of total State revenues that may
be raised from taxes and other sources. State revenues (excluding federal aid
and revenues used for payment of principal of and interest on general
obligation bonds) in any fiscal year are limited to a specified percentage of
Michigan personal income in the prior calendar year or average thereof in the
prior three calendar years, whichever is greater. The percentage is based
upon the ratio of the 1978-79 fiscal year revenues to total 1977 Michigan
personal income (the total income received by persons in Michigan from all
sources as defined and officially reported by the United States Department of
Commerce). If revenues in any fiscal year exceed the revenue limitation by
one percent, the entire amount exceeding the limitation must be rebated in
the following fiscal year's personal income tax or single business tax.
Annual excesses of less than one percent may be transferred into Michigan's
Budget and Economic Stabilization Fund ("BSF"). Michigan may raise taxes in
excess of the limit in emergency situations.
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Michigan finances its operations through its General Fund and special
revenue funds. The General Fund receives revenues that are not specifically
required to be included in the special revenue funds. Approximately 59% of
General Fund revenues are obtained from the payment of state taxes, and
approximately 41% are obtained from federal and non tax revenue sources. The
majority of the revenues from state taxes are from the personal income tax,
the single business tax, the use tax, and the sales tax. In addition Michigan
levies various other taxes. Approximately one-half of the General Fund
expenditures have been made by Michigan's Department of Education and
Department of Social Services. The Department of Education is responsible for
administering a variety of programs which provide additional special purpose
funding for local and intermediate school districts in Michigan (which
provide education to children in grades kindergarten through 12), including
general, adult and special education. The Department of Social Service
administers economic and social programs in Michigan, including Aid to
Families with Dependent Children. Other significant expenditures from the
General Fund provide funds for medical assistance programs, law enforcement,
general state government, debt service and capital outlays.
Michigan ended fiscal years 1989-90 and 1990-91 with negative General Fund
balances of $310.3 million and $169.4 million, respectively. As required by
the Michigan Constitution, each of those deficits were included in the
succeeding year's General Fund budget. Michigan ended fiscal years 1991-92,
1992-93 and 1993-94 with General Fund surpluses of $24 million, $280.1
million and $602.9 million, respectively. During fiscal years 1990-91 and
1991-92, Michigan utilized $230 million and $170.1 million, respectively,
from its BSF to add to the General Fund balances in those years. In fiscal
year 1992-93, the State of Michigan made a deposit of $312.2 million into the
BSF, the first since 1986. In fiscal year 1993-94, the State of Michigan made
another deposit into the BSF, this one being in the amount of $460.2 million.
The unreserved balances for the BSF as of the end of fiscal years 1990-91,
1991-92 and 1992-93 were $182.2 million, $20.1 million and $303.4 million,
respectively.
As of July 20, 1995, the State of Michigan projected a fiscal year 1994-95
General Fund Surplus of approximately $85 million. The final amount of the
General Fund Surplus, however, will not be known until the State closes its
books for fiscal year 1994-95 in late January 1996. In June 1995, the
Michigan Legislature adopted the budget for fiscal year 1995-96, in advance
of the beginning of that fiscal year.
Debt. The Michigan Constitution limits Michigan general obligation debt to
(i) short-term debt for State operating purposes which must be repaid in the
same fiscal year in which it is issued and which cannot exceed 15% of the
undedicated revenues received by Michigan during the preceding fiscal year,
(ii) short- and long-term debt unlimited in amount for the purpose of making
loans to school districts and (iii) long-term debt for voter-approved
purposes.
Michigan has issued and has outstanding general obligation full faith and
credit bonds for water resources, environmental protection program,
recreation program and school loan purposes, which as of September 30, 1994
totalled approximately $439 million. In November 1988 Michigan's voters
approved the issuance of $800 million of general obligation bonds for
environmental protection and recreational purposes; of this amount
approximately $440 million remained to be issued as of September 30, 1994. On
June 27, 1995, the State issued approximately $234.32 million in general
obligation bonds for those purposes. A portion of those bonds was used to
refund approximately $69.5 million of prior bonds, also issued for those
purposes. On October 11, 1994, the State of Michigan issued $65 million in
short-term general obligation school loan notes for the purpose of providing
funds for making loans to school districts and renewing the principal and
interest of certain prior notes. Those notes were renewed with the issuance
of $85.0 million in short-term general obligation school loan notes for the
same purpose on April 6, 1995. Those notes matured on August 15, 1995 and
were paid with the proceeds of long-term general obligation bonds issued by
the State in the amount of $180 million on August 1, 1995.
There are also various state authorities and special purpose agencies
created by Michigan which issue bonds secured by specific revenues. Such debt
is not a general obligation of Michigan.
Litigation. Michigan is a party to various legal proceedings seeking
damages or injunctive or other relief. In addition to routine litigation,
certain of these proceedings could, if unfavorably resolved from the point of
view of Michigan, substantially affect state programs or finances. As of July
20, 1995, those
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lawsuits involve programs generally in the areas of corrections, commerce and
budgetary reductions to school districts and governmental units and court
funding. Relief sought includes damages in tort cases generally, alleviation
of prison overcrowding, improvement of prison medical and mental health care,
and refund claims under Michigan taxes. The ultimate disposition and
consequences of all of those proceedings were not determinable as of July 20,
1995.
Property Tax Initiatives. On March 15, 1994, Michigan voters approved a
property tax and school finance reform measure known as Proposal A. Under
Proposal A, as approved, effective May 1, 1994, the State sales and use tax
increased from 4% to 6%, the State income tax decreased from 4.6% to 4.4%,
the cigarette tax was increased from $.25 to $.75 per pack and an additional
tax of 16% of the wholesale price began to be imposed on certain other
tobacco products. A .75% real estate transfer tax became effective on January
1, 1995. Beginning in 1994, a State of Michigan property tax of 6 mills began
to be imposed on all real and personal property currently subject to the
general property tax. All local school boards are authorized, with voter
approval, to levy up to the lesser of 18 mills or the number of mills levied
in 1993 for school operating purposes on nonhomestead property and
nonqualified agricultural property. Proposal A contains additional provisions
regarding the ability of local school districts to levy taxes as well as a
limit on assessment increases for each parcel of property, beginning in 1995.
Such increases for each parcel of property are limited to the least of (i)
the percentage charge in its assessed value from the prior year, (ii) 5% or
(iii) the rate of inflation. When property is subsequently sold, its assessed
value will revert to the current assessment level of 50% of true cash value.
Under Proposal A, much of the additional revenue generated by the new taxes
will be dedicated to the State's School Aid Fund. Proposal A shifts
significant portions of the cost of local school operations from local school
districts to the State of Michigan and raises additional State revenues to
fund those additional State expenses. Those additional revenues will be
included within the State's constitutional revenue limitations and may impact
the State's ability to raise additional revenues in the future.
Ratings. As of January 25, 1996, Michigan's general obligation bonds were
rated "Aa" by Moody's Investors Service, "AA" by Standard & Poor's Ratings
Services and "AA" by Fitch Investors Service. To the extent that the
portfolio of the Michigan Series is comprised of revenue obligations of the
State of Michigan or revenue or general obligations of local governments or
State or local authorities, rather than general obligations of the State of
Michigan, ratings on such components of the Michigan Series will be different
from those given to the general obligations of the State of Michigan and
their value may be independently affected by economic matters not directly
impacting the State.
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL OBLIGATIONS
During the mid-1970's, New York State (the "State"), some of its agencies,
instrumentalities and public benefit corporations (the "Authorities"), and
certain of its municipalities faced serious financial difficulties. To
address many of these financial problems, the State developed various
programs, many of which were successful in ameliorating the financial crisis.
Any further financial problems experienced by these Authorities or
municipalities could have a direct adverse effect on the New York Municipal
Obligations in which the Trust invests.
NEW YORK CITY
General. The national economic downturn which began in July 1990 adversely
affected the local economy, which had been declining since late 1989. As a
result, New York City (the "City") experienced job losses in 1990 and 1991
and real Gross City Product (GCP) fell in those two years. For the 1992
fiscal year, the City closed a projected budget gap of $3.3 billion in order
to achieve a balanced budget as required by the laws of the State. Beginning
in 1992, the improvement in the national economy helped stabilize conditions
in the City. Employment losses moderated toward year-end and real GCP
increased, boosted by strong wage gains. However, after noticeable
improvements in the City's economy during calendar year 1994, the City's
current four-year financial plan assumes that economic growth will slow in
calendar years 1995 and 1996 with local employment increasing modestly.
During the 1995 fiscal year, the City experienced substantial shortfalls in
payments of non-property tax revenues from those forecasted.
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For each of the 1981 through 1994 fiscal years, the City achieved balanced
operating results as reported in accordance with then applicable generally
accepted accounting principles ("GAAP"). The City was required to close
substantial budget gaps in recent years in order to maintain balanced
operating results. For fiscal year 1995, the City adopted a budget which
halted the trend in recent years of substantial increases in City-funded
spending from one year to the next.
1995-1998 New York City Financial Plan. The Mayor is responsible for
preparing the City's four- year financial plan (the "1995-1998 Financial
Plan," the "Financial Plan" or "City Plan"). On November 29, 1995, the City
submitted to the Control Board the Financial Plan for the 1996-1999 fiscal
years, which is a modification to a financial plan submitted to the Control
Board on July 11, 1995 (the "July Financial Plan") and which relates to the
City, the Board of Education ("BOE") and the City University of New York.
The July Financial Plan set forth proposed actions to close a previously
projected gap of approximately $3.1 billion for the 1996 fiscal year,
including (among other actions): (i) a reduction in spending of $400 million,
primarily affecting public assistance and Medicaid payments by the City; (ii)
agency reduction programs, totaling $1.2 billion; (iii) transitional labor
savings, totaling $600 million; and (iv) the phase-in of the increased annual
pension funding cost due to revisions resulting from an actuarial audit of
the City pension systems, which would reduce such costs in the 1996 fiscal
year.
The 1996-1999 Financial Plan, published on November 29, 1995, reflects
actual receipts and expenditures and changes in forecasted revenues and
expenditures since the July Financial Plan, and projects revenues and
expenditures for the 1996 fiscal year balanced in accordance with GAAP.
Changes since the July Financial Plan for the 1996 fiscal year include: (i) a
$100 million reduction in expenditures for other than personal services; (ii)
debt service savings, including savings from a proposed refunding of
outstanding debt, totaling $123 million; (iii) a $129 million increase in
projected expenditures, including $45 million in increased spending to pay
for a portion of the cost of student transit passes; and (iv) a $100 million
increase in the General Reserve.
The Financial Plan also sets forth projections for the 1997 through 1999
fiscal years and outlines a proposed gap-closing program to eliminate
projected gaps of $1.4 billion, $2.3 billion and $2.7 billion for the 1997,
1998 and 1999 fiscal years, respectively, after successful implementation of
the gap-closing program for the 1996 fiscal year. These projections for the
1996 through 1999 fiscal years reflect the costs of the recently announced
tentative settlements with certain municipal unions, and assume that the City
will reach agreement with its remaining municipal unions under terms which
are generally consistent with such settlements. The projections for the 1996
through 1999 fiscal years also assume: (i) that New York City Health and
Hospitals Corporations ("HHC") and BOE will each be able to identify actions
to offset substantial revenue shortfalls reflected in the Financial Plan,
including approximately a $254 million annual reduction in revenues for HHC
in 1997 and subsequent fiscal years, which results from the reduction in
Medicaid payments by the State and the City, without any increase in City
subsidy payments to HHC; (ii) $130 million of revenues relating to rent
payments for the City's airports, which are currently the subject of a
dispute with the Port Authority and the collection of which may depend on the
successful completion of negotiations with the Port Authority or the
enforcement of the City's remedies under the leases; and (iii) savings of $45
million in each of the 1997 through 1999 fiscal years which would result from
the State Legislature's enactment of proposed tort reform legislation.
Various actions proposed in the City Plan are subject to approval by the
Governor and the State Legislature, and the proposed increase in Federal aid
is subject to approval by Congress and the President. The State Legislature
has failed to approve certain of the City's proposals for the State
assumption of certain Medicaid costs and mandate relief in previous sessions,
thereby increasing the uncertainty as to the receipt of the State assistance
included in the City Plan. If these actions cannot be implemented, the City
will be required to take other actions to decrease expenditures or increase
revenues to maintain a balanced financial plan.
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. The State's 1995-1996
Financial Plan projects a balanced General Fund. There
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can be no assurance that there will not be reductions in State aid to the
City from amounts currently projected or that the State budgets in future
fiscal years will be adopted by the April 1 statutory deadline and that such
reductions or delays will not have adverse effects on the City's cash flow or
expenditures.
The City's projections set forth in the City Plan are based on various
assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Such assumptions and
contingencies include: the condition of the regional and local economies, the
impact on real estate tax revenues of the real estate market, wage increases
for City employees consistent with those assumed in the Financial Plan,
employment growth, the ability to implement proposed reductions in City
personnel and other cost reduction initiatives, which may require in certain
cases the cooperation of the City's municipal unions, the ability of HHC and
BOE to take actions to offset reduced revenues, the ability to complete
revenue generating transactions, provision of State and Federal aid and
mandate relief and the impact on City revenues of proposals for Federal and
State welfare reform.
Implementation of the City Plan is also dependent upon the City's ability
to market its securities successfully in the public credit markets. The
City's financing program for fiscal years 1996 through 1999 contemplates the
issuance of $11.0 billion of general obligation bonds primarily to
reconstruct and rehabilitate the City's infrastructure and physical assets
and to make capital investments. In addition, the City issues revenue and tax
anticipation notes to finance its seasonal working capital requirements. The
success of projected public sales of City bonds and notes will be subject to
prevailing market conditions, and no assurance can be given that such sales
will be completed. If the City were unable to sell its general obligation
bonds and notes, it would be prevented from meeting its planned operating and
capital expenditures.
The City Comptroller and other agencies and public officials have issued
reports and made public statements which, among other things, state that
projected revenues may be less and future expenditures may be greater than
forecast in the City Plan. In addition, the Control Board staff and others
have questioned whether the City has the capacity to generate sufficient
revenues in the future to meet the costs of its expenditure increases and to
provide necessary services. It is reasonable to expect that such reports and
statements will continue to be issued and to engender public comment.
Ratings. On July 10, 1995, Standard & Poor's revised downward its rating on
City general obligation bonds from A- to BBB+ and removed City bonds from
CreditWatch. Standard & Poor's stated that "structural budgetary balance
remains elusive because of persistent softness in the City's economy,
highlighted by weak job growth and a growing dependence on the historically
volatile financial services sector". Other factors identified by Standard &
Poor's in lowering its rating on City bonds included a trend of using
one-time measures, including debt refinancings, to close projected budget
gaps, dependence on unratified labor savings to help balance the Financial
Plan, optimistic projections of additional Federal and State aid or mandate
relief, a history of cash flow difficulties caused by State budget delays and
continued high debt levels. Fitch Investors Service continues to rate the
City general obligation bonds A-. Moody's Investors Service rating for City
general obligation bonds is Baa1.
Outstanding Indebtedness
As of June 30, 1995, the City and the Municipal Assistance Corporation for
the City of New York had, respectively, $23.062 billion and $4.033 billion of
outstanding net long-term debt.
Litigation. The City is a defendant in a significant number of lawsuits.
Such litigation includes, but is not limited to, routine litigation
incidental to the performance of its governmental and other functions,
actions commenced and claims asserted against the City arising out of alleged
constitutional violations, alleged torts, alleged breaches of contracts and
other violations of law and condemnation proceedings and other tax and
miscellaneous actions. While the ultimate outcome and fiscal impact, if any,
on the
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proceedings and claims are not currently predictable, adverse determination
in certain of them might have a material adverse effect upon the City's
ability to carry out the City Plan. As of June 30, 1995, the City estimated
its potential future liability on account of all outstanding claims against
it to be approximately $2.5 billion.
NEW YORK STATE
Recent Developments. The national economy began the current expansion in
1991 and has added over 7 million jobs since early 1992. However, the
recession lasted longer in the State and the State's economic recovery has
lagged behind the nation's. Although the State has added approximately
185,000 jobs since November 1992, employment growth in the State has been
hindered during recent years by significant cutbacks in the computer and
instrument manufacturing, utility, defense, and banking industries.
The 1995-96 New York State Financial Plan (the "State Plan") is based on a
projection that national economic growth will weaken, but not turn negative,
during the course of 1995 before beginning to rebound by the end of the year.
This dynamic is often described as a "soft landing". New York's economy is
expected to continue to expand modestly during 1995, but there will be a
pronounced slow-down during the course of the year. Although industries that
export goods and services abroad are expected to benefit from the lower
dollar, growth will be slowed by government cutbacks at all levels. On an
average annual basis, employment growth will be about the same as 1994. Both
personal income and wages are expected to record moderate gains in 1995.
Bonus payments in the securities industry are expected to increase from last
year's depressed level.
The 1995-96 Fiscal Year. The State's General Fund (the major operating
fund of the State) was projected in the State Plan to be balanced on a cash
basis for the 1995-96 fiscal year. The State Plan projected General Fund
receipts and transfers from other funds at $33.110 billion, a decrease of $48
million from total receipts in the prior fiscal year, and disbursements and
transfers to other funds at $33.055 billion, a decrease of $344 million from
the total amount disbursed in the prior fiscal year.
The State issued the first of the three required quarterly updates to the
State Plan on July 28, 1995 (the "First Quarter Update"). The First Quarter
Update projected a continued balance in the State's 1995-96 Financial Plan
and incorporated few revisions to the Plan.
The State issued its second quarterly update to the State Plan (the
"Mid-Year Update") on October 26, 1995. The Mid-Year Update projected
continued balance in the State's 1995-96 Financial Plan with estimated
receipts reduced by a net $71 million and estimated disbursements reduced by
a net $30 million as compared to the First Quarter Update. The State also
updated its forecast of national and State economic activity through the end
of calendar year 1996. The national economic forecast remained basically
unchanged from the initial forecast on which the original 1995-96 State
Financial Plan was based, while the State economic forecast was marginally
weaker.
The State revised the State Plan on December 15, 1995 in conjunction with
the release of the Executive Budget for the 1996-97 fiscal year. The State
Plan continues to project a balanced General Fund with reductions in
projected receipts offset by an equivalent reduction in projected
disbursements. Modest changes were made to the Mid-Year Update, reflecting
two more months of actual results, deficiency requests by State agencies and
administrative efficiencies achieved by State agencies. Total General Fund
receipts are expected to be approximately $73 million lower than estimated at
the time of the Mid-Year Update. Projected General Fund disbursements also
are reduced by a total of $73 million. The revisions reflect reestimates
based on actual results through November 1995, the largest of which is a
reduction of $70 million in projected costs for income maintenance.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant disparity
between tax revenues projected from a lower recurring receipts base and the
spending required to maintain state programs at current levels. To address
any potential budgetary imbalance, the State may need to take significant
actions to align recurring receipts and disbursements in future fiscal years.
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The 1996-97 Fiscal Year (Executive Budget Forecast). The Governor
presented his 1996-97 Executive Budget to the Legislature on December 15,
1995 (the "1996-97 Financial Plan"). The Executive Budget also contains
financial projections for the State's 1997-98 and 1998-99 fiscal years. The
1996-97 Financial Plan projects a continued balance in the General Fund. It
reflects a continuing strategy of substantially reduced State spending,
including program restructurings, reductions in social welfare spending, and
efficiency and productivity initiatives. Total General Fund receipts and
transfers from other funds are projected to be $31.32 billion, a decrease of
$1.4 billion from total receipts projected in the current fiscal year. Total
General Fund disbursements and transfers to other funds are projected to be
$31.22 billion, a decrease of $1.5 billion from spending totals projected for
the current fiscal year. The Executive Budget proposes $3.9 billion in
actions to balance the 1996-97 Financial Plan.
The Governor has submitted several amendments to the Executive Budget. The
net impact of the amendments leaves unchanged the total estimated amount of
General Fund spending in 1996-97, which continues to be projected at $31.22
billion.
To make progress toward addressing recurring budgetary imbalances, the
1996-97 Executive Budget proposes significant actions to align recurring
receipts and disbursements in future fiscal years. However, there can be no
assurance that the Legislature will enact the Governor's proposals or that
the State's actions will be sufficient to preserve budgetary balance or to
align recurring receipts and disbursements in either 1996-97 or in future
fiscal years. The Executive Budget contains projections of a potential
imbalance in the 1997-98 fiscal years of $1.44 billion and in the 1998-99
fiscal year of $2.47 billion, assuming implementation of the Executive Budget
recommendations. It is expected that the Governor will propose to close these
budget gaps with further spending reductions.
Uncertainties with regard to both the economy and potential decisions at
the federal level add further pressure on future budget balance in the State.
For example, various proposals relating to federal tax and spending policies,
such as changes to federal treatment of capital gains which would flow
through automatically to the State personal income tax and changes affecting
the federal share of Medicaid, could, if enacted, have a significant impact
on the State's financial condition in 1996-97 and in future fiscal years.
New York Local Government Assistance Corporation. In 1990, as part of a
state fiscal reform program, legislation was enacted creating the New York
Loan Government Assistance Corporation ("LGAC"), a public benefit corporation
empowered to issue long-term obligations to fund certain payments to local
governments traditionally funded through the State's annual seasonal
borrowing. The legislation empowered LGAC to issue bonds and notes in an
amount not in excess of $4.7 billion (exclusive of certain refunding bonds)
plus certain other amounts. Over a period of years, the issuance of those
long-term obligations, which will be amortized over no more than 30 years, is
expected to result in eliminating the need for continuing short-term seasonal
borrowing for those purposes. The legislation also imposed a cap on the
annual seasonal borrowing of the State at $4.7 billion, less net proceeds of
bonds issued by LGAC, except in cases where the Governor and the legislative
leaders have certified both the need for additional borrowing and provided a
schedule for reducing it to the cap. If borrowing above the cap is thus
permitted in any fiscal year, it is required by law to be reduced to the cap
by the fourth fiscal year after the limit was first exceeded.
As of June 30, 1995, LGAC had issued bonds and notes to provide net
proceeds of $4.7 billion completing the program. The impact of the borrowings
together with the availability of certain cash reserves is that the State
Plan includes no seasonal short-term borrowing.
Composition of State Cash Governmental Funds Group. Substantially all
State non-pension financial operations are accounted for in the State's
governmental funds group. Governmental funds include: (i) the General Fund,
which receives all income not required by law to be deposited in another
fund; (ii) Special Revenue Funds, which receive the preponderance of moneys
received by the State from the Federal government and other income the use of
which is legally restricted to certain purposes; (iii) Capital Projects
Funds, used to finance the acquisition, construction and rehabilitation of
major capital facilities by the State and to aid in certain of such projects
conducted by local governments or public authorities; and (iv) Debt Service
Funds, which are used for the accumulation of moneys for the payment of
principal of and interest on long-term debt and to meet lease-purchase and
other contractual-obligation commitments.
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Taxation and Economic Incentives. Although the State ranks 22nd in the
nation for its State tax burden, the State has the second highest combined
state and local tax burden in the United States. The burden of State and
local taxation, in combination with the many other causes of regional
economic dislocation, may have contributed to the decisions of some
businesses and individuals to relocate outside, or not locate within, the
State. To stimulate economic growth, the State has developed programs,
including the provision of direct financial assistance, designed to assist
businesses to expand existing operations located within the State and to
attract new businesses to the State. In addition, the State has provided
various tax incentives to encourage business relocation and expansion.
The 1995-96 budget reflects significant additional actions to reduce the
burden of State taxation, including adoption of a 3-year, 20 percent
reduction in the State's personal income tax and a variety of more modest
changes in other levies. In combination with business tax reductions enacted
in 1994, these actions will reduce State taxes by over $5.5 billion by the
1997-98 State fiscal year, when compared to the estimated yield in that year
of the State tax structure as it applied in 1993-94.
Authorities. The fiscal stability of the State is related to the fiscal
stability of its public authorities (i.e. public benefit corporations created
pursuant to State law, other than local authorities), which generally have
responsibility for financing, constructing and operating revenue-producing
public benefit facilities. The State's public authorities ("Authorities") are
not subject to the constitutional restrictions on the incurrence of debt
which apply to the State itself, and may issue bonds and notes within the
amounts of, and as otherwise restricted by, their legislative authorization.
As of September 30, 1994, the latest data available, there were 18
Authorities that had outstanding debt of $100 million or more and the
aggregate outstanding debt, including refunding bonds, of these 18
Authorities was $70.3 billion.
Authorities are generally supported by revenues generated by the projects
financed or operated, such as fares, user fees on bridges, highway tolls and
rentals for dormitory rooms and housing. In recent years, however, the State
has provided financial assistance through appropriations, in some cases of a
recurring nature, to certain of the 18 Authorities for operating and other
expenses and, in fulfillment of its commitments on moral obligation
indebtedness or otherwise, for debt service. This operating assistance is
expected to continue to be required in future years.
The State's experience has been that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities to
obtain financing in the public credit markets and the market price of the
State's outstanding bonds and notes may be adversely affected. There are
certain statutory arrangements that provide for State local assistance
payments otherwise payable to localities to be made under certain
circumstances to certain Authorities. The State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid to Authorities under these arrangements. However, in the event that such
local assistance payments are so diverted, the affected localities could seek
additional State funds.
Ratings. On January 13, 1992, Standard & Poor's reduced its ratings on the
State's general obligation bonds from A to A- and, in addition, reduced its
ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. Standard & Poor's also continued its negative
rating outlook assessment on State general obligation debt. On April 26,
1993, Standard & Poor's revised the rating outlook assessment to stable. On
February 14, 1994, Standard & Poor's raised its outlook to positive and, on
July 13, 1995, confirmed its A- rating. On January 6, 1992, Moody's Investors
Service reduced its ratings on outstanding limited-liability State lease
purchase and contractual obligations from A to Baa1. On July 3, 1995, Moody's
Investors Service reconfirmed its A rating on the State's general obligation
long-term indebtedness. Ratings reflect only the respective views of such
organizations, and an explanation of the significance of such ratings must be
obtained from the rating agency furnishing the same. There is no assurance
that a particular rating will continue for any given period of time or that
any such rating will not be revised downward or withdrawn entirely if, in the
judgment of the agency originally establishing the rating, circumstances so
warrant. A downward revision or withdrawal of such ratings, or either of
them, may have an effect on the market price of the State Municipal
Securities in which the New York Fund invests.
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General Obligation Debt. As of March 31, 1995, the State had outstanding
approximately $5.181 billion in general obligation bonds, excluding refunding
bonds, and including $149 million in bond anticipation notes outstanding.
Principal and interest due on general obligation bonds and interest due on
bond anticipation notes were $743.3 million for the 1994-95 fiscal year and
are estimated to be $774.4 million for the State's 1995-96 fiscal year, not
including interest on State General Obligation Refunding Bonds to the extent
that such interest was paid from escrowed funds.
Litigation. The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal
laws. These proceedings could affect adversely the financial condition of the
State in the 1995-1996 fiscal year or thereafter.
The State believes that the 1995-1996 State Financial Plan includes
sufficient reserves for the payment of judgments that may be required during
the 1995-96 fiscal year. There can be no assurance, however, that an adverse
decision in any of these proceedings would not exceed the amount of the
1995-1996 Financial Plan reserves for the payment of judgments and,
therefore, could affect the ability of the State to maintain a balanced
1995-1996 State Financial Plan. In its audited financial statements for the
fiscal year ended March 31, 1995, the State reported its estimated liability
for awarded and unanticipated unfavorable judgments at $676 million.
In addition, the State is party to other claims and litigations which its
counsel has advised are not probable of adverse court decisions. Although,
the amounts of potential losses, if any, are not presently determinable, it
is the State's opinion that its ultimate liability in these cases is not
expected to have a material adverse effect on the State's financial position
in the 1995-96 fiscal year or thereafter.
Other Localities. Certain localities in addition to the City could have
financial problems leading to requests for additional State assistance during
the State's 1995-96 fiscal year and thereafter. The potential impact on the
State of such actions by localities is not included in the projections of the
State receipts and disbursements in the State's 1995-96 fiscal year.
For example, fiscal difficulties experienced by the City of Yonkers
("Yonkers") resulted in the creation of the Financial Control Board for the
City of Yonkers (the "Yonkers Board") by the State in 1984. The Yonkers Board
is charged with oversight of the fiscal affairs of Yonkers. Future actions
taken by the Governor or the State Legislature to assist Yonkers could result
in allocation of State resources in amounts that cannot yet be determined.
From time to time, Federal expenditure reductions could reduce, or in some
cases eliminate, Federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities.
If the State, the City or any of the Authorities were to suffer serious
financial difficulties jeopardizing their respective access to the public
credit markets, the marketability of notes and bonds issued by localities
within the State could be adversely affected. Localities also face
anticipated and potential problems resulting from certain pending litigation,
judicial decisions and long-range economic trends. Long-range potential
problems of declining urban population, increasing expenditures and other
economic trends could adversely affect localities and require increasing
State assistance in the future.
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO PENNSYLVANIA MUNICIPAL
OBLIGATIONS
The Prospectus sets forth certain general socio-economic and economic
information regarding the Commonwealth. The following information, which is
based principally on information drawn from recent Official Statements
relating to securities offerings by the Commonwealth, provides additional
information regarding certain Pennsylvania issuers of investment securities.
STATE AND CERTAIN STATE-RELATED OBLIGATIONS
The Constitutional provisions pertaining to Commonwealth debt permit the
issuance of the following types of debt: (i) debt to suppress insurrection or
rehabilitate areas affected by disaster, (ii) electorate
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approved debt, (iii) debt for capital projects, subject to an aggregate debt
limit of 1.75 times the annual average tax revenues of the preceding five
fiscal years, and (iv) tax anticipation note debt payable in the fiscal year
of issuance. All debt except tax anticipation note debt must be amortized in
substantial and regular amounts.
The Commonwealth may incur debt to fund capital projects for community
colleges, highways, public improvements, transportation assistance, flood
control, redevelopment assistance, site development and the Pennsylvania
Industrial Development Authority. Before a project may be funded, it must be
itemized in a capital budget bill adopted by the General Assembly. An annual
capital budget bill states the maximum amount of debt for capital projects
that may be incurred during the current fiscal year for projects authorized
in the current or previous years' capital budget bills. Capital projects debt
is subject to a Constitutional limit on debt. Once capital projects debt has
been authorized by the necessary legislation, issuance authority rests with
two of the Issuing Officials (the Governor, the Auditor General and the State
Treasurer), one of whom must be the Governor.
The issuance of electorate approved debt is subject to the enactment of
legislation which places on the ballot the question of whether debt shall be
incurred. Such legislation must state the purposes for which the debt is to
be authorized and, as a matter of practice, includes a maximum amount of
funds to be borrowed. Upon electorate approval and enactment of legislation
implementing the proposed debt- funded program, bonds may be issued. All such
authorizing legislation to date has given issuance authority to two of the
Issuing Officials, one of whom must be the Governor.
Outstanding general obligation debt totaled $5,045 million (of which
$4,069 million was for non-highway purposes) at June 30, 1995, a decrease of
$30.4 million from June 30, 1994. Over the 10-year period ending June 30,
1995, total outstanding general obligation debt increased at an annual rate
of 1.1 percent. Within the most recent 5-year period, outstanding general
obligation debt has grown at an annual rate of 1.7 percent.
Certain state-created agencies have statutory authorization to incur debt
for which state appropriations to pay debt service thereon is not required.
The debt of these agencies is supported by assets of, or revenues derived
from the various projects financed and is not an obligation of the
Commonwealth. Some of these agencies, however, are indirectly dependent on
Commonwealth appropriations. These agencies, their purposes and their
outstanding debt are as follows:
Delaware River Joint Toll Bridge Commission ("DRJTBC"): The DRJTBC, a
public corporation of the Commonwealth and New Jersey, owns and operates
bridges across the Delaware River. Debt service on bonds is paid from tolls
and other revenues of the Commission. The DRJTBC had $56.3 million in bonds
outstanding as of June 30, 1995.
Delaware River Port Authority ("DRPA"): The DRPA, a public corporation of
the Commonwealth and New Jersey, operates several toll bridges over the
Delaware River and promotes the use of the Philadelphia-Camden port. Debt
service on bonds is paid from toll revenues and other revenues pledged by
DRPA to repayment of bonds. The DRPA had $185.5 million in revenue bond debt
outstanding on June 30, 1995.
Pennsylvania Economic Development Financing Authority ("PEDFA"): The PEDFA
was created in 1987 to offer pooled bond issues for both taxable and
tax-exempt bonds on behalf of local industrial and commercial development
authorities for economic development projects. Bonds may be secured by loan
repayments and all other revenues of the PEDFA. The PEDFA had $1,015.8
million of debt outstanding as of June 30, 1995.
Pennsylvania Energy Development Authority ("PEDA"): The PEDA was created
in 1982 to finance energy research projects, demonstration projects promoting
the production or conservation of energy and the promotion, utilization and
transportation of Pennsylvania energy resources. The authority's funding is
from appropriations and project revenues. Debt service on bonds is paid from
project revenues and other revenues pledged by PEDA to repayment of bonds.
The PEDA had $123.1 million in bonds outstanding as of June 30, 1995.
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Pennsylvania Higher Education Assistance Agency ("PHEAA"): The PHEAA makes
or guarantees student loans to students or parents, or to lending
institutions or postsecondary institutions. Debt service on the bonds is paid
by loan interest and repayments and other agency revenues. The PHEAA had
$1,283.8 million in bonds outstanding as of June 30, 1995.
Pennsylvania Higher Education Facilities Authority ("PHEFA"): The PHEFA is
a public corporation of the Commonwealth established to finance college
facilities. As of June 30, 1995, the PHEFA had $2,102.9 million in revenue
bonds and notes outstanding payable from the lease rentals or loan repayments
of the projects financed. Some of the lessees or borrowers, although private
institutions, receive grants and subsidies from the Commonwealth.
Pennsylvania Industrial Development Authority ("PIDA"): The PIDA is a
public corporation of the Commonwealth established for the purpose of
financing economic development. The PIDA had $350.0 million in revenue bond
debt outstanding on June 30, 1995, to which all of its revenues are pledged.
Pennsylvania Turnpike Commission ("PTC"): The PTC operates the
Pennsylvania Turnpike System ("System"). Its outstanding indebtedness,
$1,252.6 million as of June 30, 1995, is payable from the net revenues of the
System, primarily toll revenues and rentals from leases and concessions.
Pennsylvania Infrastructure Investment Authority ("PIIA"): The PIIA was
created in 1988 to provide low interest rate loans and grants for the purpose
of constructing new and improving existing water supply and sewage disposal
systems to protect the health and safety of the citizens of the Commonwealth
and to promote economic development within the Commonwealth. Loans and grants
are available to local governments and, in certain circumstances, to private
companies. The PIIA bonds are secured by principal repayments and interest
payments on PIIA loans. The PIIA had $213.1 million revenue bonds outstanding
as of June 30, 1995.
Philadelphia Regional Port Authority ("PRPA"). The PRPA was created in
1989 for the purpose of acquiring and operating port facilities in Bucks and
Delaware Counties, and the City of Philadelphia. Debt service on the bonds is
paid by a pledge of the PRPA's revenues, rentals and receipts. The PRPA had
$63.9 million in bonds outstanding as of June 30, 1995.
State Public School Building Authority ("SPSBA"): The SPSBA finances
public school projects. Bonds issued by the SPSBA are supported by the lease
rental payments or loan repayments made to the SPSBA by local school
districts and the sponsors of community colleges. A portion of the funds
appropriated annually by the Commonwealth as aid to local school districts
may be used by them to pay such lease rental payments or loan repayments. The
SPSBA had $316.2 million of revenue bonds outstanding on June 30, 1995.
"MORAL OBLIGATIONS"
Pennsylvania Housing Finance Agency ("PHFA"): The PHFA is a state-created
agency which provides financing for housing for lower and moderate income
families in the Commonwealth. The bonds, but not the notes, of the PHFA are
partially secured by a capital reserve fund required to be maintained by the
PHFA in an amount equal to the maximum annual debt service on its outstanding
bonds in any succeeding calendar year. The statute creating PHFA provides
that if there is a potential deficiency in the capital reserve fund or if
funds are necessary to avoid default on interest, principal or sinking fund
payments on bonds or notes of PHFA, the Governor, upon notification from the
PHFA, shall place in the budget of the Commonwealth for the next succeeding
year an amount sufficient to make up any such deficiency or to avoid any such
default. The budget as finally adopted by the General Assembly may or may not
include the amount so placed therein by the Governor. PHFA is not permitted
to borrow additional funds so long as any deficiency exists in the capital
reserve fund. As of June 30, 1995, PHFA had $2,130 million of revenue bonds
and $24 million of notes outstanding.
The Hospitals and Higher Education Facilities Authority of Philadelphia
(the "Hospitals Authority"): The Hospitals Authority is a municipal authority
organized by the City of Philadelphia (the "City") to, inter alia, acquire
and prepare various sites for use as intermediate care facilities for the
mentally retarded. On August 26, 1986, the Hospitals Authority issued $20.4
million of bonds which were refunded in 1993
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by a $21.1 million bond issue of the Hospitals Authority (the "Hospitals
Authority Bonds") for such facilities for the City. The Hospitals Authority
Bonds are secured by leases with the City payable only from project revenues
and a debt service reserve fund. The Commonwealth's Department of Public
Welfare ("DPW") has agreed with the Hospitals Authority to request in DPW's
annual budget submission to the Governor, an amount of funds sufficient to
alleviate any deficiency that may arise in the debt service reserve fund for
the Hospitals Authority Bonds. The budget as finally adopted may or may not
include the amount requested. If funds are paid to the Hospitals Authority,
DPW will obtain certain rights in the property financed with the Hospitals
Authority Bonds in return for such payment.
In response to a delay in the availability of billable beds and the
revenues from these beds to pay debt service on the Hospitals Authority
Bonds, PHFA agreed in June 1989 to provide a $2.2 million low- interest loan
to the Hospitals Authority. The loan enabled the Hospitals Authority to make
all debt service payments on the Hospitals Authority Bonds during 1990.
Enough beds were completed in 1991 to provide sufficient revenues to the
Hospitals Authority to meet its debt service payments and to begin repaying
the loan from PHFA. According to the Hospitals Authority, as of June 30,
1995, $1.57 million of the loan principal was outstanding. DPW has agreed
that the additional costs arising from the PHFA loan will be reimbursed as
necessary and reasonable costs of the project.
LOCAL GOVERNMENTAL UNIT AND RELATED AUTHORITY OBLIGATIONS
Various state statutes authorize local units of government (counties,
cities, school districts and the like) to issue general obligations and
revenue obligations, subject to compliance with the requirements of such
statutes. In addition, various statutes permit local government units to
organize authorities having the power to issue obligations which are not
subject to debt limits that may be applicable to the organizing governmental
unit and which are payable from assets of or revenues derived from projects
financed by such authorities. Such authorities include parking authorities,
industrial development authorities, redevelopment authorities, transportation
authorities, water and sewer authorities, and authorities to undertake
projects for institutions of higher education and health care. Such
obligations may generally be affected by adverse changes in the economy of
the area in which such local government units or projects financed by them or
by authorities created by them are located, by changes in applicable federal,
state or local law or regulation, or by changes in levels of federal, state
or local appropriations, grants or subsidies to the extent such
appropriations, grants or subsidies directly or indirectly affect revenues of
such issuers.
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, on
behalf of each Series, as fundamental policies, which may not be changed
without the vote of a majority of the outstanding voting securities of each
Series, as defined in the Act. Such a majority is defined as the lesser of
(a) 67% of the shares of that Series present at a meeting of shareholders, if
the holders of more than 50% of the outstanding shares of that Series are
present or represented by proxy or (b) more than 50% of the outstanding
shares of that Series. 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 securities guaranteed by separate
entities will be considered a separate security; (b) a "taxable security" is
any security the interest on which is subject to regular federal income tax;
and (c) all percentage limitations apply immediately after a purchase or
initial investment, and any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets
does not require elimination of any security from the portfolio.
The Fund, on behalf of any Series, 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.
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3. Purchase or sell real estate or interests therein (including
limited Partnership interests), although it may purchase securities
secured by real estate or interests therein.
4. Purchase or sell commodities except that the Fund, on behalf of
each Series, may purchase financial futures contracts and related options
in accordance with procedures adopted by the Trustees described in its
Prospectus and Statement of Additional Information.
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
options on futures contracts or options on debt securities.
7. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
8. Borrow money, except that the Fund, on behalf of any Series, may
borrow from a bank for temporary or emergency purposes in amounts up to 5%
(taken at the lower of cost or current value) of the value of the total
assets of the Series (including the amount borrowed) less its liabilities
(not including any borrowings but including the fair market value at the
time of computation of any senior securities then outstanding).
9. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. (For the purpose of this restriction,
collateral arrangements with respect to the writing of options and
collateral arrangements with respect to initial margin for futures are not
deemed to be pledges of assets and neither such arrangements nor the
purchase or sale of futures are deemed to be the issuance of a senior
security as set forth in restriction 10.)
10. Issue senior securities as defined in the Act except insofar as
the Fund, on behalf of any Series, may be deemed to have issued a senior
security by reason of: (a) entering into any repurchase agreement; (b)
purchasing any securities on a when-issued or delayed delivery basis; or
(c) borrowing money in accordance with restrictions described above.
11. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which the Fund may invest consistent with its
investment objective and policies; (b) by investment in repurchase
agreements; and (c) by lending its portfolio securities.
12. Make short sales of securities.
13. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of purchases of portfolio securities. The
deposit or payment by the Fund, on behalf of any Series, of initial or
variation margin in connection with futures contracts or related options
thereon is not considered the purchase of a security on margin.
14. Engage in the underwriting of securities, except insofar as the
Fund, on behalf of any Series, 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 and commodities for each Series of 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. Options and futures
transactions will usually be effected through a broker and a commission will
be charged. The Fund also expects that securities for each Series will be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as
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the underwriter's concession or discount. On occasion, the Fund, on behalf of
each Series, may also purchase certain money market instruments directly from
an issuer, in which case no commissions or discounts are paid. For the fiscal
years ended November 30, 1993, 1994 and 1995, the Fund paid no brokerage
commissions.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act
as investment manager or adviser to others. It is the practice of the
Investment Manager to cause purchase and sale transactions to be allocated
among the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client
accounts, various factors may be considered, including the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the opinion of the persons
responsible for managing the portfolios of the Fund and other client
accounts. In the case of certain initial and secondary public offerings, the
Investment Manager may utilize a pro-rata allocation process based on the
size of the Dean Witter Funds involved and the number of shares available
from the public offering.
The policy of the Fund, regarding purchases and sales of securities for
each Series' 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 price 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 each Series pays to the Investment Manager by
any amount that may be attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund,
on behalf of each Series, may effect principal transactions in certain money
market instruments with DWR. The Fund, on behalf of each Series, will limit
its transactions with DWR to U.S. Government and Government Agency
Securities, Bank Money Instruments (i.e. Certificates of Deposit and Bankers'
Acceptances) and Commercial Paper. Such transactions will be effected with
DWR only when the price available from DWR is better than that available from
other dealers.
Consistent with the policy described above, brokerage transactions in
securities and commodities listed on exchanges or admitted to unlisted
trading privileges may be effected through DWR. In order for DWR to effect
portfolio transactions for each Series of the Fund, the commissions, fees or
other remuneration received by DWR must be reasonable and fair compared to
the commissions, fees or other remuneration paid to other brokers in
connection with comparable transactions involving similar securities being
purchased or sold on an exchange during a comparable period of time. This
standard would allow DWR to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
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 year ended November 30, 1994, the Fund paid no
brokerage commissions to DWR.
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PURCHASE OF FUND SHARES
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As discussed in the Prospectus, the Fund offers its shares for sale to the
public through Dean Witter Distributors Inc. (the "Distributor"). The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of DWDC.
The Distributor has entered into a selected dealer agreement with DWR, which
through its own sales organization, sells shares of each Series of the Fund.
In addition, the Distributor may enter into selected dealer agreements with
other selected broker-dealers. The Trustees of the Fund, including a majority
of the Trustees who are not, and were not at the time they voted, interested
persons of the Fund, as defined in the Act (the "Independent Trustees"),
approved, at their meeting held on October 30, 1992, a Distribution Agreement
appointing the Distributor exclusive Distributor of the Fund's shares and
providing for the Distributor to bear distribution expenses not borne by the
Fund. At the same meeting, the Trustees of the Fund, including all of the
Independent Trustees, approved a new Distribution Agreement between the Fund
and the Distributor, which took effect upon the spin-off by Sears, Roebuck &
Co. of its remaining shares of DWDC. The new Distribution Agreement is
substantively identical to the current Distribution Agreement in all material
respects, except for the dates of effectiveness. By its terms, the
Distribution Agreement had an initial term ending April 30, 1994, and will
remain in effect from year to year thereafter if approved by the Board. At
their meeting held on April 20, 1995, the Trustees, including all of the
Independent Trustees, approved the most recent continuation of the
Distribution Agreement until April 30, 1996.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
account executives. The Distributor will also pay certain expenses in
connection with the distribution of the shares of each Series of the Fund,
including the costs of preparing, printing and distributing advertising or
promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also will bear the costs of registering the Fund and
its shares under federal and state securities laws. The Fund and the
Distributor have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for any losses sustained by
the Fund or its shareholders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan"). The Plan was approved by the Trustees on December 11,
1990, and by DWR as the Fund's then sole shareholder on December 26, 1990,
whereupon the Plan went into effect. With respect to the Arizona Series, the
Plan was initially approved by the Trustees on April 16, 1991. The Plan was
approved by the shareholders of each Series of the Fund at a Special Meeting
of shareholders on June 24, 1992 and on January 12, 1993. The vote of the
Trustees, which was cast in person at a meeting called for the purpose of
voting on such Plan, included a majority of the Trustees who are not and were
not at the time of their voting interested persons of the Fund and who have
and had at the time of their votes no direct or indirect financial interest
in the operation of the Plan (the "Independent 12b-1 Trustees"). In making
their decision to adopt the Plan, the Trustees requested from DWR and
received such information as they deemed necessary to make an informed
determination as to whether or not adoption of the Plan was in the best
interests of the shareholders of the Fund. After due consideration of the
information received, the Trustees, including the Independent 12b-1 Trustees,
determined that adoption of the Plan would benefit the shareholders of the
Fund.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments
to the Plan which took effect in January, 1993 and were designed to reflect
the fact that upon the reorganization described above the share distribution
activities theretofore performed for the Fund by DWR were assumed by the
Distributor and DWR's sales activities
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are now being performed pursuant to the terms of a selected dealer agreement
between the Distributor and DWR. The amendments provide that payments under
the Plan will be made to the Distributor rather than to DWR as before the
amendment, and that the Distributor in turn is authorized to make payments to
DWR, its affiliates or other selected broker-dealers (or direct that the Fund
pay such entities directly). The Distributor is also authorized to retain
part of such fee as compensation for its own distribution- related expenses.
The Fund is authorized to reimburse the Distributor for specific expenses
the distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. Reimbursement is made through monthly payments in amounts
determined in advance of each fiscal quarter by the Trustees, including a
majority of the Independent 12b-1 Trustees. The amount of each monthly
payment may in no event exceed an amount equal to a payment at the annual
rate of 0.15 of 1% of the average daily net assets of the shares of each
Series of the Fund during the month. Such payment is treated by each Series
of the Fund as an expense in the year it is accrued. No interest or other
financing charges will be incurred by the Distributor for which reimbursement
payments under the Plan will be made. In addition, no interest charges, if
any, incurred on any distribution expense incurred by the Distributor
pursuant to the Plan, will be reimbursable under the Plan.
The Distributor has informed the Fund that the fee payable by the Fund
each year pursuant to the Plan not to exceed to 0.15% of the Fund's average
daily net assets is characterized as a "service fee" under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (of which
the Distributor is a member). The fee is a payment made for personal service
and/or the maintenance of shareholder accounts.
Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for any losses sustained by
the Fund or its shareholders.
The Arizona Series, California Series, Florida Series, Massachusetts
Series, Michigan Series, Minnesota Series, New Jersey Series, New York
Series, Ohio Series and Pennsylvania Series, accrued a total of $71,184,
$169,661, $103,070, $23,927, $28,610, $15,374, $66,078, $21,315, $31,476 and
$74,576, respectively pursuant to the Plan of Distribution for the fiscal
year ended November 30, 1995. Such payment amounted to an annual rate of 0.14
of 1% of the average daily net assets of each respective Series of the Fund
(0.15% of the daily net assets of the California Series, Massachusetts Series
and Pennsylvania Series). It is estimated that the amount paid by the Fund
for distribution was for expenses which relate to compensation of sales
personnel and associated overhead expenses. The Distributor has informed the
Fund that it received sales charges on sales of the Fund's shares in the
approximate amounts of $6,322,103, $2,373,022 and $1,341,329 for the fiscal
years ended 1993, 1994 and 1995, respectively.
The Plan remained in effect until April 30, 1991 and will continue in
effect, from year to year thereafter, provided such continuance is approved
annually by a vote of the Trustees, including a majority of the Independent
12b-1 Trustees. At their meeting held on April 20, 1995, the Trustees
approved the most recent continuation of the Plan until April 30, 1996. At
that meeting, the Trustees, including a majority of the Independent 12b-1
Trustees, also approved certain technical amendments to the Plan in
connection with recent amendments adopted by the National Association of
Securities Dealers, Inc. to its Rules of Fair Practice. Prior to approving
the continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to
continue the Plan, the Trustees considered: (1) the Fund's experience under
the Plan and whether such experience indicates that the Plan is operating as
anticipated: (2) the benefits the Fund had obtained, was obtaining and would
be likely to obtain under the Plan; and (3) what services had been provided
and were continuing to be provided under the Plan to the Fund and its
shareholders. Based upon their review, the Trustees of the Fund, including
each of the independent 12b-1 Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
39
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appropriateness and the level of compensation provided herein. An amendment
to increase materially the maximum amount authorized to be spent under the
Plan and Agreement on behalf of any Series must be approved by the
shareholders of such Series, and all material amendments to the Plan must be
approved by the Trustees in the manner described above. The Plan may be
terminated on behalf of any Series at any time, without payment of any
penalty, by vote of the holders of a majority of the Independent 12b-1
Trustees or by a vote of a majority of the outstanding voting securities of
such Series (as defined in the Act) on not more than 30 days written notice
to any other party to the Plan. The authority to make reimbursement payments
to the Distributor automatically terminates in the event of an assignment (as
defined in the Act); however the Trustees' authority under the Plan to
utilize its assets to finance the distribution of its shares would continue.
After such an assignment, the Fund's authority to make payments to its
Distributor would resume, subject to certain conditions. So long as the Plan
is in effect, the selection or nomination of the Independent 12b-1 Trustees
is committed to the discretion of the Independent 12b-1 Trustees.
Under the Plan, the Distributor provides each Series of the Fund, for
review by the Trustees, and the Trustees review, promptly after the end of
each fiscal quarter, a written report regarding the incremental distribution
expenses incurred by the Distributor on behalf of each Series of the Fund
during such fiscal quarter, which report includes (1) an itemization of the
types of expenses and the purposes therefor; (2) the amounts of such
expenses; and (3) a description of the benefits derived by each Series of the
Fund. In the Trustees' quarterly review of the Plan they consider its
continued appropriateness and the level of compensation provided therein.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, had any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor or certain of its employees may be deemed to have such
an interest as a result of benefits derived from the successful operation of
the Plan or as a result of receiving a portion of the amounts expended
thereunder by the Fund.
REDUCED SALES CHARGES
Right of Accumulation. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefiting from the reduced sales charges available for purchases
of shares of any Series of the Fund totalling at least $25,000 in net asset
value. For example, if any person or entity who qualifies for this privilege
holds shares of any Series of the Fund having a current value of $5,000, and
purchases $20,000 of additional shares of any Series of the Fund, the sales
charge applicable to the $20,000 purchase would be 3.5% of the offering
price.
For the purposes of this Right of Accumulation, the cumulative current net
asset value of any shares of a Series and shares of any other Series held by
the shareholder will be added to the value of shares of the Fund owned by the
shareholder in determining the sales charge applicable to any new purchases
of Fund shares.
The Distributor must be notified by the dealer or the shareholder at the
time a purchase order is placed that the purchase qualifies for the reduced
charge under the Right of Accumulation. Similar notification must be made in
writing by the dealer or the shareholder when such an order is placed by
mail. The reduced sales charge will not be granted if: (a) such notification
is not furnished at the time of the order; or (b) a review of the records of
the Distributor or Dean Witter Trust Company (the "Transfer Agent") fails to
confirm the investor's represented holdings.
Letter of Intent. As discussed in the prospectus under the caption
"Reduced Sales Charges," reduced sales charges are available to investors who
enter into a written Letter of Intent providing for the purchase, within a
thirteen-month period, of shares of any Series of the Fund from the
Distributor or from a single dealer which has entered into a Selected Dealer
Agreement with the Distributor.
A Letter of Intent permits an investor to establish a total investment
goal to be achieved by any number of purchases over a thirteen-month period.
Each purchase made during the period will receive the reduced sales
commission applicable to the amount represented by the goal, as if it were a
single purchase. A number of shares equal in value to 5% of the dollar amount
of the Letter of Intent will be held
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in escrow by the Transfer Agent, in the name of the shareholder. The initial
purchase under a Letter of Intent must be equal to at least 5% of the stated
investment goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to
pay the difference between the sales charge otherwise applicable to the
purchases made during this period and sales charges actually paid. Such
payment may be made directly to the Distributor or, if not paid, the
Distributor is authorized by the shareholder to liquidate a sufficient number
of his or her escrowed shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level,
the sales charge on the entire amount of the purchase that results in passing
that level and on subsequent purchases will be subject to further reduced
sales in the same manner as set forth above under Right of Accumulation, but
there will be no retroactive reduction of sales charges on previous
purchases. For the purpose of determining whether the investor is entitled to
a further reduced sales charge applicable to purchases at or above a sales
charge level which exceeds the stated goal of a Letter of Intent, the
cumulative current net asset value of shares of any Series owned by the
investor will be added to the cost or net asset value of shares of any other
Series owned by the investor. However, the purchase of shares of any other
Dean Witter Funds will not be included in determining whether the stated goal
of a Letter of Intent has been reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction.
The 5% escrow and minimum purchase requirements will be applicable to the new
stated goal. Investors electing to purchase shares of the Fund pursuant to a
Letter of Intent should carefully read such Letter of Intent.
DETERMINATION OF NET ASSET VALUE
As discussed in the Prospectus, portfolio securities (other than
short-term debt securities and futures and options) are valued for the Fund
by an outside independent pricing service approved by the Trustees. The
pricing service has informed the Fund that in valuing the portfolio
securities for each Series of the Fund 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 portfolio
securities for each Series 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
Trustees believe 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.
As stated in the Prospectus, short-term debt securities with remaining
maturities of sixty days or less at the time of purchase are valued at
amortized cost, unless the Trustees determine such does not reflect the
securities' market value, in which case these securities will be valued at
their fair value as determined by the Trustees. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. Listed options are valued at the latest sale price on the exchange
on which they are listed unless no sales of such options have taken place
that day, in which case they will be valued at the mean between their latest
bid and asked prices. Unlisted options are valued at the mean between their
latest bid and asked prices. Futures are valued at the latest sale price on
the commodities exchange on which they trade unless the Trustees determine
such price does not reflect their market value, in which case they will be
valued at their fair value as determined by the Trustees. All other
securities and other assets are valued at their fair value as determined in
good faith under procedures established by and under the supervision of the
Trustees.
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The net asset value per share of each Series will not be determined on
such federal and non-federal holidays as are observed by the New York Stock
Exchange. 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.
SHAREHOLDER SERVICES
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Upon the purchase of shares of any Series of the Fund, a Shareholder
Investment Account is opened for the investor on the books of the Fund and
maintained by the Fund's Transfer Agent, Dean Witter Trust Company (the
"Transfer Agent"). This is an open account in which shares owned by the
investor are credited by the Transfer Agent in lieu of issuance of a share
certificate. If a share certificate is desired, it must be requested in
writing for each transaction. Certificates are issued only for full shares
and may be redeposited in the account at any time. There is no charge to the
investor for issuance of a certificate. Whenever a shareholder instituted
transaction takes place in the Shareholder Investment Account, the
shareholder will be mailed a confirmation of the transaction from the Fund or
from DWR or another selected broker-dealer.
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at net asset value
(without sales charge), next determined by returning the check or the
proceeds to the Transfer Agent within thirty days after the payment date. If
the shareholder returns the proceeds of a dividend or distribution, such
funds must be accompanied by a signed statement indicating that the proceeds
constitute a dividend or distribution to be invested. Such investment will be
made at the net asset value per share next determined after receipt of the
check or proceeds by the Transfer Agent.
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of any Series
of the Fund having a minimum value of $10,000 based upon the then current
offering price. The Withdrawal Plan provides for monthly or quarterly (March,
June, September and December) checks in any dollar amount, not less than $25,
or in any whole percentage of the account balance, on an annualized basis.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated in the application. The
shares will be redeemed at their net asset value determined, at the
shareholder's option on the tenth or twenty-fifth day (or next following
business day) of the relevant month or quarter and normally a check for the
proceeds will be mailed by the Transfer Agent within five business days after
the date of redemption. The Withdrawal Plan may be terminated at any time by
the Fund.
Withdrawal plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Systematic Withdrawal Plan, withdrawals made concurrently with purchases of
additional shares are inadvisable because of the sales charges applicable to
the purchase of additional shares.
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time change the amount and interval of
withdrawal payments through his or her Account Executive or by written
notification to the Transfer Agent. In addition, the party and/or address to
which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate
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the Systematic Withdrawal Plan at any time by written notice to the Transfer
Agent. In the event of such termination, the account will be continued as a
regular shareholder investment account. The shareholder may also redeem all
or part of the shares held in the Withdrawal Plan account (see "Redemptions
and Repurchases" in the Prospectus) at any time.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
Multi-State Municipal Series Trust (include name of Series), directly to the
Fund's Transfer Agent. After deduction of the applicable sales charge, the
balance will be applied to the purchase of shares of the respective Series at
the net asset value per share of that Series next computed after receipt of
the check or purchase payment by the Transfer Agent. The shares so purchased
will be credited to the investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of any Series of the
Fund may exchange their shares for shares of any other Series of the Fund,
for shares of other Dean Witter Funds sold with a front-end (at time of
purchase) sales charge ("FESC Funds"), for shares of Dean Witter Funds sold
with a contingent deferred (at time of purchase) sales charge ("CDSC Funds
"), for shares of Dean Witter Short-Term U.S. Treasury Trust, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter
Balanced Income Fund, Dean Witter Balanced Growth Fund, Dean Witter
Intermediate Term U.S. Treasury Trust and five Dean Witter Funds which are
money market funds (the foregoing eleven non-CDSC funds are hereinafter
referred to as the "Exchange Funds"). Exchanges may be made after the shares
of the CDSC fund or FESC fund acquired by purchase (not by exchange or
dividend reinvestment) have been held for thirty days. There is no holding
period for exchanges of shares acquired by exchange or dividend reinvestment.
However, shares of CDSC funds, including shares acquired in exchange for
shares of FESC funds, may not be exchanged for shares of FESC funds. Thus,
shareholders who exchange their Fund shares for shares of CDSC funds may
subsequently exchange those shares for shares of other CDSC funds or Exchange
Funds but may not reacquire FESC fund shares by exchange. An exchange will be
treated for federal income tax purposes and applicable state income tax
purposes the same as a repurchase or redemption of shares, on which the
shareholder may realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)
With respect to the repurchase of shares of any Series of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any
other of the funds and the general administration of the Exchange Privilege,
the Transfer Agent acts as agent for the Distributor and for the
shareholder's selected broker-dealer, if any, in the performance of such
functions. The Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
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Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000
for Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter New York Municipal Money Market Trust and Dean Witter
California Tax-Free Daily Income Trust although those funds may, at their
discretion, accept initial investments of as low as $1,000. The minimum
initial investment for Dean Witter Short-Term U.S. Treasury Trust is $10,000,
although that fund, in its discretion, may accept initial investments of as
low as $5,000. The minimum initial investment for all other Dean Witter Funds
for which the Exchange Privilege is available is $1,000.) Upon exchange into
an Exchange Fund, the shares of that fund will be held in a special Exchange
Privilege Account separately from accounts of those shareholders who have
acquired their shares directly from that fund. As a result, certain services
normally available to shareholders of those funds, including the check
writing feature, will not be available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required
by applicable regulatory agencies (presently sixty days' prior written notice
for termination or material revision), provided that six months' prior
written notice of termination will be given to the shareholders who hold
shares of an Exchange Fund, pursuant to this Exchange Privilege and provided
further that the Exchange Privilege may be terminated or materially revised
without notice at times (a) when the New York Stock Exchange is closed for
other than customary weekends and holidays, (b) when trading on that Exchange
is restricted, (c) when an emergency exists as result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist) or (e) if the Fund
would be unable to invest amounts effectively in accordance with its
investment objective, policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR account executive or the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. The term "good order" means
that the share certificate, if any, and request for redemption, are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent.
Such payment may be postponed or the right of redemption suspended at times
(a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c)
when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
(d) during any other period when the Securities and Exchange Commission by
order so permits; provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist. If the shares to be redeemed have recently
been purchased by check (including a certified or bank cashier's check),
payment of redemption proceeds may be delayed for the minimum time needed to
verify that the check used for investment has been honored (nor more than
fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another selected
broker-dealer are referred to their account executive regarding restrictions
on redemption of shares of the Fund pledged in the margin accounts.
Involuntary Redemption. As described in the Prospectus, due to the
relatively high cost of handling small investments, the Fund reserves the
right to redeem, at net asset value, the shares of any shareholder whose
shares have a value of less than $100, or such lesser amount as may be fixed
by the
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Board of Trustees. However, before the Fund redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder that the value of
the shares is less than $100 and allow him or her 60 days to make an
additional investment in an amount which will increase the value of his or
her account to $100 or more before the redemption is processed.
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 Series of the Fund held by the
shareholder at the net asset value (without sales charge) 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 and state 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 and state personal 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, each Series of the Fund intends to distribute
substantially all of its net investment income and all of 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, each Series of the Fund will pay federal income tax thereon, and
will notify shareholders that following such election by that Series, the
shareholders of that Series will be required to include such undistributed
gains in determining their taxable income and may claim their share of the
tax paid by that Series as a credit against their individual federal income
tax (but not the personal income tax of a particular state).
As discussed in the Prospectus, each Series of the Fund may invest a
portion of its assets in certain "private activity bonds" issued after August
7, 1986. As a result, a portion of the exempt-interest dividends paid by each
Series of the Fund may be an item of tax preference to shareholders subject
to the federal alternative minimum tax. Certain corporations which are
subject to the alternative minimum tax may also have to include
exempt-interest dividends in calculating their alternative minimum taxable
income in situations where the "adjusted current earnings" of the corporation
exceeds its alternative minimum taxable income.
Each shareholder will be sent a summary of his or her account, at least
quarterly, including information as to reinvested dividends and capital gains
distributions. Share certificates for dividends or distributions will not be
issued unless a shareholder requests in writing that a certificate be issued
for a specific number of shares.
In computing interest income, each Series of the Fund will amortize any
premiums and original issue discounts on securities owned. 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 each Series of the Fund will
be long-term capital gains or losses if the securities have been held by a
Series 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.
Gains and losses on the sale, expiration or other termination of options on
securities will generally be treated as gains and losses from the sale of
securities. Pursuant to present federal income tax laws, futures contracts
held by each Series of the Fund at the end of each fiscal year will be
required to be "marked to market", that is, treated as having been sold at
their fair market value at such date. Sixty percent of any gain or loss
recognized on these deemed sales will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss.
Gains or losses from options on futures and options on debt instruments will
also generally be treated as part short-term and part long-term capital gains
or losses, unless such gains or losses were incurred as part of a securities
"straddle," in which case the appropriate straddle rules of the Internal
Revenue Code (the "Code") would apply.
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Each Series of the Fund has qualified and intends to remain qualified as a
regulated investment company under Subchapter M of the Code. If so qualified,
each Series 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.
One of the requirements for regulated investment company status is that at
least 90% of a fund's gross income be derived from dividends, interest, gains
from the sale or other disposition of securities and certain other related
income. Another requirement for regulated investment company status is that
less than 30% of a fund's gross income can be derived from gains from the
sale or other disposition of securities held less than three months.
Accordingly, each Series of the Fund may be restricted in the writing of
options on securities held for less than three months, in the writing of
options which expire in less than three months, and in effecting closing
transactions with respect to call or put options which have been written or
purchased less than three months prior to such transactions. Each Series of
the Fund may also be restricted in its ability to engage in transactions
involving futures contracts.
As discussed in the Prospectus, each Series of 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. An exempt-interest dividend is
that part of dividend distributions made by any Series which consists of
interest received by that Series on tax-exempt securities upon which the
shareholder incurs no federal income taxes (apart from any possible
application of the alternative minimum tax).
Within 60 days after the end of its calendar year, the Fund will mail to
shareholders of each Series a statement indicating the percentage of the
dividend distributions for such fiscal year which constitutes exempt-interest
dividends and the percentage, if any, that is taxable, and the percentage, if
any, of the exempt-interest dividends which constitutes an item of tax
preference, and to what extent the taxable portion is long-term capital gain,
short-term capital gain or ordinary income. These percentages should be
applied uniformly to all monthly distributions made during the fiscal year to
determine the proportion of dividends that is tax-exempt. The percentages may
differ from the percentage of tax-exempt dividend distributions for any
particular month.
Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of net
short-term capital gains. Such dividends and distributions are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Distributions of
long-term capital gains, if any, are taxable as long-term gains, regardless
of how long the shareholder has held Fund shares of any Series and whether
the distribution is received in additional shares or in cash. Since each
Series' income is expected to be derived entirely from interest rather than
dividends, none of such dividend distributions will be eligible for the 70%
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 any Series 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 a Series of the Fund is not deductible to the
extent allocable to exempt-interest dividends of that Series of the Fund
(which allocation does not take into account capital gain dividends of that
Series 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 any
Series 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.
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Federal Income Tax Status. At November 30, 1995, the California Series had
net capital loss carryovers of approximately $324,000 of which $76,900, which
will be available through November 30, 2002 and $247,100 will be available
through November 30, 2003 to offset future gains to the extent provided by
regulations; the Minnesota Series had net capital loss carryovers of $56,300
of which $32,000 will be available through November 30, 2002 and $24,300 will
be available through November 30, 2003 to offset future gains to the extent
provided by regulations; the New Jersey Series had net capital loss carryovers
of $376,100 of which $207,100 will be available through November 30, 2002 and
$169,000 will be available through November 30, 2003 to offset future gains to
the extent provided by regulations. At November 30, 1995, the Arizona Series,
Florida Series, Michigan Series, New York Series, Ohio Series and Pennsylvania
Series had net capital loss carryovers of approximately $240,800, $75,800,
$13,200, $6,300, $172,700 and $25,100, respectively, available through November
30, 2002 to offset future gains to the extent provided by regulations. To the
extent that these net capital loss carryovers are used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders.
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 each Series of the
Fund could be affected. In such event, the Fund would re-evaluate its
investment objective and policies.
Any dividends or capital gains distributions received by a shareholder
from any investment company will have the effect of reducing the net asset
value of the shareholder's stock in that fund by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains
distributions are, and some portion of the dividends may be, subject to
income tax. If the net asset value of the shares should be reduced below a
shareholder's cost as a result of the payment of taxable dividends or the
distribution of realized long-term capital gains, such payment or
distribution would be in part a return of capital but nonetheless taxable to
the shareholder. Therefore, an investor should consider the tax implications
of purchasing Fund shares immediately prior to a distribution record date.
The foregoing relates to federal income taxation in effect as of the date
of the Prospectus.
The Fund is organized as a Massachusetts business trust. Under current
law, so long as it qualifies as a "regulated investment company" under the
Internal Revenue Code, the Fund itself is not liable for any income or
franchise tax in The Commonwealth of Massachusetts.
PERFORMANCE INFORMATION
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As discussed in the Prospectus, from time to time each Series of the Fund
may quote its "yield" and/or its "total return" in advertisements and sales
literature. The yield of each Series is calculated for any 30-day period as
follows: the amount of interest income for each security in a particular
Series' portfolio is determined in accordance with regulatory requirements;
the total for the entire portfolio constitutes the Series' 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 of that Series on the last day of the period
multiplied by the average number of the Series' 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. For the 30 day period
ended November 30, 1995, the yields, calculated pursuant to the formula
described above, for the Arizona Series, the California Series, the Florida
Series, the Massachusetts Series, the Michigan Series, the Minnesota Series,
the New Jersey Series, the New York Series, the Ohio Series and the
Pennsylvania Series were 4.57%, 5.02%, 4.59%, 4.86%, 4.87%, 4.79%, 4.85%,
4.91%, 4.85% and 4.79% respectively. During the period, the Investment
Manager assumed certain expenses with respect to the Massachusetts Series,
the Michigan Series, the Minnesota Series, the New York Series and the Ohio
Series. Had each Series borne these expenses for the period, the yield for
each of the aforementioned Series for the 30-day period ending November 30,
1995 would have been 4.62%, 4.61%, 4.27%, 4.49% and 4.60%, respectively.
47
<PAGE>
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.
Each Series of 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 tax-equivalent yield for the Arizona Series, the California
Series, the Florida Series, the Massachusetts Series, the Michigan Series,
the Minnesota Series, the New Jersey Series, the New York Series, the Ohio
Series and the Pennsylvania Series based upon a combined Federal and
respective State personal income tax bracket of 42.98%, 46.24%, 39.60%,
46.84%, 42.26%, 44.73%, 43.44%, 43.90%, 44.13% and 41.29% respectively for the
30 day period ended November 30, 1995, were 8.01%, 9.34%, 7.60%, 9.14%,
8.43%, 8.67%, 8.58%, 8.75%, 8.68% and 8.16% respectively, based upon the
respective yields quoted above. During the period, the Investment Manager
assumed certain expenses with respect to the Massachusetts Series, the
Michigan Series, the Minnesota Series, the New York Series and the Ohio
Series. Had each Series borne these expenses for the period, the yield for
each of the aforementioned Series for the 30-day period ending November 30,
1995 would have been 8.69%, 7.98%, 7.73%, 8.00% and 8.23%, respectively.
Each Series' "average annual total return" represents an annualization of
that Series' 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 Arizona Series, California Series,
the Florida Series, the Massachusetts Series, the Michigan Series, the
Minnesota Series, the New Jersey Series, the New York Series, the Ohio Series
and the Pennsylvania Series for the period January 15, 1991 (commencement of
operations) (May 1, 1991 for the Arizona Series) through November 30, 1995
were 7.44%, 7.84%, 7.78%, 8.31%, 8.14%, 7.31%, 7.84%, 8.13%, 7.94% and 7.86%
respectively, and for the year ended November 30, 1995 were 14.45%, 15.35%,
14.76%, 15.76%, 15.86%, 15.77%, 14.81%, 16.54%, 16.18% and 14.86%
respectively. During the period January 15, 1991 through November 30, 1994,
the Investment Manager assumed certain expenses and waived the compensation
provided for in its Management Agreement with respect to each Series of the
Fund. Had each Series borne these expenses and paid these fees during the
stated period, the average annual total return for the period January 15,
1991 (commencement of operations) (May 1, 1991 for the Arizona Series)
through November 30, 1995 would have been 6.98%, 7.45%, 7.26%, 7.30%, 7.34%,
5.53%, 7.32%, 6.85%, 6.39%, and 7.12% respectively, and for the year ended
November 30, 1995 would have been 14.45%, 15.35%, 14.76%, 15.43%, 15.56%,
15.23%, 14.81%, 16.15%, 15.87%, and 14.86% respectively. Computations of
average annual total return for periods of less than one year represent an
annualization of a Series' actual total return for the applicable period. A
Series' actual total return for its first full year of operations cannot be
predicted and therefore is likely to be different from any such annualized
computations.
In addition to the foregoing, each Series of the Fund may advertise its
total return over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the imposition of the maximum front-end sales charge. In
addition, each Series of the Fund may also 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
48
<PAGE>
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 total returns (without deduction
for applicable sales charge) for the Arizona Series, the California Series,
the Florida Series, the Massachusetts Series, the Michigan Series, the
Minnesota Series, the New Jersey Series, the New York Series, the Ohio Series
and the Pennsylvania Series for the period January 15, 1991 (May 1, 1991 for
the Arizona Series) through November 30, 1995 were 44.73%, 50.47%, 50.11%,
53.70%, 52.52%, 46.88%, 50.47%, 52.48%, 51.16% and 50.60% respectively, and
for the year ended November 30, 1995 were 19.21%, 20.15%, 19.54%, 20.58%,
20.69%, 20.60%, 19.60%, 21.40%, 21.02% and 19.65% respectively.
The Fund may also advertise the growth of the hypothetical investments of
$10,000, $50,000 and $100,000 in shares of any Series of the Fund by adding 1
to the respective Series' aggregate total return to date and multiplying by
$9,600, $48,375 or $97,250 ($10,000, $50,000 or $100,000 adjusted for a 4.0%,
3.25% and 2.75% sales charge). Investments of $10,000 adjusted for a 4.0%
sales charge in the Arizona Series, California Series, Florida Series,
Massachusetts Series, Michigan Series, Minnesota Series, New Jersey Series,
New York Series, Ohio Series and Pennsylvania Series at inception would have
grown to $13,894, $14,445, $14,411, $14,755, $14,842, $14,100, $14,445,
$14,638, $14,511, and $14,458, respectively, at November 30, 1995. An
investment of $50,000 adjusted for a 3.25% sales charge, in the Arizona
Series, California Series, Florida Series, Massachusetts Series, Michigan
Series, Minnesota Series, New Jersey Series, New York Series, Ohio Series and
Pennsylvania Series from inception would have grown to $70,013, $72,790,
$72,616, $74,362, $73,782, $71,053, $72,790, $73,762, $73,124, and $72,863,
respectively, at November 30, 1995. An investment of $100,000 adjusted for a
2.75% sales charge, in the Arizona Series, California Series, Florida Series,
Massachusetts Series, Michigan Series, Minnesota Series, New Jersey Series,
New York Series, Ohio Series and Pennsylvania Series from inception would
have grown to $140,750, $146,332, $145,982, $149,473, $148,326, $142,841,
$146,332, $148,287, $147,003, and $146,459, respectively, at November 30,
1995.
Each Series of the Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations.
SHARES OF THE FUND
- -----------------------------------------------------------------------------
Shareholders of each Series 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 at a Special
Meeting of Shareholders held on January 12, 1993. Messrs. Bozic, Purcell and
Schroeder were elected by the other Trustees of the Fund on April 8, 1994.
The Trustees themselves have the power to alter the number and the terms of
office of the Trustees, 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 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.
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). However, the Trustees have
not presently authorized any such additional series or classes of shares.
49
<PAGE>
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's 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 con- cerning 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 Fund 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, Two Montgomery Street, Jersey City, New Jersey
07302 is the Transfer Agent of the Fund's shares and Dividend Disbursing
Agent for payment of dividends and distributions of Fund shares and Agent for
shareholders under various investment plans described herein. Dean Witter
Trust Company is an affiliate of Dean Witter InterCapital Inc., the Fund's
Investment Manager and of Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter
Trust Company's responsibilities include maintaining shareholder accounts,
including providing subaccounting and recordkeeping services for certain
retirement accounts; disbursing cash dividends and distributions and
reinvesting dividends and distributions; processing account registration
changes; handling purchase and redemption transactions; mailing prospectuses
and reports; mailing and tabulating proxies; processing share certificate
transactions; and maintaining shareholder records and lists. For these
services, Dean Witter Trust Company receives a per shareholder account fee
from the Fund.
INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- -------------------------------------------------------------------------------
The Fund, on behalf of each Series, will send to shareholders, at least
semi-annually, reports showing each Series' portfolio and other information.
An annual report, containing financial statements audited by independent
accountants, together with their report thereon, will be sent to shareholders
each year.
The Fund's fiscal year ends on November 30. 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 Trustees.
VALIDITY OF SHARES OF BENEFICIAL INTEREST
- -------------------------------------------------------------------------------
The validity of shares offered by the Prospectus will be passed upon for
the Fund by Sheldon Curtis, Esq., who is an officer and General Counsel of
the Investment Manager and an officer and General Counsel of the Fund.
50
<PAGE>
LEGAL COUNSEL
- -------------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The financial statements of the Fund for the fiscal year ended November
30, 1995 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.
51
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
RATINGS OF INVESTMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
MUNICIPAL BOND RATINGS
<TABLE>
<CAPTION>
<S> <C>
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligation; 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.
</TABLE>
Conditional Rating: Bonds for which the security depends upon the
completion of some act of 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.
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.
52
<PAGE>
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 undeniabale 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 rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.
<TABLE>
<CAPTION>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest-rated
issues only in small degree.
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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.
Cl The rating "Cl" is reserved for income bonds on which no interest is being paid.
D Debt rated "D" is in payment default. The 'D' rating category is used when interest payments or principal
payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The 'D' rating also will be used upon the filing
of a bankruptcy petition if debt service payments are jeopardized.
NR Indicates that no rating has been requested, that there is insufficient information on which to base a rating
or that Standard & Poor's does not rate a particular type of obligation as a matter of policy.
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having predominantly speculative characteristics
with respect to capacity to pay interest and repay principal. "BB" indicates the least degree of speculation
and "C" the highest degree of speculation. While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus(-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign
to show relative standing within the major ratings categories.
The foregoing ratings are sometimes followed by a "p" which indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project being financed by the bonds being rated and indicates
that payment of debt service requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood or risk of default upon failure of such completion.
</TABLE>
54
<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.
COMMERICAL PAPER RATINGS
Standard and Poor's commerical paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to
purchase or sell a security. The ratings are based upon current information
furnished by the issuer or obtained by S&P from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into
group categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. Ratings are applicable to both taxable and tax-exempt
commercial paper. The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2 and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payments is very
strong.
A-2 indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations
carrying this designation are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the
higher designations.
55
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
PORTFOLIO SUMMARY November 30, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS
SERIES SERIES SERIES SERIES
------------ -------------- ------------ -----------------
<S> <C> <C> <C> <C>
CREDIT RATINGS (1):
AAA OR AAA ..................... 48% 31% 66% 34%
AA OR AA ....................... 26% 25% 15% 12%
A OR A ......................... 23% 32% 14% 48%
BAA OR BBB ..................... 3% 12% 5% 6%
BA OR BB ....................... -- -- -- --
NON-RATED ...................... -- -- -- --
AVERAGE WEIGHTED:
MATURITY ....................... 19 YEARS 21 YEARS 21 YEARS 19 YEARS
CALL PROTECTION ................ 7 YEARS 8 YEARS 7 YEARS 8 YEARS
PER SHARE NET ASSET VALUE:
NOVEMBER 30, 1994 .............. $9.42 $9.38 $9.60 $9.60
NOVEMBER 30, 1995 .............. $10.65 $10.67 $10.88 $10.97
DIVIDENDS (2) ................... $0.54 $0.56 $0.56 $0.57
TOTAL RETURN 12 MONTHS
ENDED 11/30/95 (3) ............. 19.21% 20.15% 19.54% 20.58%
TAX-FREE YIELD (4) .............. 4.57% 5.02% 4.59% 4.86%
TAXABLE EQUIVALENT YIELD (5) ... 8.01% 9.34% 7.60% 9.14%
</TABLE>
- ---------------
(1) Represents Moody's or Standard & Poor's ratings of the credit quality
of the long-term bonds owned by each Series.
(2) Includes all income dividends and capital gains distributions, if any,
paid by each Series for the 12 months ended November 30, 1995.
(3) Total return figures represent the change in each Series' total value
for each period measured, taking into account the change in NAV plus
compounded, reinvested dividends.
(4) Yields were calculated for the 30-day period ended November 30, 1995
following the SEC yield formula (based on adjusted net asset value).
(5) Assumes the top federal income tax rate and the top effective state
income tax rate, if any, and includes the effect of fully deducting
state taxes on your federal return.
56
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MICHIGAN MINNESOTA NEW JERSEY NEW YORK PENNSYLVANIA
SERIES SERIES SERIES SERIES OHIO SERIES SERIES
- ------------ ------------- -------------- ------------ ------------ ----------------
<C> <C> <C> <C> <C> <C>
57% 22% 45% 28% 43% 54%
33% 36% 17% 16% 22% 23%
9% 35% 25% 45% 30% 16%
1% 7% 8% 11% 4% 7%
-- -- 2% -- -- --
-- -- 3% -- 1% --
22 Years 20 Years 19 Years 22 Years 20 Years 20 Years
7 Years 7 Years 7 Years 9 Years 7 Years 8 Years
$ 9.46 $ 9.28 $ 9.47 $ 9.46 $ 9.42 $ 9.56
$10.81 $10.61 $10.73 $10.88 $10.80 $10.85
$ 0.57 $ 0.54 $ 0.56 $ 0.56 $ 0.56 $ 0.55
20.69% 20.60% 19.60% 21.40% 21.02% 19.65%
4.87% 4.79% 4.85% 4.91% 4.85% 4.79%
8.43% 8.67% 8.58% 8.75% 8.68% 8.16%
</TABLE>
57
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- ARIZONA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- -------------
<C> <S> <C> <C> <C>
ARIZONA EXEMPT MUNICIPAL BONDS+ (96.9%)
GENERAL OBLIGATION (11.9%)
$ 200 Chandler, Sierra Vista Refg Ser 1991 (FGIC) .............................. 7.00 % 07/01/12 $ 223,588
1,000 Paradise Valley Unified School District #69, Ser B 1995 (MBIA) (WI) ..... 5.25 07/01/15 998,740
Phoenix,
1,250 Refg Ser 1993 A ......................................................... 5.25 07/01/12 1,251,800
1,550 Refg Ser 1992 ........................................................... 6.375 07/01/13 1,658,143
750 Tucson, Refg Ser 1995 (FGIC) ............................................. 5.50 07/01/12 763,478
1,000 Tucson Unified School District #1, Impr 1989 Ser D 1992 (FGIC) .......... 6.10 07/01/11 1,066,630
- ----------- -------------
5,750 5,962,379
- ----------- -------------
EDUCATIONAL FACILITIES REVENUE (6.4%)
1,000 Arizona Board of Regents, Arizona State University Ser 1992 A ........... 5.50 07/01/19 986,940
1,000 Price-Elliott Research Park Inc, Arizona State University Ser 1991 (MBIA) 7.00 07/01/21 1,125,640
1,000 University of Arizona, Telecommunications Ser 1991 COPs .................. 6.50 07/15/12 1,089,760
- ----------- -------------
3,000 3,202,340
- ----------- -------------
ELECTRIC REVENUE (4.5%)
725 Arizona Power Authority, Hoover Uprating Refg 1993 Ser (MBIA) ........... 5.25 10/01/17 719,359
1,000 Salt River Agricultural Improvement & Power District, Refg 1992 Ser D ... 6.25 01/01/27 1,051,700
500 Puerto Rico Electric Power Authority, Power Ser X ........................ 6.00 07/01/15 512,135
- ----------- -------------
2,225 2,283,194
- ----------- -------------
HOSPITAL REVENUE (10.2%)
Arizona Health Facilities Authority,
1,150 Phoenix Baptist Hospital & Medical Center Inc & Medical
Environments Inc Ser 1992 (MBIA) ....................................... 6.25 09/01/11 1,232,191
700 Phoenix Memorial Hospital Refg Ser 1991 ................................. 8.20 06/01/21 755,881
2,000 Maricopa County Industrial Development Authority, Catholic Healthcare
West 1992 Ser A (MBIA) ................................................... 5.75 07/01/11 2,055,780
1,100 Pima County Industrial Development Authority, Carondelet Health Care
Corp Ser 1993 (MBIA) ..................................................... 5.25 07/01/13 1,094,951
- ----------- -------------
4,950 5,138,803
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL (9.6%)
1,000 Greenlee County Industrial Development Authority, Phelps Dodge Corp
Refg 1994 ................................................................ 5.45 06/01/09 1,012,520
2,000 Mohave County Industrial Development Authority, Citizens Utilities Co
1993 Ser B (AMT) ......................................................... 5.80 11/15/28 2,010,060
1,700 Santa Cruz County Industrial Development Authority, Citizens Utilities Co
1991 (AMT) ............................................................... 7.15 02/01/23 1,810,755
- ----------- -------------
4,700 4,833,335
- ----------- -------------
MORTGAGE REVENUE - MULTI-FAMILY (2.1%)
980 Pima County Industrial Development Authority, Rancho Mirage Ser 1992
(AMT) (AGRC) ............................................................. 7.05 04/01/22 1,041,995
- ----------- -------------
</TABLE>
58
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- ARIZONA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS COUPON MATURITY
RATE DATE VALUE
- ----------- --------- ---------- -------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE - SINGLE FAMILY (2.0%)
Maricopa County Industrial Development Authority,
$ 470 1991 Ser A .............................................................. 7.375% 08/01/05 $ 508,991
450 1991 Ser A .............................................................. 7.50 08/01/12 483,917
- ----------- -------------
920 992,908
- ----------- -------------
PUBLIC FACILITIES REVENUE (6.7%)
Arizona,
500 Refg Ser 1992 B COPs (AMBAC) ............................................ 6.25 09/01/10 540,765
500 Ser 1991 COPs (FSA) ..................................................... 6.25 09/01/11 537,350
700 Puerto Rico Infrastructure Financing Authority, Special Tax Ser 1988 A .. 7.90 07/01/07 783,832
1,500 Puerto Rico Public Buildings Authority, Govt Facs Ser A (AMBAC) ......... 5.50 07/01/21 1,493,790
- ----------- -------------
3,200 3,355,737
- ----------- -------------
TRANSPORTATION FACILITIES REVENUE (14.2%)
Phoenix, Street & Highway
2,000 User Refg Ser 1993 ...................................................... 5.125 07/01/11 1,961,020
1,000 User Ser 1992 ........................................................... 6.25 07/01/11 1,090,740
2,000 Phoenix Civic Improvement Corporation, Airport Terminal Excise Tax Ser
1989 (AMT) .............................................................. 7.80 07/01/11 2,149,280
1,000 Tucson, Street & Highway User Sr Lien Refg Ser 1993 ...................... 5.50 07/01/09 1,019,350
1,000 Puerto Rico Highway & Transportation Authority, Refg Ser X .............. 5.25 07/01/21 944,880
- ----------- -------------
7,000 7,165,270
- ----------- -------------
WATER & SEWER REVENUE (23.8%)
1,000 Arizona Wastewater Management Authority, Wastewater Treatment
Financial Assistance Ser 1992 A (AMBAC) ................................. 5.95 07/01/12 1,048,540
Chandler, Water & Sewer
750 Refg Ser 1991 (FGIC) .................................................... 7.00 07/01/12 838,455
1,000 Refg Ser 1992 (FGIC) .................................................... 6.25 07/01/13 1,076,200
1,000 Gilbert, Water & Wastewater Refg Ser 1992 (FGIC) ......................... 6.50 07/01/22 1,109,430
Phoenix Civic Improvement Corporation, Wastewater
2,000 Refg Ser 1993 ........................................................... 4.75 07/01/23 1,793,440
1,500 Jr Lien Ser 1994 ........................................................ 5.45 07/01/19 1,488,120
2,200 Tucson, Water Refg Ser 1991 .............................................. 6.50 07/01/16 2,374,481
2,000 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A ....................... 7.90 07/01/07 2,223,220
- ----------- -------------
11,450 11,951,886
- ----------- -------------
REFUNDED (5.5%)
1,500 Arizona Transportation Board, Sub Highway Ser 1991 A ..................... 6.50 07/01/11 1,676,040
1,000 Central Arizona Water Conservative District, Ser 1991 B .................. 6.50 11/01/11 1,116,030
- ----------- -------------
2,500 2,792,070
- ----------- -------------
46,675 TOTAL ARIZONA EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $45,958,891) .............................. 48,719,917
- ----------- -------------
</TABLE>
59
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- ARIZONA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- -------------
<C> <S> <C> <C> <C>
SHORT-TERM ARIZONA EXEMPT MUNICIPAL OBLIGATIONS (3.0%)
$ 500 Maricopa County Industrial Development Authority, Samaritan Health
Ser 1985 B-2 (MBIA) (Demand 12/01/95) .................................... 3.80* % 12/01/08 $ 500,000
1,000 Pinal County Industrial Development Authority, New Mont Mining Corp
Ser 1984 (Demand 12/01/95) ............................................... 3.70* 12/01/09 1,000,000
- ----------- -------------
1,500 TOTAL SHORT-TERM ARIZONA EXEMPT MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $1,500,000) .................................................................... 1,500,000
- ----------- -------------
$48,175 TOTAL INVESTMENTS (IDENTIFIED COST $47,458,891) (A) ................................. 99.9% 50,219,917
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 0.1 70,575
------- -------------
NET ASSETS .......................................................................... 100.0% $50,290,492
------- -------------
------- -------------
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
WI Security purchased on a when issued basis.
+ Puerto Rico exemption represents 11.8% of net assets.
* Current coupon rate of variable rate security.
(a) The aggregate cost for federal income tax purposes is $47,458,891;
the aggregate gross unrealized appreciation is $2,773,561 and the
aggregate gross unrealized depreciation is $12,535, resulting in net
unrealized appreciation of $2,761,026.
Bond Insurance:
- ---------------
AGRC Asset Guaranty Reinsurance Company.
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
60
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- CALIFORNIA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C>
CALIFORNIA EXEMPT MUNICIPAL BONDS (95.3%)
GENERAL OBLIGATION (5.0%)
$ 2,000 California, Various Purpose dtd 04/01/93 (FSA) ........................... 5.50 % 04/01/19 $ 1,968,840
Mojave Water Agency,
1,100 Impr Dist M Morongo Basin Pipeline Ser 1992 ............................. 6.60 09/01/13 1,141,899
2,700 Impr Dist M Morongo Basin Pipeline Ser 1992 ............................. 6.60 09/01/22 2,774,979
- ----------- --------------
5,800 5,885,718
- ----------- --------------
EDUCATIONAL FACILITIES REVENUE (17.1%)
California Educational Facilities Authority,
4,500 Carnegie Institution of Washington 1993 Ser A ........................... 5.60 10/01/23 4,424,850
4,000 Claremont Colleges Ser 1992 ............................................. 6.375 05/01/22 4,124,400
2,000 Loyola Marymount University Refg Ser 1992 ............................... 6.00 10/01/14 2,006,620
2,000 University of San Francisco Ser 1992 .................................... 6.40 10/01/17 2,063,720
2,500 University of Southern California Ser 1993 B ............................ 5.80 10/01/15 2,514,650
2,000 California Public Works Board, California State University 1992 Ser A ... 6.70 10/01/17 2,138,560
3,000 University of California, Multiple Purpose Refg 1993 Ser C (AMBAC) ...... 5.125 09/01/18 2,869,710
- ----------- --------------
20,000 20,142,510
- ----------- --------------
ELECTRIC REVENUE (13.2%)
2,000 Kings River Conservation District, Pine Power Ser D ...................... 6.00 01/01/17 2,037,960
3,000 Los Angeles Department of Water & Power, Refg Issue of 1993 ............. 5.375 09/01/23 2,888,880
1,750 Northern California Power Agency, Geothermal #3 1993 Refg Ser 3 ......... 5.85 07/01/10 1,826,895
Southern California Public Power Authority,
7,000 Mead - Phoenix (AMBAC) .................................................. 5.15 07/01/15 6,748,910
2,090 Multiple Proj 1989 Ser .................................................. 6.00 07/01/18 2,096,500
- ----------- --------------
15,840 15,599,145
- ----------- --------------
HOSPITAL REVENUE (13.2%)
1,000 Berkeley, Alta Bates Medical Center Refg Ser A ........................... 6.50 12/01/11 1,014,950
California Health Facilities Financing Authority,
2,000 Catholic Health Corp Ser 1992 (MBIA) .................................... 6.00 07/01/13 2,068,980
3,150 Downey Community Hospital Ser 1993 ...................................... 5.75 05/15/15 3,063,721
2,000 Kaiser Permanente 1983 Ser .............................................. 5.45 10/01/13 1,950,860
3,000 Scripps Memorial Hospitals Ser 1992 A (MBIA) ............................ 6.375 10/01/22 3,192,270
2,000 California Statewide Communities Development Authority,
Cedars Sinai Medical Center Ser 1992 COPs ............................... 6.50 08/01/12 2,198,720
2,000 Duarte, City of Hope National Medical Center COPs ........................ 6.00 04/01/08 2,022,600
- ----------- --------------
15,150 15,512,101
- ----------- --------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (1.8%)
California Pollution Control Financing Authority,
1,000 Pacific Gas & Electric Co 1992 Ser A (AMT) .............................. 6.625 06/01/09 1,056,820
1,000 Southern California Edison Co 1988 Ser A (AMT) .......................... 6.90 09/01/06 1,074,030
- ----------- --------------
2,000 2,130,850
- ----------- --------------
</TABLE>
61
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- CALIFORNIA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- --------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE - MULTI-FAMILY (1.8%)
$ 2,000 California Housing Finance Agency, Rental II 1992 Ser B .................. 6.70 % 08/01/15 $ 2,067,420
- ----------- --------------
MORTGAGE REVENUE - SINGLE FAMILY (1.5%)
690 California Housing Finance Agency, Home 1991 Ser C (AMT) (MBIA) ......... 7.00 08/01/23 728,957
975 Puerto Rico Housing Finance Corporation, Portfolio One GNMA-Backed Ser C 6.85 10/15/23 1,026,246
- ----------- --------------
1,665 1,755,203
- ----------- --------------
PUBLIC FACILITIES REVENUE (8.5%)
2,000 Los Angeles County, 1991 Master Refg COPs ................................ 6.708 05/01/15 1,936,660
2,000 Nevada County, Western Nevada County Solid Waste Mgmt 1991 .............. 7.50 06/01/21 2,055,260
2,000 San Jose Financing Authority, Convention Center Refg 1993 Ser C ......... 6.375 09/01/13 2,063,220
2,700 Torrance, Police Refg 1991 COPs .......................................... 6.80 07/01/12 2,889,054
1,000 Puerto Rico Infrastructure Financing Authority, Special Tax Ser 1988 A .. 7.90 07/01/07 1,119,760
- ----------- --------------
9,700 10,063,954
- ----------- --------------
TAX ALLOCATION (4.2%)
1,000 Industry Urban-Development Agency, Transportation-Distribution-
Industrial Redev Proj #3 1992 Refg ...................................... 6.90 11/01/16 1,067,190
1,000 Riverside County Redevelopment Agency, Proj #4 1991 Ser A ................ 7.50 10/01/26 1,085,960
3,000 Rosemead Redevelopment Agency, Proj #1 Ser 1993 A ........................ 5.50 10/01/18 2,734,800
- ----------- --------------
5,000 4,887,950
- ----------- --------------
TRANSPORTATION FACILITIES REVENUE (7.7%)
2,000 Los Angeles County Transportation Commission, Sales Tax Ser 1991-B ...... 6.50 07/01/13 2,123,840
2,000 San Diego County Regional Transportation Commission, Sales Tax
1994 Ser A (FGIC) ....................................................... 4.75 04/01/08 1,932,800
San Francisco Bay Area Rapid Transit District, Sales Tax
1,000 Ser 1991 (FGIC) ......................................................... 6.60 07/01/12 1,092,270
1,850 Ser 1995 (FGIC) ......................................................... 5.50 07/01/20 1,840,029
2,000 Santa Clara Transit District, Sales Tax 1991 Ser A ....................... 6.25 06/01/21 2,048,160
- ----------- --------------
8,850 9,037,099
- ----------- --------------
WATER & SEWER REVENUE (20.4%)
1,000 Alameda County Water District, 1992 COPs (MBIA) .......................... 6.20 06/01/13 1,056,390
California Department of Water Resources,
1,000 Central Valley Ser J-2 .................................................. 6.00 12/01/20 1,020,010
2,000 Central Valley Ser K .................................................... 6.00 12/01/21 2,044,560
2,000 Central Coast Water Authority, Ser 1992 (AMBAC) .......................... 6.50 10/01/14 2,165,120
1,000 Contra Costa Water Authority, Water 1992 Ser E (AMBAC) ................... 6.25 10/01/12 1,111,980
3,000 East Bay Municipal Utility District, Water Refg Ser 1992 ................. 6.00 06/01/20 3,078,270
Los Angeles, Wastewater
1,000 1991 Ser C .............................................................. 7.10 06/01/18 1,100,850
2,000 Refg Ser 1993-A (MBIA) .................................................. 5.70 06/01/20 2,007,280
2,000 Los Angeles County Sanitation Districts Financing Authority, 1993 Ser A . 5.25 10/01/10 1,977,520
4,000 San Diego County Water Authority, Ser 1991-B COPs (MBIA) ................. 6.30 04/08/21 4,196,560
2,000 San Francisco Public Utilities Commission, Water 1992 Refg Ser A ........ 6.00 11/01/15 2,037,240
2,000 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A ....................... 7.90 07/01/07 2,223,220
- ----------- --------------
23,000 24,019,000
- ----------- --------------
</TABLE>
62
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- CALIFORNIA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- --------------
<C> <S> <C> <C> <C>
REFUNDED (0.9%)
$ 1,000 San Diego County Regional Transportation Commission, Sales Tax,
1991 Ser A (ETM) ........................................................ 6.00 % 04/01/08 $ 1,069,830
- ----------- --------------
110,005 TOTAL CALIFORNIA EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $108,137,119) ......................... 112,170,780
- ----------- --------------
SHORT-TERM CALIFORNIA EXEMPT MUNICIPAL OBLIGATIONS (3.2%)
200 California Health Facilities Financing Authority, Sutter Health Ser 1990 B
(Demand 12/01/95) ....................................................... 3.70* 03/01/20 200,000
3,600 Newport Beach, Hoag Memorial Hospital Presbyterian Ser 1992
(Demand 12/01/95) ....................................................... 3.80* 10/01/22 3,600,000
- ----------- --------------
3,800 TOTAL SHORT-TERM CALIFORNIA EXEMPT MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $3,800,000) ................................................................... 3,800,000
- ----------- --------------
$113,805 TOTAL INVESTMENTS (IDENTIFIED COST $111,937,119) (A) ............................... 98.5% 115,970,780
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ..................................... 1.5 1,798,664
---------- --------------
NET ASSETS ......................................................................... 100.0 % $117,769,444
=========== ==============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to Maturity.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $111,937,119;
the aggregate gross unrealized appreciation is $4,814,261 and the
aggregate gross unrealized depreciation is $780,600, resulting in
net unrealized appreciation of $4,033,661.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
63
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- FLORIDA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
FLORIDA EXEMPT MUNICIPAL BONDS (89.1%)
ELECTRIC REVENUE (9.8%)
$ 2,500 Jacksonville Electric Authority, St Johns River Power Park Issue 2 Ser 7 . 5.50 % 10/01/14 $ 2.496,875
Orlando Utilities Commission,
1,000 Refg Ser 1993 A ......................................................... 5.25 10/01/14 978,860
2,000 Ser 1993 ................................................................ 5.125 10/01/19 1,913,680
2,000 Puerto Rico Electric Power Authority, Power Ser O ........................ 5.00 07/01/12 1,867,260
- ----------- -------------
7,500 7,256,675
- ----------- -------------
HOSPITAL REVENUE (18.5%)
500 Cape Canaveral Hospital District, Ser 1991 COPs (AMBAC) .................. 6.875 01/01/21 544,915
2,500 Dade County, Jackson Memorial Hospital Ser 1993 (MBIA) ................... 5.625 06/01/13 2,557,225
1,000 Jacksonville, University Medical Center Inc Ser 1992 (Connie Lee) ....... 6.60 02/01/21 1,071,650
1,000 Jacksonville Health Facilities Authority, Daughters of Charity/
St Vincent's Medical Center Inc Ser 1993 A .............................. 5.00 11/15/15 920,520
1,000 Lakeland, Regional Medical Center Ser 1992 A (FGIC) ...................... 6.125 11/15/22 1,043,710
Orange County Health Facilities Authority,
2,000 Adventist Health/Sunbelt Ser 1995 (AMBAC) ............................... 5.25 11/15/20 1,943,080
1,500 Orlando Regional Healthcare Ser 1993 A (MBIA) ........................... 6.00 11/01/24 1,549,035
1,000 Polk County Industrial Development Authority, United Haven Hospital
1985 Ser 2 (MBIA) ....................................................... 6.25 09/01/15 1,061,350
1,000 South Broward Hospital District, Ser 1991 B & C (AMBAC) .................. 6.611 05/01/21 1,064,740
2,000 Tampa, Allegany Health/St Mary's Hospital Ser 1993 (MBIA) ................ 5.00 12/01/12 1,924,640
- ----------- -------------
13,500 13,680,865
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (5.7%)
Citrus County, Florida Power Corp
1,000 Refg Ser 1992 B ......................................................... 6.35 02/01/22 1,059,240
2,000 Refg Ser 1992 A ......................................................... 6.625 01/01/27 2,140,440
1,000 St Lucie County, Florida Power & Light Co Ser 1992 (AMT) ................. 6.70 05/01/27 1,055,820
- ----------- -------------
4,000 4,255,500
- ----------- -------------
MORTGAGE REVENUE - SINGLE FAMILY (3.7%)
745 Brevard County Housing Finance Authority, Refg Ser 1991 B (FSA) ......... 7.00 03/01/13 797,320
580 Florida Housing Finance Agency, GNMA Collateral 1990 Ser G-1 (AMT) ...... 7.90 03/01/22 622,056
1,250 Puerto Rico Housing Finance Corporation, Portfolio One GNMA-Backed Ser C 6.85 10/15/23 1,315,700
- ----------- -------------
2,575 2,735,076
- ----------- -------------
NURSING & HEALTH RELATED FACILITIES REVENUE (1.5%)
1,000 Hillsborough County Industrial Authority, Allegany Health/John Knox
- ----------- Village of Tampa Bay Inc Ser 1992 (MBIA) ................................ 6.375 12/01/12 1,075,690
-------------
PUBLIC FACILITIES REVENUE (5.0%)
1,500 Brevard County School Board, Florida School Boards Assn Inc
Ser 1992 A COPs (AMBAC) ................................................. 6.50 07/01/12 1,641,210
1,000 Miami Sports & Exhibition Authority, Refg Ser 1992 A (FGIC) ............. 6.15 10/01/20 1,050,630
1,000 Puerto Rico Public Buildings Authority, Ser A (AMBAC) .................... 5.50 07/01/21 995,860
- ----------- -------------
3,500 3,687,700
- ----------- -------------
</TABLE>
64
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- FLORIDA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
RESOURCE RECOVERY REVENUE (4.0%)
Broward County,
$ 1,035 Broward Waste Energy Co North Ser 1984 .................................. 7.95 % 12/01/08 $ 1,171,630
650 SES Broward Co LP South Ser 1984 ........................................ 7.95 12/01/08 735,807
1,000 Lee County, Solid Waste Ser 1991 A (AMT) (MBIA) .......................... 6.50 10/01/13 1,077,350
- ----------- -------------
2,685 2,984,787
- ----------- -------------
TRANSPORTATION FACILITIES REVENUE (15.8%)
Dade County, Aviation
400 1991 Ser U (AMT) ........................................................ 6.75 10/01/06 430,844
1,000 1992 Ser B (AMT) (MBIA) ................................................. 6.60 10/01/22 1,076,280
1,000 Florida Department of Transportation, Turnpike Ser 1991 A (AMBAC) ....... 6.25 07/01/20 1,045,360
Greater Orlando Aviation Authority,
750 Ser 1992 A (AMT) (FGIC) ................................................. 6.50 10/01/12 810,578
1,000 Ser 1993 A (AMT) (AMBAC) ................................................ 5.50 10/01/18 982,060
1,250 Hillsborough County Aviation Authority, Tampa Intl Airport
Refg Ser 1993B (FGIC) ................................................... 5.60 10/01/19 1,252,700
1,500 Lee County, Refg Ser 1991 (AMBAC) ........................................ 6.00 10/01/17 1,542,150
3,000 Mid-Bay Bridge Authority, Sr Lien Crossover Refg Ser 1993 A ............. 6.10 10/01/22 3,021,750
1,500 Osceola County, Osceola Parkway (MBIA) ................................... 6.10 04/01/17 1,565,505
- ----------- -------------
11,400 11,727,227
- ----------- -------------
WATER & SEWER REVENUE (14.7%)
500 Boynton Beach, Utility Ser 1992 (FGIC) ................................... 6.25 11/01/12 539,290
1,425 Charlotte County, Utility Refg Ser 1993 (FGIC) ........................... 5.25 10/01/21 1,387,551
2,000 Dade County, Water & Sewer Ser 1995 (FGIC) ............................... 5.50 10/01/25 1,979,580
1,000 Key West, Sewer Refg Ser 1993 (FGIC) ..................................... 5.70 10/01/20 1,008,150
1,000 Orange County, Water Utilities Ser 1992 (AMBAC) .......................... 6.25 10/01/17 1,061,880
500 Port St Lucie, Stormwater Utility Ser 1991 (AMBAC) ....................... 6.625 05/01/15 539,080
2,000 Tampa, Water & Sewer Ser 1992 A (FGIC) ................................... 6.00 10/01/17 2,078,080
2,030 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A ....................... 7.90 07/01/07 2,256,568
- ----------- -------------
10,455 10,850,179
- ----------- -------------
OTHER REVENUE (4.2%)
1,000 Homestead, Hurricane Andrew Special Insurance Assessment Ser 1993 (MBIA) 5.25 03/01/03 1,045,900
2,000 Orlando, Cap Impr Refg Ser 1992 .......................................... 6.00 10/01/22 2,050,000
- ----------- -------------
3,000 3,095,900
- ----------- -------------
REFUNDED (6.2%)
1,900 Orlando Utilities Commision, Ser 1991 A .................................. 6.50 10/01/20 2,145,347
2,150 St Lucie County, Sales Tax Ser 1992 (FGIC) ............................... 6.50 10/01/22 2,455,451
- ----------- -------------
4,050 4,600,798
- ----------- -------------
63,665 TOTAL FLORIDA EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $61,922,214) ............................. 65,950,397
- ----------- -------------
</TABLE>
65
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- FLORIDA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
SHORT-TERM FLORIDA EXEMPT MUNICIPAL OBLIGATIONS (9.0%)
$ 2,600 Dade County Health Facilities Authority, Miami Childrens Hospital Ser
1990 (Demand 12/01/95) ................................................... 4.00*% 01/02/00 $ 2,600,000
3,200 Dade County Industrial Development Authority, Florida Power & Light Co
Ser 1993 (Demand 12/01/95) ............................................... 3.65* 06/01/21 3,200,000
900 Jacksonville Health Facilities Authority, Baptist Medical Center Ser 1993
(MBIA) (Demand 12/01/95) ................................................. 3.85* 06/01/08 900,000
- ----------- -------------
6,700 TOTAL SHORT-TERM FLORIDA EXEMPT MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $6,700,000) ................................................................... 6,700,000
- ----------- -------------
$70,365 TOTAL INVESTMENTS (IDENTIFIED COST $68,622,214) (A) ................................ 98.1% 72,650,397
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ..................................... 1.9 1,407,664
----- -------------
NET ASSETS ......................................................................... 100.0% $74,058,061
===== ============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is
$68,622,214; the aggregate gross unrealized appreciation is
$4,063,486 and the aggregate gross unrealized depreciation is
$35,303, resulting in net unrealized appreciation of $4,028,183.
Bond Insurance:
---------------
AMBAC AMBAC Indemnity Corporation.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
66
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST --MASSACHUSETTS SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
MASSACHUSETTS EXEMPT MUNICIPAL BONDS (91.3%)
GENERAL OBLIGATION (10.3%)
Massachusetts,
$ 500 Refg 1992 Ser B ............................................... 6.50 % 08/01/08 $ 567,200
1,000 Refg 1993 Ser A ............................................... 5.50 02/01/11 1,010,680
150 Nantucket, 1991 ................................................ 6.80 12/01/11 165,507
- ----------- -------------
1,650 1,743,387
- ----------- -------------
EDUCATIONAL FACILITIES REVENUE (25.2%)
Massachusetts Health & Educational Facilities Authority,
100 Amherst College Ser E ......................................... 6.80 11/01/21 109,426
1,000 Boston College Ser K .......................................... 5.25 06/01/18 974,240
400 Boston University Ser K & L (MBIA) ............................ 6.66 10/01/31 430,720
150 Community College Ser A (Connie Lee) .......................... 6.60 10/01/22 160,113
400 Suffolk University Ser B (Connie Lee) ......................... 6.25 07/01/12 417,232
500 University of Massachusetts Foundation Inc/Medical School
Research Ser A (Connie Lee) ................................... 6.00 07/01/23 509,705
150 Worcester Polytechnic Institute Refg Ser E .................... 6.625 09/01/17 163,161
Massachusetts Industrial Finance Agency,
1,000 Brooks School Ser 1993 ........................................ 5.90 07/01/13 1,030,190
150 Holy Cross College Ser 1992 ................................... 6.45 01/01/12 161,128
300 Mount Holyoke College Refg Ser 1992 A (MBIA) .................. 6.30 07/01/13 318,909
- ----------- -------------
4,150 4,274,824
- ----------- -------------
ELECTRIC REVENUE (6.2%)
500 Massachusetts Municipal Wholesale Electric Company, Power Supply
1992 Ser C .................................................... 6.625 07/01/18 531,375
500 Puerto Rico Electric Power Authority, Power Ser X .............. 6.00 07/01/15 512,135
- ----------- -------------
1,000 1,043,510
- ----------- -------------
HOSPITAL REVENUE (14.6%)
500 Boston, Boston City Hospital - FHA Insured Mtge Refg Ser B .... 5.75 02/15/13 501,330
Massachusetts Health & Educational Facilities Authority,
100 Charlton Memorial Hospital Ser B .............................. 7.25 07/01/13 106,945
500 Lahey Clinic Medical Center Ser B (MBIA) ...................... 5.625 07/01/15 500,890
1,000 Massachusetts General Hospital Ser F (MBIA) ................... 6.00 07/01/15 1,037,560
200 McLean Hospital Ser C (FGIC) .................................. 6.625 07/01/15 217,510
100 New England Deaconess Hospital Ser C .......................... 7.20 04/01/22 107,190
- ----------- -------------
2,400 2,471,425
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (5.9%)
1,000 Massachusetts Industrial Finance Agency, Eastern Edison Co
- ----------- Refg Ser 1993 ................................................. 5.875 08/01/08 999,370
-------------
MORTGAGE REVENUE - MULTI-FAMILY (3.1%)
500 Massachusetts Housing Finance Agency, Rental 1994 Ser A
- ----------- (AMT) (AMBAC) ................................................. 6.60 07/01/14 520,835
-------------
</TABLE>
67
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- MASSACHUSETTS SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE - SINGLE FAMILY (3.9%)
Massachusetts Housing Finance Agency,
$ 435 Ser 21 (AMT) .................................................. 6.30 % 06/01/25 $ 437,553
220 Ser 21 (AMT) .................................................. 7.125 06/01/25 232,846
- ----------- -------------
655 670,399
- ----------- -------------
STUDENT LOAN REVENUE (3.6%)
165 Massachusetts Educational Facilities Authority, Education Loan
Issue D Ser 1991 (AMT) (MBIA) ................................. 7.25 01/01/09 178,776
400 New England Education Loan Marketing Corporation,
1992 Sub Issue H (AMT) ........................................ 6.90 11/01/09 431,264
- ----------- -------------
565 610,040
- ----------- -------------
TRANSPORTATION FACILITIES REVENUE (9.8%)
300 Guam, Highway 1992 Ser A (CGIC) ................................ 6.30 05/01/12 319,938
Massachusetts Port Authority,
500 Ser 1992-B .................................................... 6.00 07/01/13 521,430
100 Ser A 1990 (AMT) (FGIC) ....................................... 7.50 07/01/20 112,159
250 Massachusetts Turnpike Authority, 1993 Ser A ................... 5.00 01/01/13 240,268
500 Puerto Rico Highway & Transportation Authority, Refg Ser X .... 5.25 07/01/21 472,440
- ----------- -------------
1,650 1,666,235
- ----------- -------------
WATER & SEWER REVENUE (8.7%)
500 Boston Water & Sewer Commission, Sr 1992 Ser A ................. 5.75 11/01/13 517,810
500 Massachusetts Water Pollution Abatement Trust, Pool Ser 2 ..... 5.70 02/01/12 515,805
400 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A ............ 7.90 07/01/07 444,644
- ----------- -------------
1,400 1,478,259
- ----------- -------------
14,970 TOTAL MASSACHUSETTS EXEMPT MUNICIPAL BONDS
- ----------- (IDENTIFIED COST $14,762,486) ....................................................... 15,478,284
-------------
SHORT-TERM MASSACHUSETTS EXEMPT MUNICIPAL OBLIGATIONS (6.8%)
650 Massachusetts, Dedicated Income Tax Ser 1990 B (Demand 12/01/95) 3.75* 12/01/97 650,000
500 Massachusetts Port Authority, Refg Ser 1995 A (Demand 12/01/95) 3.60* 07/01/15 500,000
- ----------- -------------
1,150 TOTAL SHORT-TERM MASSACHUSETTS EXEMPT MUNICIPAL OBLIGATIONS
- ----------- (IDENTIFIED COST $1,150,000) ........................................................ 1,150,000
-------------
$16,120 TOTAL INVESTMENTS (IDENTIFIED COST $15,912,486) (A) ...................... 98.1% 16,628,284
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 1.9 326,179
----- -------------
NET ASSETS ............................................................... 100.0% $16,954,463
===== =============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is
$15,912,486; the aggregate gross unrealized appreciation is
$717,881 and the aggregate gross unrealized depreciation is
$2,083, resulting in net unrealized appreciation of $715,798.
Bond Insurance:
---------------
AMBAC AMBAC Indemnity Corporation.
CGIC Capital Guaranty Insurance Company.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
68
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- MICHIGAN SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
MICHIGAN EXEMPT MUNICIPAL BONDS (94.9%)
GENERAL OBLIGATION (19.5%)
$1,000 Chelsea School District, 1995 Bldg & Site (FGIC) ............... 5.875 % 05/01/25 $1,025,400
1,650 Holly Area School District, 1995 Bldg & Site (FGIC) ........... 5.375 05/01/13 1,652,013
500 Kentwood Public Schools, 1992 Bldg & Site Refg ................. 6.40 05/01/15 532,050
1,000 Mona Shores Public Schools, 1995 Bldg & Site (FGIC) ........... 5.80 05/01/17 1,020,880
- ----------- -------------
4,150 4,230,343
- ----------- -------------
EDUCATIONAL FACILITIES REVENUE (14.1%)
1,000 Central Michigan University, Refg Ser 1993 (MBIA) .............. 5.50 10/01/10 1,019,540
1,000 Michigan State University, Ser 1992 A .......................... 6.00 08/15/16 1,032,740
1,000 Oakland University Board of Trustees, Ser 1995 (MBIA) ......... 5.75 05/15/26 1,008,320
- ----------- -------------
3,000 3,060,600
- ----------- -------------
ELECTRIC REVENUE (9.1%)
1,500 Michigan Public Power Agency, Belle River 1993 A ............... 5.25 01/01/18 1,444,890
500 Wyandotte, Electric Refg 1992 (MBIA) ........................... 6.25 10/01/17 530,950
- ----------- -------------
2,000 1,975,840
- ----------- -------------
HOSPITAL REVENUE (10.5%)
Michigan Hospital Finance Authority,
300 Detroit Medical Center Oblig Group Ser 1991 A ................. 7.50 08/15/11 331,554
1,000 Oakwood Hospital Oblig Group Refg Ser 1993 A (FGIC) .......... 5.625 11/01/18 999,310
500 Royal Oak Hospital Finance Authority, William Beaumont Hospital
Ser 1991 D .................................................... 6.75 01/01/20 532,435
400 University of Michigan, Ser 1990 ............................... 6.375 12/01/24 411,960
- ----------- -------------
2,200 2,275,259
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (2.5%)
500 Monroe County, Detroit Edison Co Monroe & Fermi Plants
- ----------- Collateralized Ser 1-1992 (AMT) (MBIA) ......................... 6.875 09/01/22 547,000
-------------
MORTGAGE REVENUE - MULTI-FAMILY (9.2%)
Michigan Housing Development Authority,
500 Rental Ser 1992 A ............................................. 6.60 04/01/12 520,985
1,000 1992 Ser A (FSA) .............................................. 6.50 04/01/23 1,032,420
400 Ser 1990 A (AMT) .............................................. 7.70 04/01/23 428,860
- ----------- -------------
1,900 1,982,265
- ----------- -------------
</TABLE>
69
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- MICHIGAN SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
NURSING & HEALTH RELATED FACILITIES REVENUE (6.0%)
$ 1,200 University of Michigan, Medical Service Plan Ser 1991 ......... 6.50 12/01/21 $ 1,291,392
- ----------- -------------
PUBLIC FACILITIES REVENUE (7.2%)
1,500 Michigan Building Authority, Refg Ser I ........................ 6.25 10/01/20 1,566,825
- ----------- -------------
RESOURCE RECOVERY REVENUE (0.7%)
150 Greater Detroit Resource Recovery Authority, Ser A ............ 9.25 12/13/08 154,932
- ----------- -------------
TRANSPORTATION FACILITIES REVENUE (1.3%)
250 Wayne County, Detroit Metropolitan Wayne County Airport Sub Lien
- ----------- Ser 1991 B (AMT) (MBIA) ....................................... 6.75 12/01/21 270,873
-------------
WATER & SEWER REVENUE (11.7%)
Detroit,
500 Sewage Ser 1991 (FGIC) ........................................ 6.625 07/01/21 563,715
1,000 Sewage Refg Ser 1993 A (FGIC) ................................. 5.70 07/01/23 1,002,880
400 Water Refg Ser 1992 (FGIC) .................................... 6.375 07/01/22 421,692
500 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A ............ 7.90 07/01/07 555,805
- ----------- -------------
2,400 2,544,092
- ----------- -------------
REFUNDED (3.1%)
600 Detroit, Water Refg Ser 1992 (FGIC) ............................ 6.375 07/01/22 673,422
- ----------- -------------
19,850 TOTAL MICHIGAN EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $19,554,242) ................. 20,572,843
- ----------- -------------
SHORT-TERM MICHIGAN EXEMPT MUNICIPAL OBLIGATION (3.7%)
800 Delta County Economic Development Corporation, Mead-Escanaba
Paper Co 1985 Ser E (Demand 12/01/95) (Identified Cost
$800,000) ..................................................... 3.90* 12/01/23 800,000
- ----------- -------------
$20,650 TOTAL INVESTMENTS (IDENTIFIED COST $20,354,242) (A) ...................... 98.6% 21,372,843
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 1.4 299,775
----- -------------
NET ASSETS ............................................................... 100.0% $21,672,618
===== =============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $20,354,242;
the aggregate gross and net unrealized appreciation is $1,018,601.
Bond Insurance:
- ---------------
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
70
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- MINNESOTA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
MINNESOTA EXEMPT MUNICIPAL BONDS (92.2%)
GENERAL OBLIGATION (3.7%)
Minneapolis,
$ 100 Sales Tax Refg Ser 1992 ........................................... 6.25 % 04/01/12 $ 107,549
300 Dtd 08/15/92 ...................................................... 5.90 12/01/13 310,593
- ----------- -------------
400 418,142
- ----------- -------------
EDUCATIONAL FACILITIES REVENUE (15.1%)
Minnesota Higher Education Facilities Authority,
200 Hamline University Ser Three-K .................................... 6.60 06/01/09 213,352
200 Northfield St Olaf College 1992 ................................... 6.40 10/01/21 211,156
1,000 University of Minnesota Ser 1993 A ................................ 4.80 08/15/03 1,016,660
250 University of St Thomas Refg Ser Three-R2 ......................... 5.60 09/01/14 250,535
- ----------- -------------
1,650 1,691,703
- ----------- -------------
ELECTRIC REVENUE (6.7%)
300 Northern Municipal Power Agency, Refg Ser 1989 A ................... 5.00 01/01/21 276,264
500 Southern Minnesota Municipal Power Agency, Ser 1993 B ............. 5.00 01/01/13 479,995
- ----------- -------------
800 756,259
- ----------- -------------
HOSPITAL REVENUE (19.9%)
500 Breckenridge, Catholic Health Corp Ser 1993 ........................ 5.25 11/15/13 477,060
500 Robbinsdale, North Memorial Medical Center Ser 1993 A (AMBAC) ..... 5.45 05/15/13 503,290
Rochester, Mayo Foundation/Mayo Medical Center
250 Ser 1992 I ........................................................ 5.75 11/15/21 252,010
200 Ser 1992 F ........................................................ 6.25 11/15/21 210,060
Saint Paul Housing & Redevelopment Authority,
300 Health East Refg Ser 1993-A ....................................... 6.625 11/01/17 303,564
500 St Paul-Ramsey Medical Center Ser 1993 (AMBAC) .................... 5.55 05/15/23 496,500
- ----------- -------------
2,250 2,242,484
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (11.3%)
500 Anoka County, United Power Assoc Ser 1987 A NRU-CFC Gtd (AMT) ..... 6.95 12/01/08 538,065
500 Bass Brook, Minnesota Power & Light Co Refg Ser 1992 ............... 6.00 07/01/22 501,300
Minneapolis Community Development Agency,
100 Ltd Tax Supported Common Bond Fund Ser 1991-3 ..................... 8.25 12/01/11 117,421
100 Ltd Tax Supported Common Bond Fund Ser 1991-1 (AMT) ............... 8.00 12/01/16 114,688
- ----------- -------------
1,200 1,271,474
- ----------- -------------
MORTGAGE REVENUE - MULTI-FAMILY (4.5%)
300 Burnsville, Summit Park Apts - FHA Insured Refg Ser 1993 .......... 6.00 07/01/33 298,206
200 Minneapolis Housing Finance Agency, Ser 1992 A ..................... 6.95 08/01/17 212,372
- ----------- -------------
500 510,578
- ----------- -------------
</TABLE>
71
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- MINNESOTA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE - SINGLE FAMILY (10.0%)
$ 100 Dakota & Washington Counties Housing & Redevelopment Authority,
GNMA-Backed Ser 1988 (AMT) ......................................... 8.375% 09/01/21 $ 140,770
175 Minneapolis-Saint Paul Housing Finance Board, GNMA-Backed
Phase IX Ser 1991 (AMT) ............................................ 7.25 08/01/21 186,905
Minnesota Housing Finance Agency,
100 Ser 1990 D (AMT) .................................................. 8.00 01/01/23 106,191
465 Ser 1992 C-1 (AMT) ................................................ 6.75 07/01/23 483,186
200 Ser 1992 H (AMT) .................................................. 6.50 01/01/26 204,384
- ----------- -------------
1,040 1,121,436
- ----------- -------------
NURSING & HEALTH RELATED FACILITIES REVENUE (4.8%)
500 Minneapolis & Saint Paul Housing & Redevelopment Authority, Group
- ----------- Health Plan Inc Ser 1992 ........................................... 6.75 12/01/13 535,480
-------------
PUBLIC FACILITIES REVENUE (14.2%)
300 Hennepin County, Ser 1991 COPs ..................................... 6.80 05/15/17 328,977
Saint Paul Housing & Redevelopment Authority,
400 Civic Center Ser 1993 ............................................. 5.45 11/01/13 401,804
500 Civic Center Ser 1993 ............................................. 5.55 11/01/23 500,730
Saint Paul Independent School District #625,
175 Ser 1995 COPs ..................................................... 5.45 02/01/11 177,254
175 Ser 1995 COPs ..................................................... 5.50 02/01/12 177,249
- ----------- -------------
1,550 1,586,014
- ----------- -------------
WATER & SEWER REVENUE (2.0%)
Minnesota Public Facilities Authority,
100 Water Pollution Control Ser 1991 A ................................ 6.95 03/01/13 111,082
100 Water Pollution Control Ser 1992 A ................................ 6.50 03/01/14 109,146
- ----------- -------------
200 220,228
- ----------- -------------
10,090 TOTAL MINNESOTA EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $9,936,996) ...................... 10,353,798
- ----------- -------------
SHORT-TERM MINNESOTA EXEMPT MUNICIPAL OBLIGATIONS (6.2%)
200 Beltrami County, Northwood Panelboard Co Ser 1991 (Demand 12/01/95) 3.80* 12/01/21 200,000
500 Mankato, Northern States Power Co Ser 1985 (Demand 12/01/95) ...... 3.75* 03/01/11 500,000
- ----------- -------------
700 TOTAL SHORT-TERM MINNESOTA EXEMPT MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $700,000) .............................................................. 700,000
- ----------- -------------
$10,790 TOTAL INVESTMENTS (Identified Cost $10,636,996) (a) ............................. 98.4% 11,053,798
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................... 1.6 175,886
-------- ------------
NET ASSETS ........................................................................ 100.0% $11,229,684
======== ============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $10,636,996;
the aggregate gross unrealized appreciation is $440,559 and the
aggregate gross unrealized depreciation is $23,757, resulting in
net unrealized appreciation of $416,802.
Bond Insurance:
---------------
AMBAC AMBAC Indemnity Corporation.
See Notes to Financial Statements
72
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- NEW JERSEY SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
NEW JERSEY EXEMPT MUNICIPAL BONDS (101.8%)
GENERAL OBLIGATION (6.0%)
$2,500 Guam, 1993 Ser A ........................................................ 5.375% 11/15/13 $2,301,225
500 Essex County, Ser 1991 (FSA) ............................................ 6.50 12/01/11 544,910
- ----------- -------------
3,000 2,846,135
- ----------- -------------
EDUCATIONAL FACILITIES REVENUE (7.7%)
New Jersey Economic Development Authority,
2,000 Educational Testing Service Ser 1995 A (MBIA) .......................... 5.90 05/15/15 2,074,180
500 The Seeing Eye Inc 1991 ................................................ 7.30 04/01/11 520,915
500 Rutgers, The State University Refg Ser R ................................ 6.50 05/01/13 542,545
500 University of Medicine & Dentistry of New Jersey, Refg Ser D ........... 6.50 12/01/04 551,400
- ----------- -------------
3,500 3,689,040
- ----------- -------------
ELECTRIC REVENUE (3.9%)
2,000 Puerto Rico Electric Power Authority, Power Ser O ....................... 5.00 07/01/12 1,867,260
- ----------- -------------
HOSPITAL REVENUE (11.7%)
New Jersey Health Care Facilities Financing Authority,
1,000 Allegany Health System Ser 1993 (MBIA) ................................. 5.125 07/01/13 973,400
1,000 Atlantic City Medical Center Ser C ..................................... 6.80 07/01/11 1,075,740
500 Cathedral Health Services Inc - FHA Insured Mtges Ser A ................ 7.25 02/15/21 523,055
1,000 Columbus Hospital Ser A ................................................ 7.50 07/01/08 1,034,290
460 Pascack Valley Hospital Assn Ser 1991 .................................. 6.90 07/01/21 488,355
500 Robert Wood Johnson University Hospital Ser B (MBIA) ................... 6.625 07/01/16 548,280
1,000 Somerset Medical Center Ser A (FGIC) ................................... 5.10 07/01/14 966,170
- ----------- -------------
5,460 5,609,290
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (10.6%)
500 Middlesex County Pollution Control Financing Authority,
Amerada Hess Corp Refg Ser 1992 ......................................... 6.875 12/01/22 522,315
New Jersey Economic Development Authority,
500 American Airlines Inc Ser 1991 (AMT) ................................... 7.10 11/01/31 535,370
1,000 BP Oil Ser 1982 ........................................................ 6.55 10/01/12 1,043,960
500 Hackensack Water Co Ser C (AMT) ........................................ 7.00 10/01/17 517,055
300 Jersey Central Power & Light Co 1985 Ser ............................... 7.10 07/01/15 321,024
2,100 Salem County Pollution Control Financing Authority,
E I du Pont de Nemours & Co 1992 Ser A (AMT) ........................... 6.125 07/15/22 2,149,916
- ----------- -------------
4,900 5,089,640
- ----------- -------------
MORTGAGE REVENUE - MULTI-FAMILY (7.6%)
New Jersey Housing & Mortgage Finance Agency,
2,000 1995 Ser A (AMBAC) ..................................................... 6.00 11/01/14 2,039,640
1,000 Presidential Plaza at Newport - FHA Insured Mtges Refg 1991 Ser 1 ..... 7.00 05/01/30 1,057,720
500 Rental 1991 Ser A (AMT) ................................................ 7.25 11/01/22 528,380
- ----------- -------------
3,500 3,625,740
- ----------- -------------
</TABLE>
73
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- NEW JERSEY SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
NURSING & HEALTH RELATED FACILITIES REVENUE (2.1%)
$ 970 New Jersey Health Care Facilities Financing Authority,
- ----------- Spectrum For Living - FHA Insured Mtges Refg Ser B ..................... 6.50% 02/01/22 $ 1,021,051
-------------
PUBLIC FACILITIES REVENUE (6.3%)
1,000 Atlantic County Utilities Authority, Solid Waste Ser 1992 .............. 7.125 03/01/16 1,036,070
2,000 New Jersey Sports & Exposition Authority, State Contract 1993 Ser A .... 5.50 09/01/23 1,994,160
- ----------- -------------
3,000 3,030,230
- ----------- -------------
RESOURCE RECOVERY REVENUE (8.8%)
1,000 Mercer County Improvement Authority, Refg Ser A 1992 (AMT) (FGIC) ...... 6.70 04/01/13 1,053,320
2,000 Union County Utilities Authority, 1991 Ser A (AMT) ...................... 7.20 06/15/14 2,128,280
900 Warren County Pollution Control Financing Authority, Warren Energy
Resource Co Ltd Partnership Ser 1984 (MBIA) ............................ 6.60 12/01/07 1,018,656
- ----------- -------------
3,900 4,200,256
- ----------- -------------
TRANSPORTATION FACILITIES REVENUE (18.7%)
1,000 Delaware River & Bay Authority, Ser 1993 (MBIA) ......................... 5.00 01/01/17 960,910
2,000 Delaware River Port Authority, Ser 1995 (FGIC) (WI) ..................... 5.50 01/01/26 1,979,860
1,500 New Jersey Highway Authority, Sr Parkway Refg 1992 Ser .................. 6.25 01/01/14 1,577,550
1,000 New Jersey Turnpike Authority, Ser C .................................... 5.75 01/01/11 1,018,000
1,500 Port Authority of New York & New Jersey, Cons 99th Ser (AMT) (FGIC) .... 5.75 05/01/15 1,508,655
2,000 Puerto Rico Highway & Transportation Authority, Refg Ser X ............. 5.25 07/01/21 1,889,760
- ----------- -------------
9,000 8,934,735
- ----------- -------------
WATER & SEWER REVENUE (14.2%)
1,000 Atlantic City Municipal Utilities Authority, Refg Ser 1993 ............. 5.75 05/01/17 1,007,910
1,000 Lacey Municipal Utilities Authority, Ser 1993 A (MBIA) .................. 5.50 12/01/19 1,000,760
1,000 Northwest Bergen County Utilities Authority, Refg 1992 Ser (MBIA) ...... 6.00 07/15/13 1,056,810
2,000 Passaic Valley Sewerage Commissioners, Ser 1992 D (AMBAC) .............. 5.75 12/01/13 2,072,460
1,500 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A ...................... 7.90 07/01/07 1,667,415
- ----------- -------------
6,500 6,805,355
- ----------- -------------
REFUNDED (4.2%)
1,790 Passaic Valley Water Commission, 1992 Ser A (FGIC) ...................... 6.40 12/15/22 2,031,077
- ----------- -------------
47,520 TOTAL NEW JERSEY EXEMPT MUNICIPAL BONDS
- ----------- (IDENTIFIED COST $46,597,495) ................................................................ 48,749,809
-------------
</TABLE>
74
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- NEW JERSEY SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
SHORT-TERM NEW JERSEY EXEMPT MUNICIPAL OBLIGATION (0.2%)
$ 100 Union County Industrial Pollution Control Financing Authority, Exxon Corp
(Demand 12/01/95) (Identified Cost $100,000) ....................... 3.60*% 07/01/33 $ 100,000
- ----------- -------------
47,620 TOTAL INVESTMENTS (IDENTIFIED COST $46,697,495) (A) ............................ 102.0% 48,849,809
===========
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ................................. (2.0) (961,207)
----- -------------
NET ASSETS ..................................................................... 100.0% $47,888,602
===== =============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
WI Security purchased on a when issued basis.
+ Puerto Rico exemption represents 11.3% of net assets.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $46,697,495;
the aggregate gross unrealized appreciation is
$2,384,854 and the aggregate gross unrealized depreciation is
$232,540, resulting in net unrealized appreciation of
$2,152,314.
Bond Insurance:
---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
75
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- NEW YORK SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
NEW YORK EXEMPT MUNICIPAL BONDS (95.3%)
GENERAL OBLIGATION (9.6%)
$ 500 New York City, 1995 Ser D (MBIA) ........................................ 6.20% 02/01/07 $ 555,820
500 New York State, Refg Ser 1995 B ........................................ 5.70 08/15/13 514,595
300 Puerto Rico, Pub Impr Refg Ser 1992 A .................................. 6.00 07/01/14 305,823
- ----------- -------------
1,300 1,376,238
- ----------- -------------
EDUCATIONAL FACILITIES REVENUE (18.0%)
350 New York City Cultural Resources Trust, The Museum of Modern Art
Refg Ser 1993 A ....................................................... 5.40 01/01/12 352,730
New York State Dormitory Authority,
400 Manhattan College Ser 1992 ............................................ 6.50 07/01/19 422,576
1,000 State University Ser 1993 A ........................................... 5.25 05/15/15 950,850
345 University of Rochester Ser 1987 ...................................... 6.50 07/01/09 360,453
500 University of Rochester Ser 1993 A .................................... 5.625 07/01/12 503,210
- ----------- -------------
2,595 2,589,819
- ----------- -------------
ELECTRIC REVENUE (6.2%)
500 New York State Power Authority, Gen Purpose Ser CC ..................... 5.25 01/01/18 485,350
400 Puerto Rico Electric Power Authority, Power Ser X ...................... 6.00 07/01/15 409,708
- ----------- -------------
900 895,058
- ----------- -------------
HOSPITAL REVENUE (5.2%)
New York State Medical Care Facilities Finance Agency,
200 Insured Hospital & Nursing Home - FHA Insured Mtge 1992 Ser A ........ 6.70 08/15/23 213,556
500 Hospital - FHA Insured Mtge 1994 Ser A (AMBAC) ........................ 6.50 08/15/29 537,165
- ----------- -------------
700 750,721
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (16.7%)
New York State Energy Research & Development Authority,
1,000 Brooklyn Union Gas Co 1991 Ser A & B (AMT) ............................ 6.952 07/01/26 1,109,300
500 Consolidated Edison Co of New York Ser 1991 A (AMT) ................... 6.00 03/15/28 505,265
500 New York State Electric & Gas Corp 1987 Ser A (AMT) (MBIA) ........... 6.15 07/01/26 520,585
250 Rochester Gas & Electric Corp Ser 1992 B (AMT) (MBIA) ................. 6.50 05/15/32 266,200
- ----------- -------------
2,250 2,401,350
- ----------- -------------
MORTGAGE REVENUE - SINGLE FAMILY (4.4%)
New York State Mortgage Agency,
500 Home Owners Ser 27 .................................................... 6.90 04/01/15 537,380
95 Home Owners Ser UU (AMT) .............................................. 7.75 10/01/23 101,932
- ----------- -------------
595 639,312
- ----------- -------------
RESOURCE RECOVERY REVENUE (3.7%)
500 Oneida-Herkimer Solid Waste Management Authority, Ser 1992 ............ 6.65 04/01/05 529,150
- ----------- -------------
TAX ALLOCATION (3.2%)
500 Grand Central District Management Association Inc, Cap Impr
- ----------- Refg Ser 1994 ......................................................... 5.25 01/01/22 467,045
-------------
</TABLE>
76
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- NEW YORK SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
TRANSPORTATION FACILITIES REVENUE (14.3%)
$ 550 Buffalo & Fort Erie Public Bridge Authority, Toll Bridge Ser 1995 (MBIA) 5.75 % 01/01/25 $560,813
500 New York State Thruway Authority, Ser C (FGIC) ......................... 6.00 01/01/25 520,515
500 Port Authority of New York & New Jersey, Cons 99th Ser (AMT) (FGIC) ... 5.75 05/01/15 502,885
500 Triborough Bridge & Tunnel Authority, Gen Purpose Ser 1993 B .......... 5.00 01/01/20 473,845
- ----------- -------------
2,050 2,058,058
- ----------- -------------
WATER & SEWER REVENUE (6.6%)
500 New York City Municipal Water Finance Authority, 1993 Ser A ........... 6.00 06/15/17 504,635
400 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A ..................... 7.90 07/01/07 444,644
- ----------- -------------
900 949,279
- ----------- -------------
OTHER REVENUE (7.4%)
500 New York Local Government Assistance Corporation, Ser 1991 C .......... 7.00 04/01/10 559,715
500 United Nations Development Corporation, Sr Lien 1992 Refg Ser A ....... 6.00 07/01/26 504,685
- ----------- -------------
1,000 1,064,400
- ----------- -------------
13,290 TOTAL NEW YORK EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $13,040,682) .......................... 13,720,430
- ----------- -------------
SHORT-TERM NEW YORK EXEMPT MUNICIPAL OBLIGATION (2.8%)
400 Port Authority of New York & New Jersey, Ser 2 (Demand 12/01/95)
- ----------- (Identified Cost $400,000) ............................................. 3.35* 05/01/19 400,000
-------------
$13,690 TOTAL INVESTMENTS (IDENTIFIED COST $13,440,682) (A) .............................. 98.1% 14,120,430
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................... 1.9 267,759
----- -------------
NET ASSETS ....................................................................... 100.0% $14,388,189
===== =============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $13,440,682;
the aggregate gross unrealized appreciation is $712,093 and the
aggregate gross unrealized depreciation is $32,345, resulting in net
unrealized appreciation of $679,748.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
77
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- OHIO SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
OHIO EXEMPT MUNICIPAL BONDS (94.9%)
GENERAL OBLIGATION (8.8%)
$ 300 Bedford School District, Ser 1993 .................................... 6.25 % 12/01/13 $ 316,026
1,000 Delaware City School District, Construction & Impr (FGIC) .......... 5.75 12/01/20 1,014,660
180 Euclid, Ser 1991 .................................................... 6.625 12/01/11 196,214
100 Euclid City School District, Impr Ser 1991 .......................... 7.10 12/01/11 111,985
250 Hilliard City School District, Impr Refg Ser 1992 (FGIC) ........... 6.55 12/01/05 284,433
100 South Euclid, Unltd Tax Recreational ................................ 7.00 12/01/11 111,472
- ----------- -------------
1,930 2,034,790
- ----------- -------------
EDUCATIONAL FACILITIES REVENUE (22.0%)
Ohio Higher Educational Facility Commission,
500 Case Western Reserve University Ser 1992 ........................... 6.00 10/01/22 513,745
1,000 John Carroll University Refg ....................................... 5.30 11/15/14 987,030
1,000 Oberlin College Ser 1993 ........................................... 5.375 10/01/15 998,110
University of Cincinnati,
1,000 General Receipts Ser R7 ............................................ 5.20 06/01/10 991,960
500 General Receipts Ser G ............................................. 7.00 06/01/11 562,940
1,000 University of Toledo, Ser 1992 A (FGIC) ............................. 5.90 06/01/20 1,024,540
- ----------- -------------
5,000 5,078,325
- ----------- -------------
ELECTRIC REVENUE (4.5%)
500 Hamilton!, Refg 1992 Ser A (FGIC) ................................... 6.00 10/15/12 527,025
500 Ohio Municipal Electric Generation Agency Joint Venture 5,
Belleville Hydro 1993 COPs (AMBAC) ................................. 5.375 02/15/13 501,215
- ----------- -------------
1,000 1,028,240
- ----------- -------------
HOSPITAL REVENUE (18.3%)
1,000 Akron Bath & Copley Joint Township Hospital District, Summa Health
Ser 1992 A ......................................................... 6.25 11/15/07 1,068,500
1,000 Clermont County, Mercy Health Ser 1991 .............................. 6.733 10/05/21 1,090,570
670 Cuyahoga County, Meridia Health Ser 1990 ............................ 7.25 08/15/19 721,409
Hamilton County,
475 Bethesda Hospital Inc Ser 1986 A ................................... 7.00 01/01/09 493,330
500 Franciscan Sisters of the Poor/Providence Hospital Ser 1992 ....... 6.875 07/01/15 511,820
300 Middleburg Heights, Southwest General Hospital Ser 1991 ............ 7.20 08/15/19 345,825
- ----------- -------------
3,945 4,231,454
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (4.1%)
400 Ashtabula County, Ashland Oil Inc Refg 1992 Ser A ................... 6.90 05/01/10 425,400
500 Ohio Water Development Authority, Dayton Power & Light Co
Collateralized Refg 1992 Ser A ..................................... 6.40 08/15/27 525,810
- ----------- -------------
900 951,210
- ----------- -------------
MORTGAGE REVENUE - SINGLE FAMILY (3.6%)
800 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser A-1 & 2 (AMT) .... 6.903 03/01/31 837,056
- ----------- -------------
PUBLIC FACILITIES REVENUE (8.6%)
Ohio Building Authority,
1,000 Workers' Compensation/William Green Building 1993 Ser A ........... 5.125 04/01/10 984,480
1,000 1993 Ser A ......................................................... 5.50 10/01/12 1,005,350
- ----------- -------------
2,000 1,989,830
- ----------- -------------
</TABLE>
78
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- OHIO SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
TRANSPORTATION FACILITIES REVENUE (4.4%)
$ 1,000 Ohio Turnpike Commission, 1994 Ser A ................................ 5.75 % 02/15/24 $ 1,014,550
- ----------- -------------
WATER & SEWER REVENUE (20.6%)
1,000 Clermont County, Sewer Refg Ser 1993 (AMBAC) ........................ 5.20 12/01/21 972,230
1,000 Montgomery County, Water Ser 1992 (FGIC) ............................ 6.25 11/15/17 1,065,560
1,000 Northeast Ohio Regional Sewer District, Wastewater Impr Refg
Ser 1995 (AMBAC) .................................................... 5.60 11/15/13 1,024,510
1,000 Ohio Water Development Authority, Water Pollution Ser 1995 (MBIA) .. 5.60 06/01/10 1,032,550
600 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A .................. 7.90 07/01/07 666,966
- ----------- -------------
4,600 4,761,816
- ----------- -------------
21,175 TOTAL OHIO EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $20,961,700) ........................... 21,927,271
- ----------- -------------
SHORT-TERM OHIO EXEMPT MUNICIPAL OBLIGATIONS (3.5%)
500 Cuyahoga County, University Hospitals of Cleveland Ser 1985
(Demand 12/01/95) .................................................. 3.80* 01/01/16 500,000
300 Ohio Air Quality Development Authority, Mead Corp 1986 Ser A
- -----------
(Demand 12/01/95) .................................................. 3.80* 10/01/01 300,000
-------------
800 TOTAL SHORT-TERM OHIO EXEMPT MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $800,000) ............................................................... 800,000
- ----------- -------------
$ 21,975 TOTAL INVESTMENTS (IDENTIFIED COST $21,761,700) (A) ........................... 98.4% 22,727,271
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................ 1.6 376,433
----- -------------
NET ASSETS .................................................................... 100.0% $23,103,704
===== =============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $21,761,700;
the aggregate gross unrealized appreciation is $987,007 and the
aggregate gross unrealized depreciation is $21,436, resulting in net
unrealized appreciation of $965,571.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
79
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- PENNSYLVANIA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
PENNSYLVANIA EXEMPT MUNICIPAL BONDS+ (98.6%)
GENERAL OBLIGATION (4.9%)
$ 2,000 Berks County, Second Ser 1992 (FGIC) .................................. 5.75 % 11/15/12 $ 2,050,580
600 Puerto Rico, Pub Impr Refg Ser 1992 A ................................. 6.00 07/01/14 611,646
- ----------- -------------
2,600 2,662,226
- ----------- -------------
EDUCATIONAL FACILITIES REVENUE (22.4%)
2,000 Delaware County Authority, Villanova University Ser 1995 (AMBAC) ..... 5.80 08/01/25 2,037,180
1,000 Northeastern Pennsylvania Hospital & Education Authority, Kings
College Ser B 1993 ................................................... 6.00 07/15/11 1,006,450
Pennsylvania Higher Educational Facilities Authority,
750 Allegheny College Impr & Refg Ser 1993 B ............................. 6.00 11/01/22 738,150
500 Medical College of Pennsylvania 1991 Ser A ........................... 7.25 03/01/11 548,595
500 Temple University First Ser 1991 (MBIA) .............................. 6.50 04/01/21 535,575
1,000 Thomas Jefferson University 1992 Ser A ............................... 6.625 08/15/09 1,096,890
1,000 Thomas Jefferson University 1993 Ser A ............................... 5.30 11/01/15 979,480
Pennsylvania State University,
1,000 Second Refg Ser 1992 ................................................. 5.50 08/15/16 999,910
1,000 Ser B 1992 ........................................................... 5.50 08/15/16 999,910
1,000 Swarthmore Borough Authority, Swarthmore College Ser 1992 ............ 6.00 09/15/20 1,030,870
2,000 University of Pittsburgh, Cap 1992 Ser A (MBIA) ....................... 6.125 06/01/21 2,085,360
- ----------- -------------
11,750 12,058,370
- ----------- -------------
ELECTRIC REVENUE (1.7%)
1,000 Puerto Rico Electric Power Authority, Power Ser O ..................... 5.00 07/01/12 933,630
- ----------- -------------
HOSPITAL REVENUE (17.4%)
Allegheny County Hospital Development Authority,
1,000 Ohio Valley General Hospital Refg Ser 1993 ........................... 5.875 04/01/11 996,410
1,000 Presbyterian University Health System Inc Ser 1992 B (MBIA) ......... 6.00 11/01/12 1,038,390
1,000 Berks County Municipal Authority, Reading Hospital & Medical Center
Ser of 1993 (MBIA) .................................................... 5.50 10/01/08 1,036,310
1,500 Lehigh County General Purpose Authority, Lehigh Valley Hospital
Ser B 1995 (MBIA) ..................................................... 5.625 07/01/25 1,498,845
Philadelphia Hospitals & Higher Educational Facilities Authority,
1,750 Chestnut Hill Hospital Ser of 1992 ................................... 6.375 11/15/11 1,809,605
1,000 Temple University Hospital 1993 Ser A ................................ 6.50 11/15/08 1,072,560
2,000 The Children's Hospital of Philadelphia Ser A of 1993 ................ 5.375 02/15/14 1,939,980
- ----------- -------------
9,250 9,392,100
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (3.1%)
500 Lehigh County Industrial Development Authority, Strawbridge & Clothier
Refg Ser of 1991 ..................................................... 7.20 12/15/01 545,855
1,000 Montgomery County Industrial Development Authority, Philadelphia
Electric Co Refg 1991 Ser B (MBIA) ................................... 6.70 12/01/21 1,094,450
- ----------- -------------
1,500 1,640,305
- ----------- -------------
</TABLE>
80
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- PENNSYLVANIA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE - MULTI-FAMILY (2.0%)
Pennsylvania Housing Finance Agency,
$ 75 Moderate Rehab Sec 8 Assisted Issue B ................................ 9.00 % 08/01/01 $ 77,085
1,000 Ser 1992-35 D (AMT) .................................................. 6.20 04/01/25 1,006,470
- ----------- -------------
1,075 1,083,555
- ----------- -------------
MORTGAGE REVENUE - SINGLE FAMILY (8.7%)
Pennsylvania Housing Finance Agency,
2,000 Ser 1993-37 A ........................................................ 5.45 10/01/17 1,901,900
2,000 Ser 1991-31 C (AMT) .................................................. 7.00 10/01/23 2,099,020
655 Puerto Rico Housing Finance Corporation, Portfolio One GNMA-Backed
Ser C ................................................................ 6.85 10/15/23 689,427
- ----------- -------------
4,655 4,690,347
- ----------- -------------
PUBLIC FACILITIES REVENUE (3.7%)
2,000 Puerto Rico Public Buildings Authority, Govt Facs Ser A (AMBAC) ...... 5.50 07/01/21 1,991,720
- ----------- -------------
RESOURCE RECOVERY REVENUE (2.6%)
300 Cambria County Industrial Development Authority, Cambria Cogen Co
Ser 1989 F-1 (AMT) ................................................... 7.75 09/01/19 320,937
1,000 Montgomery County Industrial Development Authority, Ser 1989 ......... 7.50 01/01/12 1,090,900
- ----------- -------------
1,300 1,411,837
- ----------- -------------
STUDENT LOAN REVENUE (3.9%)
Pennsylvania Higher Education Assistance Agency,
1,000 1988 Ser D (AMT) (AMBAC) ............................................. 6.05 01/01/19 1,028,490
1,000 1991 Ser B (AMT) (AMBAC) ............................................. 6.854 09/01/26 1,068,660
- ----------- -------------
2,000 2,097,150
- ----------- -------------
TRANSPORTATION FACILITIES REVENUE (12.4%)
1,000 Guam, Highway 1992 Ser A (CGIC) ....................................... 6.30 05/01/12 1,066,460
500 Allegheny County, Greater Pittsburgh Intl Airport Ser 1992 (AMT) (FSA) 6.625 01/01/22 531,930
2,000 Delaware River Port Authority, Ser 1995 (FGIC) (WI) ................... 5.50 01/01/26 1,979,860
2,000 Pennsylvania Turnpike Commission, Ser O of 1992 (FGIC) ................ 6.00 12/01/12 2,089,020
1,000 Pittsburgh Public Parking Authority, Ser 1992 A (FGIC) ................ 5.875 12/01/12 1,040,020
- ----------- -------------
6,500 6,707,290
- ----------- -------------
WATER & SEWER REVENUE (10.7%)
Bethlehem Authority, Northampton & Lehigh Counties
1,000 Refg Ser of 1994 (MBIA) .............................................. 4.875 11/15/14 940,420
1,500 Refg Ser of 1994 (MBIA) .............................................. 5.30 11/15/17 1,480,800
2,000 Philadelphia, Water & Wastewater Ser 1995 (MBIA) ...................... 6.25 08/01/11 2,225,280
1,000 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A .................... 7.90 07/01/07 1,111,610
- ----------- -------------
5,500 5,758,110
- ----------- -------------
OTHER REVENUE (3.0%)
1,500 Pennsylvania Finance Authority, Cap Impr Refg Ser 1993 ................ 6.60 11/01/09 1,624,215
- ----------- -------------
REFUNDED (2.1%)
1,000 Reading, Ser of 1992 (AMBAC) .......................................... 6.50 11/15/12 1,124,680
- ----------- -------------
51,630 TOTAL PENNSYLVANIA EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $50,808,379) ..................... 53,175,535
- ----------- -------------
</TABLE>
81
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST -- PENNSYLVANIA SERIES
PORTFOLIO OF INVESTMENTS November 30, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------- ---------- -------------
<C> <S> <C> <C> <C>
SHORT-TERM PENNSYLVANIA EXEMPT MUNICIPAL OBLIGATION (3.7%)
$ 2,000 Pennsylvania Higher Educational Facilities Authority, Temple University
- ----------- Ser 1984-1 (Demand 12/01/95) (Identified Cost $2,000,000) ........... 3.70*% 10/01/09 $ 2,000,000
-------------
$53,630 TOTAL INVESTMENTS (IDENTIFIED COST $52,808,379) (A) ............................. 102.3% 55,175,535
===========
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .................................. (2.3) (1,240,483)
----- -------------
NET ASSETS ...................................................................... 100.0% $53,935,052
===== =============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
WI Security purchased on a when issued basis.
+ Puerto Rico exemption represents 13.6% of net assets.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $52,808,379;
the aggregate gross unrealized appreciation is $2,499,074 and the
aggregate gross unrealized depreciation is $131,918, resulting in
net unrealized appreciation of $2,367,156.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
CGIC Capital Guaranty Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
82
<PAGE>
(This page has been left blank intentionally)
83
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value* .................... $50,219,917 $115,970,780 $72,650,397 $16,628,284
Cash .................................................... 47,400 30,719 129,808 15,894
Receivable for:
Investments sold ....................................... -- -- 25,000 --
Shares of beneficial interest sold ..................... 19,230 85,126 403,178 30,076
Interest ............................................... 1,068,225 1,871,159 957,466 325,667
Deferred organizational expenses ........................ -- 414 414 414
Prepaid expenses ........................................ 6,312 6,415 5,330 6,108
Receivable from affiliate ............................... -- -- -- --
------------- -------------- ------------- ---------------
TOTAL ASSETS ........................................ 51,361,084 117,964,613 74,171,593 17,006,443
------------- -------------- ------------- ---------------
LIABILITIES:
Payable for:
Investments purchased .................................. 969,368 -- -- --
Shares of beneficial interest repurchased .............. 32,025 78,803 33,424 22,320
Dividends to shareholders .............................. 17,333 34,663 20,138 4,740
Plan of distribution fee ............................... 6,155 14,318 9,002 2,080
Investment management fee .............................. 14,363 33,409 21,004 439
Accrued expenses ........................................ 31,348 33,976 29,964 22,401
------------- -------------- ------------- ---------------
TOTAL LIABILITIES ................................... 1,070,592 195,169 113,532 51,980
------------- -------------- ------------- ---------------
NET ASSETS:
Paid-in-capital ......................................... 47,770,249 114,059,754 70,107,236 16,203,386
Undistributed net realized gain (accumulated net
realized loss) ......................................... (240,783) (323,971) (77,358) 35,279
Net unrealized appreciation ............................. 2,761,026 4,033,661 4,028,183 715,798
------------- -------------- ------------- ---------------
NET ASSETS .......................................... $50,290,492 $117,769,444 $74,058,061 $16,954,463
============= ============== ============= ===============
*IDENTIFIED COST ........................................ $47,458,891 $111,937,119 $68,622,214 $15,912,486
============= ============== ============= ===============
SHARES OF BENEFICIAL INTEREST OUTSTANDING ............... 4,722,228 11,033,281 6,804,211 1,544,881
============= ============== ============= ===============
NET ASSET VALUE PER SHARE (unlimited authorized shares
of $.01 par value) ..................................... $10.65 $10.67 $10.88 $10.97
MAXIMUM OFFERING PRICE PER SHARE (net asset value plus ====== ====== ====== ======
4.17% of net asset value)** ............................ $11.09 $11.11 $11.33 $11.43
====== ====== ====== ======
</TABLE>
- ---------------
** On sales of $25,000 or more, the offering price is reduced.
See Notes to Financial Statements
84
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MICHIGAN MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
- ------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
$21,372,843 $11,053,798 $48,849,809 $14,120,430 $22,727,271 $55,175,535
48,372 32,706 114,728 96,050 30,709 128,448
-- -- -- -- -- --
5,790 -- 57,201 -- 29,663 53,847
274,726 158,973 897,776 228,046 347,572 767,979
414 414 414 414 414 414
1,619 1,336 4,254 2,177 1,463 4,865
1,115 8,371 -- 2,867 -- --
- ------------- ------------- ------------- ------------- ------------- --------------
21,704,879 11,255,598 49,924,182 14,449,984 23,137,092 56,131,088
- ------------- ------------- ------------- ------------- ------------- --------------
-- -- 1,970,750 -- -- 1,970,750
-- -- 4,976 34,000 -- 160,319
6,229 3,210 12,846 4,096 6,502 15,075
2,633 1,377 5,858 1,759 2,810 6,566
-- -- 13,669 -- 668 15,322
23,399 21,327 27,481 21,940 23,408 28,004
- ------------- ------------- ------------- ------------- ------------- --------------
32,261 25,914 2,035,580 61,795 33,388 2,196,036
- ------------- ------------- ------------- ------------- ------------- --------------
20,667,238 10,868,738 46,112,385 13,714,794 22,307,801 51,593,009
(13,221) (55,856) (376,097) (6,353) (169,668) (25,113)
1,018,601 416,802 2,152,314 679,748 965,571 2,367,156
- ------------- ------------- ------------- ------------- ------------- --------------
$21,672,618 $11,229,684 $47,888,602 $14,388,189 $23,103,704 $53,935,052
============= ============= ============= ============= ============= ==============
$20,354,242 $10,636,996 $46,697,495 $13,440,682 $21,761,700 $52,808,379
============= ============= ============= ============= ============= ==============
2,004,183 1,058,331 4,462,168 1,323,049 2,138,912 4,969,645
============= ============= ============= ============= ============= ==============
$10.81 $10.61 $10.73 $10.88 $10.80 $10.85
====== ====== ====== ====== ====== ======
$11.26 $11.05 $11.18 $11.33 $11.25 $11.30
====== ====== ====== ====== ====== ======
</TABLE>
85
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
STATEMENT OF OPERATIONS For the year ended November 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS
------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME ........................... $2,953,928 $ 7,062,096 $ 4,327,597 $ 969,532
------------ ------------- ------------- ---------------
EXPENSES
Investment management fee ................ 173,132 405,705 253,653 57,633
Plan of distribution fee ................. 71,184 169,661 103,070 23,927
Professional fees ........................ 25,882 29,702 32,958 22,501
Transfer agent fees and expenses ........ 18,835 33,426 26,042 6,381
Shareholder reports and notices .......... 9,698 20,633 13,319 3,309
Trustees' fees and expenses .............. 4,386 8,907 5,697 900
Registration fees ........................ 6,989 6,551 4,721 3,102
Organizational expenses .................. -- 3,270 3,270 3,270
Custodian fees ........................... 3,129 5,903 4,313 1,628
Other .................................... 9,642 12,921 11,961 7,843
------------ ------------- ------------- ---------------
Total Expenses before Expense Offset
and Amounts Waived/Assumed ............ 322,877 696,679 459,004 130,494
Less: Amounts Waived/Assumed ........... -- -- -- (46,545)
Less: Expense Offset ................... (3,110) (5,855) (4,278) (1,614)
------------ ------------- ------------- ---------------
Total Expenses after Expense Offset and
Amounts Waived/Assumed ................ 319,767 690,824 454,726 82,335
------------ ------------- ------------- ---------------
Net Investment Income .................. 2,634,161 6,371,272 3,872,871 887,197
------------ ------------- ------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) ................. 136,451 (247,082) 297,548 79,118
Net change in unrealized depreciation ... 5,859,879 15,149,432 8,855,916 2,071,069
------------ ------------- ------------- ---------------
Net Gain ............................... 5,996,330 14,902,350 9,153,464 2,150,187
------------ ------------- ------------- ---------------
Net Increase ........................... $8,630,491 $21,273,622 $13,026,335 $3,037,384
============ ============= ============= ===============
</TABLE>
See Notes to Financial Statements
86
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MICHIGAN MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
- ------------ ------------ ------------ ------------ ------------ --------------
<C> <C> <C> <C> <C> <C>
$1,250,066 $ 630,143 $2,880,366 $ 882,337 $1,301,193 $3,036,426
- ------------ ------------ ------------ ------------ ------------ --------------
73,104 37,712 165,599 52,047 76,895 178,837
28,610 15,374 66,078 21,315 31,476 74,576
24,968 29,473 26,722 24,979 28,306 27,102
12,062 5,620 23,322 5,983 10,788 22,125
5,248 2,681 11,107 3,117 5,084 9,535
1,459 704 3,488 1,080 1,572 3,562
2,653 3,549 4,882 7,101 2,398 3,882
3,270 3,270 3,270 3,270 3,270 3,270
1,798 1,367 2,936 1,718 1,771 3,543
6,667 6,299 9,646 5,810 8,126 9,941
- ------------ ------------ ------------ ------------ ------------ --------------
159,839 106,049 317,050 126,420 169,686 336,373
(53,630) (50,815) -- (50,364) (58,094) --
(1,785) (1,359) (2,914) (1,704) (1,749) (3,521)
- ------------ ------------ ------------ ------------ ------------ --------------
104,424 53,875 314,136 74,352 109,843 332,852
- ------------ ------------ ------------ ------------ ------------ --------------
1,145,642 576,268 2,566,230 807,985 1,191,350 2,703,574
- ------------ ------------ ------------ ------------ ------------ --------------
11,026 17,107 (125,009) 9,027 161,498 59,271
2,758,269 1,390,495 6,003,704 2,049,802 2,795,212 6,305,461
- ------------ ------------ ------------ ------------ ------------ --------------
2,769,295 1,407,602 5,878,695 2,058,829 2,956,710 6,364,732
- ------------ ------------ ------------ ------------ ------------ --------------
$3,914,937 $1,983,870 $8,444,925 $2,866,814 $4,148,060 $9,068,306
============ ============ ============ ============ ============ ==============
</TABLE>
87
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
For the year ended November 30,
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA
----------------------------- ------------------------------
1995 1994 1995 1994
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ........................ $ 2,634,161 $ 3,019,123 $ 6,371,272 $ 7,310,665
Net realized gain (loss) ..................... 136,451 (377,211) (247,082) (76,890)
Net change in unrealized appreciation/
depreciation ................................ 5,859,879 (6,786,528) 15,149,432 (18,993,072)
------------- -------------- -------------- --------------
Net increase (decrease) .................... 8,630,491 (4,144,616) 21,273,622 (11,759,297)
------------- -------------- -------------- --------------
Dividends and distributions from:
Net investment income ........................ (2,634,161) (3,019,123) (6,371,272) (7,310,665)
Net realized gain ............................ -- (65,333) -- (1,746,975)
------------- -------------- -------------- --------------
Total ...................................... (2,634,161) (3,084,456) (6,371,272) (9,057,640)
------------- -------------- -------------- --------------
Transactions in shares of beneficial interest:
Net proceeds from sales ...................... 5,174,717 8,302,316 9,740,664 18,530,482
Reinvestment of dividends and distributions 1,334,340 1,628,501 3,199,688 5,154,881
Cost of shares repurchased ................... (9,843,250) (14,950,597) (22,523,316) (29,726,860)
------------- -------------- -------------- --------------
Net increase (decrease) .................... (3,334,193) (5,019,780) (9,582,964) (6,041,497)
------------- -------------- -------------- --------------
Total increase (decrease) .................. 2,662,137 (12,248,852) 5,319,386 (26,858,434)
NET ASSETS:
Beginning of period ........................... 47,628,355 59,877,207 112,450,058 139,308,492
------------- -------------- -------------- --------------
END OF PERIOD ................................. $50,290,492 $ 47,628,355 $117,769,444 $112,450,058
============= ============== ============== ==============
SHARES ISSUED AND REPURCHASED:
Sold .......................................... 508,816 795,764 954,040 1,777,153
Reinvestment of dividends and distributions .. 130,488 159,652 313,444 495,104
Repurchased ................................... (971,313) (1,484,391) (2,223,029) (2,944,606)
------------- -------------- -------------- --------------
Net increase (decrease) ....................... (332,009) (528,975) (955,545) (672,349)
============= ============== ============== ==============
</TABLE>
See Notes to Financial Statements
88
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLORIDA MASSACHUSETTS MICHIGAN
- ------------------------------ ---------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
- -------------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 3,872,871 $ 4,381,929 $ 887,197 $ 956,943 $ 1,145,642 $ 1,174,848
297,548 (238,226) 79,118 (43,840) 11,026 (24,247)
8,855,916 (10,264,924) 2,071,069 (2,334,430) 2,758,269 (2,973,184)
- -------------- -------------- ------------- ------------- ------------- -------------
13,026,335 (6,121,221) 3,037,384 (1,421,327) 3,914,937 (1,822,583)
- -------------- -------------- ------------- ------------- ------------- -------------
(3,872,871) (4,381,929) (887,197) (956,943) (1,145,642) (1,174,848)
-- -- -- (167,916) -- (363,656)
- -------------- -------------- ------------- ------------- ------------- -------------
(3,872,871) (4,381,929) (887,197) (1,124,859) (1,145,642) (1,538,504)
- -------------- -------------- ------------- ------------- ------------- -------------
10,874,113 16,449,296 2,298,582 2,842,908 2,130,223 3,330,753
1,388,435 1,503,336 499,293 662,124 653,136 892,827
(18,815,557) (20,485,991) (3,500,367) (3,795,658) (3,711,031) (3,114,925)
- -------------- -------------- ------------- ------------- ------------- -------------
(6,553,009) (2,533,359) (702,492) (290,626) (927,672) 1,108,655
- -------------- -------------- ------------- ------------- ------------- -------------
2,600,455 (13,036,509) 1,447,695 (2,836,812) 1,841,623 (2,252,432)
71,457,606 84,494,115 15,506,768 18,343,580 19,830,995 22,083,427
- -------------- -------------- ------------- ------------- ------------- -------------
$ 74,058,061 $ 71,457,606 $16,954,463 $15,506,768 $21,672,618 $19,830,995
============== ============== ============= ============= ============= =============
1,040,055 1,560,132 217,640 267,619 205,926 315,764
132,818 144,781 47,460 62,943 63,129 85,272
(1,813,124) (1,993,666) (335,507) (371,144) (361,199) (302,511)
- -------------- -------------- ------------- ------------- ------------- -------------
(640,251) (288,753) (70,407) (40,582) (92,144) 98,525
============== ============== ============= ============= ============= =============
</TABLE>
89
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS (continued)
- -----------------------------------------------------------------------------
For the year ended November 30,
<TABLE>
<CAPTION>
MINNESOTA NEW JERSEY
---------------------------- -----------------------------
1995 1994 1995 1994
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ........................ $ 576,268 $ 624,565 $ 2,566,230 $ 2,786,488
Net realized gain (loss) ..................... 17,107 (73,439) (125,009) (251,096)
Net change in unrealized appreciation/
depreciation ................................ 1,390,495 (1,530,836) 6,003,704 (6,801,131)
------------- ------------- ------------- --------------
Net increase (decrease) .................... 1,983,870 (979,710) 8,444,925 (4,265,739)
------------- ------------- ------------- --------------
Dividends and distributions from:
Net investment income ........................ (576,268) (624,565) (2,566,230) (2,786,488)
Net realized gain ............................ -- (83,885) -- (387,878)
------------- ------------- ------------- --------------
Total ...................................... (576,268) (708,450) (2,566,230) (3,174,366)
------------- ------------- ------------- --------------
Transactions in shares of beneficial interest:
Net proceeds from sales ...................... 1,489,363 1,972,261 3,969,557 8,465,825
Reinvestment of dividends and distributions 319,206 450,744 1,419,332 1,869,538
Cost of shares repurchased ................... (1,779,338) (2,479,885) (8,876,237) (11,896,977)
------------- ------------- ------------- --------------
Net increase (decrease) .................... 29,231 (56,880) (3,487,348) (1,561,614)
------------- ------------- ------------- --------------
Total increase (decrease) .................. 1,436,833 (1,745,040) 2,391,347 (9,001,719)
NET ASSETS:
Beginning of period ........................... 9,792,851 11,537,891 45,497,255 54,498,974
------------- ------------- ------------- --------------
END OF PERIOD ................................. $11,229,684 $ 9,792,851 $47,888,602 $ 45,497,255
============= ============= ============= ==============
SHARES ISSUED AND REPURCHASED:
Sold .......................................... 145,931 191,155 385,163 806,053
Reinvestment of dividends and distributions .. 31,444 44,176 137,676 180,172
Repurchased ................................... (173,959) (250,831) (867,546) (1,160,235)
------------- ------------- ------------- --------------
Net increase (decrease) ....................... 3,416 (15,500) (344,707) (174,010)
============= ============= ============= ==============
</TABLE>
See Notes to Financial Statements
90
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK OHIO PENNSYLVANIA
- ---------------------------- ----------------------------- -----------------------------
1995 1994 1995 1994 1995 1994
- ------------- ------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
$ 807,985 $ 851,906 $ 1,191,350 $ 1,332,217 $ 2,703,574 $ 2,825,018
9,027 (15,381) 161,498 (334,182) 59,271 (84,384)
2,049,802 (2,296,834) 2,795,212 (3,125,323) 6,305,461 (7,028,096)
- ------------- ------------- ------------- -------------- -------------- -------------
2,866,814 (1,460,309) 4,148,060 (2,127,288) 9,068,306 (4,287,462)
- ------------- ------------- ------------- -------------- -------------- -------------
(807,985) (851,906) (1,191,350) (1,332,217) (2,703,574) (2,825,018)
-- (66,663) -- (284,377) -- (292,250)
- ------------- ------------- ------------- -------------- -------------- -------------
(807,985) (918,569) (1,191,350) (1,616,594) (2,703,574) (3,117,268)
- ------------- ------------- ------------- -------------- -------------- -------------
1,474,331 3,239,727 2,891,735 10,906,004 8,975,484 8,825,758
426,508 494,616 733,649 1,085,139 1,417,646 1,724,222
(4,093,402) (2,788,145) (4,171,051) (12,403,711) (10,380,066) (8,965,577)
- ------------- ------------- ------------- -------------- -------------- -------------
(2,192,563) 946,198 (545,667) (412,568) 13,064 1,584,403
- ------------- ------------- ------------- -------------- -------------- -------------
(133,734) (1,432,680) 2,411,043 (4,156,450) 6,377,796 (5,820,327)
14,521,923 15,954,603 20,692,661 24,849,111 47,557,256 53,377,583
- ------------- ------------- ------------- -------------- -------------- -------------
$14,388,189 $14,521,923 $23,103,704 $ 20,692,661 $ 53,935,052 $47,557,256
============= ============= ============= ============== ============== =============
144,006 307,576 279,961 1,040,504 864,290 840,565
41,174 47,552 71,040 104,330 136,142 165,631
(397,106) (266,575) (408,164) (1,213,100) (1,003,414) (882,180)
- ------------- ------------- ------------- -------------- -------------- -------------
(211,926) 88,553 (57,163) (68,266) (2,982) 124,016
============= ============= ============= ============== ============== =============
</TABLE>
91
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter Multi-State Municipal
Series Trust (the "Fund") is registered under the Investment Company Act of
1940, as amended (the "Act"), as a non-diversified, open-end management
investment company.
The Fund, organized on October 29, 1990, as a Massachusetts business trust,
is comprised of ten separate Series (the "Series") and commenced operations
as follows:
<TABLE>
<CAPTION>
COMMENCEMENT OF
OPERATIONS
--------------------
<S> <C>
Arizona .......... April 30, 1991
California ....... January 15, 1991
Florida .......... January 15, 1991
Massachusetts ... January 15, 1991
Michigan ......... January 15, 1991
Minnesota ........ January 15, 1991
New Jersey ....... January 15, 1991
New York ......... January 15, 1991
Ohio ............. January 15, 1991
Pennsylvania ..... January 15, 1991
</TABLE>
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
individually for each Series with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of
its taxable and nontaxable income to its shareholders. Accordingly, no
federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Fund records
dividends and distributions to its shareholders on the record date. The
amount of dividends and distributions from net investment income 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
92
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995 (continued)
- ----------------------------------------------------------------------------
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.
E. Organizational Expenses -- Dean Witter InterCapital Inc. (the
"Investment Manager") paid the organizational expenses of the Fund of
approximately $204,000 of which $150,000 of such expenses ($16,667 for
each of the initial Series excluding the Arizona Series) have been
reimbursed. Such expenses have been deferred and are being amortized by
the straight-line method over a period not to exceed five years from the
commencement of operations.
F. Expenses -- Direct expenses are charged to the respective Series and
general corporate expenses are allocated on the basis of relative net
assets.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement, each Series of the Fund pays a management fee, accrued daily and
payable monthly, by applying the annual rate of 0.35% to the daily net assets
of each Series 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 office space and facilities, equipment, clerical,
bookkeeping and certain legal services, and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
The Investment Manager has undertaken to waive management fees and assume
all expenses that exceeded 0.50% of the daily net assets with respect to the
Massachusetts, Michigan, Minnesota, New York and Ohio Series through December
31, 1996.
3. PLAN OF DISTRIBUTION -- Dean Witter Distributors Inc. (the "Distributor"),
an affiliate of the Investment Manager, is the distributor of the Fund's
shares and, in accordance with a Plan of Distribution (the "Plan") pursuant
to Rule 12b-1 under the Act, finances certain expenses in connection with the
distribution of shares of the Fund.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determined to reimburse, as described below. The following
activities and services may be provided by the Distributor, under the Plan:
(1) compensation to, and expenses of, account executives of Dean Witter
Reynolds Inc., an affiliate of the Investment Manager and Distributor, and
other employees and selected broker-dealers; (2) sales incentives and bonuses
to sales representatives and to marketing personnel in connection with
promoting sales of the Fund's shares; (3) expenses incurred in connection
with promoting sales of the Fund's shares; (4) preparing and distributing
sales literature; and (5) providing advertising and promotional activities,
including direct mail solicitation and television, radio, newspaper, magazine
and other media advertisements.
93
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995 (continued)
- ----------------------------------------------------------------------------
The Fund is authorized to reimburse the Distributor for specific expenses
the Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no
event exceed an amount equal to a payment at the annual rate of 0.15% of each
Series' average daily net assets during the month. Expenses incurred by the
Distributor pursuant to the Plan in any fiscal year will not be reimbursed by
the Fund through payments accrued in any subsequent fiscal year. For the year
ended November 30, 1995, the distribution fees were accrued at the following
annual rates:
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS MICHIGAN
--------- ------------ --------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Annual Rate .. 0.14% 0.15% 0.14% 0.15% 0.14%
========= ============ ========= =============== ==========
MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
----------- ------------ ---------- ------- --------------
Annual Rate .. 0.14% 0.14% 0.14% 0.14% 0.15%
=========== ============ ========== ======= ==============
</TABLE>
For the year ended November 30, 1995, the Distributor has informed the
Fund that it received commissions from the sale of the Fund's shares of
beneficial interest as follows:
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS MICHIGAN
---------- ------------ ---------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Commissions .. $151,686 $232,508 $339,410 $ 67,383 $ 73,140
========== ============ ========== =============== ==========
MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
----------- ------------ ---------- ---------- --------------
Commissions .. $ 44,990 $134,215 $ 33,259 $101,471 $163,267
=========== ============ ========== ========== ==============
</TABLE>
Such commissions are not an expense of the Fund; they are deducted from
the proceeds of the sale of the shares of beneficial interest.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from the sales of portfolio securities, excluding
short-term investments, for the year ended November 30, 1995 were as follows:
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS MICHIGAN
------------ ------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Purchases .. $4,087,350 $5,263,943 $ 5,626,070 $ 983,280 $4,821,475
============ ============ ============= =============== ============
Sales ....... $3,530,510 $7,575,150 $13,054,950 $1,848,853 $4,214,327
============ ============ ============= =============== ============
MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
------------ ------------ ------------- --------------- ------------
Purchases .. $ 338,208 $8,343,725 $ 3,827,578 $ 4,083,983 $9,437,480
============ ============ ============= =============== ============
Sales ....... $ 266,889 $6,330,500 $ 3,305,198 $ 3,921,235 $3,762,321
============ ============ ============= =============== ============
</TABLE>
94
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995 (continued)
- -----------------------------------------------------------------------------
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At November 30, 1995, each of the
Series had transfer agent fees and expenses payable as follows:
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS MICHIGAN
--------- ------------ --------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Transfer Agent Fees
and Expenses
Payable ........... $1,777 $2,020 $2,322 $810 $1,065
========= ============ ========= =============== ==========
MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
----------- ------------ ---------- ------ --------------
Transfer Agent Fees
and Expenses
Payable ........... $480 $2,050 $539 $954 $2,352
=========== ============ ========== ====== ==============
</TABLE>
The Fund has an unfunded noncontributory defined benefit pension plan
covering all Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under
this plan are based on years of service and compensation during the last five
years of service. Aggregate pension costs for the year ended November 30,
1995 included in Trustees' fees and expenses in the Statement of Operations
and the accrued pension liability included in accrued expenses in the
Statement of Assets and Liabilities for each of the respective Series were as
follows:
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS MICHIGAN
--------- ------------ --------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Aggregate Pension
Costs ........... $1,416 $3,332 $2,156 $460 $ 584
========= ============ ========= =============== ==========
Accrued Pension
Liability ....... $2,649 $6,253 $4,017 $872 $1,101
========= ============ ========= =============== ==========
MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
----------- ------------ ---------- -------- --------------
Aggregate Pension
Costs ........... $296 $1,382 $434 $ 613 $1,402
=========== ============ ========== ======== ==============
Accrued Pension
Liability ....... $584 $2,565 $816 $1,150 $2,626
=========== ============ ========== ======== ==============
</TABLE>
5. FEDERAL INCOME TAX STATUS -- At November 30, 1995, the following Series
had an approximate net capital loss carryover which may be used to offset
future capital gains to the extent provided by regulations:
<TABLE>
<CAPTION>
AVAILABLE THROUGH NOVEMBER 30, 2002 2003 TOTAL
- ------------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
Arizona ...................... $240,800 -- $240,800
California ................... 76,900 $247,100 324,000
Florida ...................... 75,800 -- 75,800
Massachusetts ................ -- -- --
Michigan ..................... 13,200 -- 13,200
Minnesota .................... 32,000 24,300 56,300
New Jersey ................... 207,100 169,000 376,100
New York ..................... 6,300 -- 6,300
Ohio ......................... 172,700 -- 172,700
Pennsylvania ................. 25,100 -- 25,100
</TABLE>
During the year ended November 30, 1995, the following Series had utilized
capital loss carryovers of approximately:
<TABLE>
<CAPTION>
ARIZONA FLORIDA MASSACHUSETTS MICHIGAN NEW YORK OHIO PENNSYLVANIA
- ----------- ---------- --------------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
$136,400 $299,100 $43,800 $11,000 $7,500 $127,400 $49,500
=========== ========== =============== ========== ========== ========== ==============
</TABLE>
Capital losses incurred after October 31 ("post-October" losses) within
the taxable year are deemed to arise on the first business day of the Fund's
next taxable year. The Florida Series incurred and will elect to defer net
capital losses during fiscal 1995 of $1,600.
95
<PAGE>
Dean Witter Multi-State Municipal Series Trust
Financial Highlights
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET
YEAR VALUE NET NET REALIZED TOTAL FROM TOTAL DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO DISTRIBUTIONS TO AND
NOVEMBER 30, OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
----------- ------------ -------------- ------------ -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arizona Series
1991(b) $ 9.60 $0.36 $ 0.17 $ 0.53 $(0.36) $ -- $(0.36)
1992 9.77 0.64 0.41 1.05 (0.64) -- (0.64)
1993 10.18 0.58 0.56 1.14 (0.58) (0.02) (0.60)
1994 10.72 0.55 (1.29) (0.74) (0.55) (0.01) (0.56)
1995 9.42 0.54 1.23 1.77 (0.54) -- (0.54)
California Series
1991(a) 9.60 0.60 0.39 0.99 (0.60) -- (0.60)
1992 9.99 0.67 0.34 1.01 (0.67) (0.01) (0.68)
1993 10.32 0.61 0.68 1.29 (0.61) -- (0.61)
1994 11.00 0.58 (1.48) (0.90) (0.58) (0.14) (0.72)
1995 9.38 0.56 1.29 1.85 (0.56) -- (0.56)
Florida Series
1991(a) 9.60 0.55 0.28 0.83 (0.55) -- (0.55)
1992 9.88 0.64 0.41 1.05 (0.64) -- (0.64)
1993 10.29 0.59 0.64 1.23 (0.59) -- (0.59)
1994 10.93 0.56 (1.33) (0.77) (0.56) -- (0.56)
1995 9.60 0.56 1.28 1.84 (0.56) -- (0.56)
Massachusetts Series
1991(a) 9.60 0.54 0.38 0.92 (0.54) -- (0.54)
1992 9.98 0.66 0.42 1.08 (0.66) (0.04) (0.70)
1993 10.36 0.60 0.72 1.32 (0.60) -- (0.60)
1994 11.08 0.56 (1.38) (0.82) (0.56) (0.10) (0.66)
1995 9.60 0.57 1.37 1.94 (0.57) -- (0.57)
Michigan Series
1991(a) 9.60 0.54 0.36 0.90 (0.54) -- (0.54)
1992 9.96 0.65 0.46 1.11 (0.65) (0.01) (0.66)
1993 10.41 0.61 0.64 1.25 (0.61) -- (0.61)
1994 11.05 0.56 (1.41) (0.85) (0.56) (0.18) (0.74)
1995 9.46 0.57 1.35 1.92 (0.57) -- (0.57)
</TABLE>
- ---------------
(a) January 15, 1991 (commencement of operations) to November 30, 1991.
(b) April 30, 1991 (commencement of operations) to November 30, 1991.
* After application of the Fund's expense limitation.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
96
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS (AFTER EXPENSES ASSETS (BEFORE EXPENSES
WERE ASSUMED) WERE ASSUMED)*
---------------------- -----------------------
NET ASSETS
NET ASSET TOTAL END OF NET NET PORTFOLIO
VALUE END INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER
OF PERIOD RETURN+ (000'S) EXPENSES INCOME EXPENSES INCOME RATE
- ----------- ---------- ---------- ---------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$9.77 5.66%(1) $ 20,733 0.15%(2) 6.32%(2) 1.43%(2) 5.04%(2) 8%(1)
10.18 11.08 38,812 0.15 6.33 0.74 5.74 15
10.72 11.42 59,877 0.48 5.40 0.65 5.22 5
9.42 (7.16) 47,628 0.62 5.33 0.63 5.32 11
10.65 19.21 50,290 0.65 (3) 5.33 0.65 5.33 6
9.99 10.29 (1) 41,568 0.15 (2) 6.53 (2) 0.97 (2) 5.71 (2) 24 (1)
10.32 10.23 95,604 0.15 6.36 0.67 5.84 5
11.00 12.77 139,308 0.48 5.57 0.60 5.45 11
9.38 (8.65) 112,450 0.58 5.59 0.59 5.58 12
10.67 20.15 117,769 0.60 (3) 5.50 0.60 5.50 5
9.88 8.84 (1) 17,719 0.15 (2) 6.45 (2) 1.27 (2) 5.33 (2) 10 (1)
10.29 10.92 51,560 0.15 6.19 0.73 5.62 6
10.93 12.20 84,494 0.48 5.39 0.63 5.23 3
9.60 (7.29) 71,458 0.61 5.34 0.62 5.33 3
10.88 19.54 74,058 0.63 (3) 5.34 0.63 5.34 8
9.98 9.87 (1) 3,205 0.15 (2) 6.50 (2) 2.50 (2) 4.08 (2) 40 (1)
10.36 11.19 10,113 0.14 6.26 1.25 5.16 10
11.08 13.06 18,344 0.48 5.47 0.84 5.10 12
9.60 (7.71) 15,507 0.50 5.35 0.78 5.07 10
10.97 20.58 16,954 0.50 (3)++ 5.39 0.79 5.11 7
9.96 9.54 (1) 6,630 0.15 (2) 6.54 (2) 1.73 (2) 4.96 (2) 46 (1)
10.41 11.78 13,809 0.14 6.28 1.01 5.42 9
11.05 12.28 22,083 0.48 5.53 0.80 5.20 15
9.46 (8.07) 19,831 0.50 5.44 0.75 5.19 9
10.81 20.69 21,673 0.50 (3)++ 5.49 0.77 5.23 22
</TABLE>
- ---------------
(3) The above expense ratios reflect the effect for gross-up of custody
cash credits for the Arizona, California, Florida, Massachusetts and
Michigan Series of 0.01%, 0.01%, 0.01%, 0.01% and 0.01%,
respectively.
++ After application of the Investment Manager's voluntary waiver.
97
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET
YEAR VALUE NET NET REALIZED TOTAL FROM TOTAL DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO DISTRIBUTIONS TO AND
NOVEMBER 30, OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ------------ ----------- ------------ -------------- ------------ -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Minnesota Series
1991(a) $ 9.60 $0.51 $ 0.19 $ 0.70 $(0.51) $ -- $(0.51)
1992 9.79 0.63 0.32 0.95 (0.63) -- (0.63)
1993 10.11 0.58 0.67 1.25 (0.58) -- (0.58)
1994 10.78 0.55 (1.42) (0.87) (0.55) (0.08) (0.63)
1995 9.28 0.54 1.33 1.87 (0.54) -- (0.54)
New Jersey Series
1991(a) 9.60 0.55 0.35 0.90 (0.55) -- (0.55)
1992 9.95 0.66 0.44 1.10 (0.66) (0.04) (0.70)
1993 10.35 0.60 0.62 1.22 (0.60) (0.03) (0.63)
1994 10.94 0.55 (1.39) (0.84) (0.55) (0.08) (0.63)
1995 9.47 0.56 1.26 1.82 (0.56) -- (0.56)
New York Series
1991(a) 9.60 0.54 0.46 1.00 (0.54) -- (0.54)
1992 10.06 0.68 0.34 1.02 (0.68) (0.06) (0.74)
1993 10.34 0.62 0.69 1.31 (0.62) -- (0.62)
1994 11.03 0.57 (1.52) (0.95) (0.57) (0.05) (0.62)
1995 9.46 0.56 1.42 1.98 (0.56) -- (0.56)
Ohio Series
1991(a) 9.60 0.53 0.25 0.78 (0.53) -- (0.53)
1992 9.85 0.66 0.41 1.07 (0.66) (0.01) (0.67)
1993 10.25 0.60 0.72 1.32 (0.60) -- (0.60)
1994 10.97 0.55 (1.43) (0.88) (0.55) (0.12) (0.67)
1995 9.42 0.56 1.38 1.94 (0.56) -- (0.56)
Pennsylvania Series
1991(a) 9.60 0.53 0.30 0.83 (0.53) -- (0.53)
1992 9.90 0.66 0.44 1.10 (0.66) -- (0.66)
1993 10.34 0.61 0.67 1.28 (0.61) -- (0.61)
1994 11.01 0.56 (1.39) (0.83) (0.56) (0.06) (0.62)
1995 9.56 0.55 1.29 1.84 (0.55) -- (0.55)
</TABLE>
- ------------
(a) January 15, 1991 (commencement of operations) to November 30, 1991.
* After application of the Fund's expense limitation.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
98
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS (AFTER EXPENSES ASSETS (BEFORE EXPENSES
WERE ASSUMED) WERE ASSUMED)*
---------------------- -----------------------
NET ASSETS
NET ASSET TOTAL END OF NET NET PORTFOLIO
VALUE END INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER
OF PERIOD RETURN+ (000'S) EXPENSES INCOME EXPENSES INCOME RATE
- ----------- ---------- ---------- ---------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.79 $ 7.42 (1) $ 3,131 0.15%(2) 6.04%(2) 2.50%(2) 2.87%(2) 4%(1)
10.11 9.91 6,420 0.14 6.16 1.46 4.85 23
10.78 12.64 11,538 0.48 5.39 1.04 4.83 8
9.28 (8.42) 9,793 0.50 5.41 0.91 5.00 14
10.61 20.60 11,230 0.50 (4)++ 5.35 0.98 4.88 3
9.95 9.59 (1) 15,812 0.15 (2) 6.43 (2) 1.21 (2) 5.36 (2) 36 (1)
10.35 11.34 32,123 0.15 6.36 0.79 5.71 19
10.94 12.03 54,499 0.48 5.41 0.69 5.20 7
9.47 (7.96) 45,497 0.64 5.38 0.65 5.37 6
10.73 19.60 47,889 0.67 (4) 5.42 0.67 5.42 14
10.06 10.73 (1) 3,976 0.15 (2) 6.44 (2) 2.22 (2) 4.37 (2) 51 (1)
10.34 10.35 9,604 0.15 6.45 1.23 5.37 21
11.03 12.91 15,955 0.48 5.61 0.88 5.21 11
9.46 (8.96) 14,522 0.50 5.48 0.82 5.16 14
10.88 21.40 14,388 0.50 (4)++ 5.43 0.85 5.09 24
9.85 8.35 (1) 6,267 0.15 (2) 6.38 (2) 2.04 (2) 4.48 (2) 22 (1)
10.25 11.12 13,686 0.15 6.41 1.01 5.56 23
10.97 13.19 24,849 0.48 5.45 0.78 5.14 20
9.42 (8.34) 20,693 0.50 5.31 0.71 5.10 18
10.80 21.02 23,104 0.50 (4)++ 5.42 0.77 5.16 19
9.90 8.77 (1) 12,147 0.15 (2) 6.46 (2) 1.54 (2) 5.07 (2) 12 (1)
10.34 11.47 31,509 0.15 6.31 0.81 5.65 3
11.01 12.64 53,378 0.48 5.54 0.68 5.33 5
9.56 (7.84) 47,557 0.64 5.37 0.66 5.35 19
10.85 19.65 53,935 0.66 (4) 5.29 0.66 5.29 8
</TABLE>
- ---------------
(4) The above expense ratios reflect the effect for gross-up of custody
cash credits for the Minnesota, New Jersey, New York, Ohio and
Pennsylvania Series of 0.01%, 0.01%, 0.01%, 0.01% and 0.01%,
respectively.
++ After application of the Investment Manager's voluntary waiver.
99
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter Multi-State Municipal Series
Trust
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios 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 the Arizona
Series, the California Series, the Florida Series, the Massachusetts Series,
the Michigan Series, the Minnesota Series, the New Jersey Series, the New
York Series, the Ohio Series and the Pennsylvania Series (constituting the
Dean Witter Multi-State Municipal Series Trust, hereafter referred to as the
"Fund") at November 30, 1995, the results of each of their operations for the
year then ended, the changes in each of their net assets for each of the two
years in the period then ended and the financial highlights for each of the
four years in the period then ended and for the period January 15, 1991
(commencement of operations for all Series except the Arizona Series) and
April 30, 1991 (commencement of operations for the Arizona Series) through
November 30, 1991, 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 November 30, 1995 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
January 9, 1996
1995 FEDERAL INCOME TAX NOTICE (unaudited)
During the year ended November 30, 1995, the Fund paid to shareholders
dividends per share from net investment income as follows:
<TABLE>
<CAPTION>
ARIZONA CALIFORNIA FLORIDA MASSACHUSETTS MICHIGAN MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA
- --------- ------------ --------- --------------- ---------- ----------- ------------ ---------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.54 $0.56 $0.56 $0.57 $0.57 $0.54 $0.56 $0.56 $0.56 $0.55
</TABLE>
All of the Fund's dividends from net investment income were exempt interest
dividends, excludable from gross income for Federal income tax purposes.
100
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
----------
Financial highlights for period January 15, 1991 to
November 30, 1991 and for the period April 30, 1991
to November 30, 1991 and for the years ended
November 30, 1992, 1993, 1994 and 1995 ............... 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Portfolio Summary at November 30, 1995 ............... 56
Portfolio of Investments at November 30, 1995 ........ 58
Statement of assets and liabilities at
November 30, 1995 .................................... 84
Statement of operations for the year ended
November 30, 1995..................................... 86
Statement of changes in net assets for the
years ended November 30, 1994 and 1995................ 88
Notes to Financial Statements......................... 92
Financial highlights for period January 15, 1991 to
November 30, 1991 and for the period April 30, 1991
to November 30, 1991 and for the years ended
November 30, 1992, 1993, 1994 and 1995 ............... 96
(3) Financial statements included in Part C:
None
(b) Exhibits:
1 (a) -- Declaration of Trust*
1 (b) -- Amendment to the Declaration of Trust, dated
April 18, 1991*
6. -- Form of Selected Dealers Agreement
8. -- Form of Custody Agreement*
9. -- Form of Services Agreement between InterCapital and
Dean Witter Services Company Inc.
11. -- Consent of Independent Accountants
15. -- Amended and Restated Plan of Distribution Pursuant
to Rule 12b-1
16. -- Schedules for Computation of Performance
Quotations
27. -- Financial Data Schedule
---------------
* Previously filed; re-filed via EDGAR with this Amendment to the
Registration Statement. 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, 1996
-------------- ------------------------
Shares of Beneficial Interest 11,135
Item 27. Indemnification
Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the
indemnification of the Registrant's trustees, officers, employees and
agents is permitted if it is determined that they acted under the belief
that their actions were in or not opposed to the best interest of the
Registrant, and, with respect to any criminal proceeding, they had
reasonable cause to believe their conduct was not unlawful. In addition,
indemnification is permitted only if it is determined that the actions in
question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason
of reckless disregard of their obligations and duties to the Registrant.
Trustees, officers, employees and agents will be indemnified for the
expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they
give their undertakings to repay the Registrant unless their conduct is
later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust
and paragraph 8 of the Registrant's Investment Management Agreement,
neither the Investment Manager nor any trustee, officer, employee or agent
of the Registrant shall be liable for any action or failure to act, except
in the case of bad faith, willful misfeasance, gross negligence or reckless
disregard of duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding)
is asserted against the Registrant by such trustee, officer or controlling
person in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has 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.
3
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
Closed-End Investment Companies
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(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
4
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
(33) Dean Witter Diversified Income Trust
(34) Dean Witter U.S. Government Money Market Trust
(35) Dean Witter Global Dividend Growth Securities
(36) Active Assets California Tax-Free Trust
(37) Dean Witter Natural Resource Development Securities Inc.
(38) Active Assets Government Securities Trust
(39) Active Assets Money Trust
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(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
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
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
5
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
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.
6
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
David A. Hughey Executive Vice President and Chief Administrative
Executive Vice Officer of DWSC, Distributors and DWTC; Director
President and Chief of DWTC; Vice President of the Dean Witter Funds
Administrative Officer and the TCW/DW Funds.
Edmund C. Puckhaber Director of DWTC; Vice President of the Dean
Executive Vice Witter Funds.
President
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward 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; 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.
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
7
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Joseph J. McAlinden
Senior Vice President Vice President of the Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira Ross
Senior Vice President Vice President of various Dean Witter Funds.
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 First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary 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
8
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Douglas Brown
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.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Peter W. Gurman
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of Dean Witter Mid-Cap Growth Fund.
David Hoffman
Vice President
9
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
David Johnson
Vice President
Christopher Jones
Vice President
Stanley Kapica
Vice President
Michael Knox Vice President of Dean Witter Convertible
Vice President Securities Trust.
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
Hugh Rose
Vice President
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.
10
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime 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.
Marianne Zalys
Vice President
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
11
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(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
(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None
of the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
- ---- ------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
12
Positions and
Office with
Name Distributors
- ---- ------------
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained
by the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
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 18th day of March, 1996.
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
By /s/ Sheldon Curtis
---------------------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 7 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 03/18/96
-----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 03/18/96
-----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 03/18/96
-----------------------------
Sheldon Curtis
Attorney-in-Fact
Michael Bozic Paul Kolton
John R. Haire Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John L. Schroeder
By /s/ David M. Butowsky 03/18/96
-----------------------------
David M. Butowsky
Attorney-in-Fact
EXHIBIT INDEX
1 (a) -- Declaration of Trust*
1 (b) -- Amendment to the Declaration of Trust, dated
April 18, 1991*
6. -- Form of Selected Dealers Agreement
8. -- Form of Custody Agreement*
9. -- Form of Services Agreement between InterCapital and
Dean Witter Services Company Inc.
11. -- Consent of Independent Accountants
15. -- Amended and Restated Plan of Distribution Pursuant
to Rule 12b-1
16. -- Schedules for Computation of Performance
Quotations
27. -- Financial Data Schedule
- ---------------
* Previously filed; re-filed via EDGAR with this Amendment to the
Registration Statement. All other exhibits were previously filed
and are hereby incorporated by reference.
<PAGE>
DEAN WITTER
MULTI-STATE MUNICIPAL SERIES TRUST
TWO WORLD TRADE CENTER
NEW YORK, NY 10048
DECLARATION OF TRUST
DATED: OCTOBER 26, 1990
TABLE OF CONTENTS
PAGE
----
ARTICLE I - Name and Definitions ................................... 2
Section 1.1 Name .................................................. 2
Section 1.2 Definitions ........................................... 2
ARTICLE II - Trustees .............................................. 3
Section 2.1 Number of Trustees .................................... 3
Section 2.2 Election and Term ..................................... 3
Section 2.3 Resignation and Removal ............................... 3
Section 2.4 Vacancies ............................................. 3
Section 2.5 Delegation of Power to Other Trustees ................. 4
ARTICLE III - Powers of Trustees .................................... 4
Section 3.1 General ............................................... 4
Section 3.2 Investments ........................................... 4
Section 3.3 Legal Title ........................................... 5
Section 3.4 Issuance and Repurchase of Securities ................. 5
Section 3.5 Borrowing Money; Lending Trust Assets ................. 5
Section 3.6 Delegation; Committees ................................ 5
Section 3.7 Collection and Payment ................................ 5
Section 3.8 Expenses .............................................. 5
Section 3.9 Manner of Acting; By-Laws ............................. 5
Section 3.10 Miscellaneous Powers .................................. 6
Section 3.11 Principal Transactions ................................ 6
Section 3.12 Litigation ............................................ 6
ARTICLE IV - Investment Adviser, Distributor, Custodian and
Transfer Agent .......................................... 6
Section 4.1 Investment Adviser .................................... 6
Section 4.2 Administrative Services ............................... 7
Section 4.3 Distributor ........................................... 7
Section 4.4 Transfer Agent ........................................ 7
Section 4.5 Custodian ............................................. 7
Section 4.6 Parties to Contract ................................... 7
ARTICLE V - Limitations of Liability of Shareholders, Trustees and
Others ................................................... 8
Section 5.1 No Personal Liability of Shareholders, Trustees, etc .. 8
Section 5.2 Non-Liability of Trustees, etc. ....................... 8
Section 5.3 Indemnification ....................................... 8
Section 5.4 No Bond Required of Trustees .......................... 8
Section 5.5 No Duty of Investigation; Notice In Trust
Instruments, etc. ..................................... 8
Section 5.6 Reliance on Experts, etc. ............................. 9
PAGE
----
ARTICLE VI - Shares of Beneficial Interest ............................ 9
Section 6.1 BenefIcial Interest .................................... 9
Section 6.2 Rights of Shareholders ................................. 9
Section 6.3 Trust Only ............................................. 9
Section 6.4 Issuance of Shares ..................................... 9
Section 6.5 Register of Shares ..................................... 10
Section 6.6 Transfer of Shares ..................................... 10
Section 6.7 Notices ................................................ 10
Section 6.8 Voting Powers .......................................... 10
Section 6.9 Series or Classes of Shares ............................ 11
ARTICLE VII - Redemptions ............................................. 13
Section 7.1 Redemptions ........................................... 13
Section 7.2 Redemption at the Option of the Trust .................. 13
Section 7.3 Effect of Suspension of Determination of Net Asset Value 13
Section 7.4 Suspension of Right of Redemption ...................... 13
ARTICLE VIII - Determination of Net Asset Value, Net Income
and Distributions ...................................... 14
Section 8.1 Net Asset Value ....................................... 14
Section 8.2 Distributions to Shareholders .......................... 14
Section 8.3 Determination of Net Income .......................... 14
Section 8.4 Power to Modify Foregoing Procedures ................... 15
ARTICLE IX - Duration; Termination of Trust; Amendment; Mergers, etc. . 15
Section 9.1 Duration ............................................... 15
Section 9.2 Termination of Trust or a Series ....................... 15
Section 9.3 Amendment Procedure .................................... 15
Section 9.4 Merger, Consolidation and Sale of Assets ............... 16
Section 9.5 Incorporation .......................................... 16
ARTICLE X - Reports to Shareholders ................................... 17
ARTICLE XI - Miscellaneous ........................................... 17
Section 11.1 Filing ................................................. 17
Section 11.2 Resident Agent ......................................... 17
Section 11.3 Governing Law .......................................... 17
Section 11.4 Counterparts ........................................... 17
Section 11.5 Reliance by Third Parties .............................. 17
Section 11.6 Provisions in Conflict with Law or Regulations ......... 17
Section 11.7 Use of the Name "Dean Witter" .......................... 18
SIGNATURE PAGE ........................................................ 19
DECLARATlON OF TRUST
OF
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
Dated: October 26, 1990
THE DECLARATION OF TRUST of Dean Witter Multi-State Municipal Series Trust
is made the 26th day of October, 1990 by the parties signatory hereto, as
trustees (such persons, so long as they shall continue in office in accordance
with the terms of this Declaration of Trust, and all other persons who at the
time in question have been duly elected or appointed as trustees in accordance
with the provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
WITNESSETH:
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is provided that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is the "Dean
Witter Multi-State Municipal Series Trust," and so far as may be practicable
the Trustees shall conduct the Trust's activities, execute all documents and
sue or be sued under that name, which name (and the word "Trust" wherever
herein used) shall refer to the Trustees as Trustees, and not as individuals,
or personally, and shall not refer to the officers, agents, employees or
Shareholders of the Trust. Should the Trustees determine that the use of such
name is not advisable, they may use such other name for the Trust as they deem
proper and the Trust may hold its property and conduct its activities under
such other name.
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.9 hereof, as
from time to time amended.
(b) the terms "Commission," "Affillated Person" and "Interested
Person," have the meanings given them in the 1940 Act.
(c) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(d) "Distributor" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(e) "Fundamental Policies" shall mean the investment policies and
restrictions set forth in the Prospectus and Statement of Additional
Information and designated as fundamental policies therein.
(f) "Investment Adviser" means any party, other than the Trust, to a
contract described in Section 4.1 hereof.
(g) "Majority Shareholder Vote" means the vote of the holders of a
majority of Shares, which shall consist of: (i) a majority of Shares
represented in person or by proxy and entitled to vote at a meeting of
Shareholders at which a quorum, as determined in accordance with the By-Laws,
is present; (ii) a majority of Shares issued and outstanding and entitled to
vote when action is taken by written consent of Shareholders; and (iii) a
"majority of the outstanding voting securities," as the phrase is defined in
the 1940 Act, when any action is required by the 1940 Act by such majority as
so defined.
(h) "1940 Act" means the Investment Company Act of 1940 and the rules
and regulations thereunder as amended from time to time.
(i) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
(j) "Prospectus" means the Prospectus and Statement of Additional
Information constituting parts of the Registration Statement of the Trust under
the Securities Act of 1933 as such Prospectus and Statement of Additional
Information may be amended or supplemented and filed with the Commission from
time to time.
(k) "Series" means one of the separately managed components of the
Trust (or, if the Trust shall have only one such component, then that one) as
set forth in Section 6.1 hereof or as may be established and designated from
time to time by the Trustees pursuant to that section.
(l) "Shareholder" means a record owner of outstanding Shares.
2
(m) "Shares" means the units of interest into which the beneficial interest
in the Trust shall be divided from time to time, including the shares of any
and all series or classes which may be established by the Trustees, and
includes fractions of Shares as well as whole Shares.
(n) "Transfer Agent" means the party, other than the Trust, to the contract
described in Section 4.4 hereof.
(o) "Trust" means the Dean Witter Multi-State Municipal Series Trust.
(p) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the account of the Trust or the
Trustees.
(q) "Trustees" means the persons who have signed the Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected or appointed, qualified
and serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (15).
Section 2.2. Election and Term. The Trustees shall be elected by a
Majority Shareholder Vote at the first meeting of Shareholders following the
public offering of Shares of the Trust. The Trustees shall have the power to
set and alter the terms of office of the Trustees, and they may at any time
lengthen or lessen their own terms or make their terms of unlimited duration,
subject to the resignation and removal provisions of Section 2.3 hereof.
Subject to Section 16(a) of the 1940 Act, the Trustees may elect their own
successors and may, pursuant to Section 2.4 hereof, appoint Trustees to fill
vacancies. The Trustees shall adopt By-Laws not inconsistent with this
Declaration or any provision of law to provide for election of Trustees by
Shareholders at such time or times as the Trustees shall determine to be
necessary or advisable.
Section 2.3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregrate number
of Trustees after such removal shall not be less than the number required by
Section 2.1 hereof) by the action of two-thirds of the remaining Trustees or by
the action of the Shareholders of record of not less than two-thirds of the
Shares outstanding (for purposes of determining the circumstances and
procedures under which such removal by the Shareholders may take place, the
provisions of Section 16(c) of the 1940 Act shall be applicable to the same
extent as if the Trust were subject to the provisions of that Section). Upon
the resignation or removal of a Trustee, or his otherwise ceasing to be a
Trustee, he shall execute and deliver such documents as the remaining Trustees
shall require for the purpose of conveying to the Trust or the remaining
Trustees any Trust Property held in the name of the resigning or removed
Trustee. Upon the incapacity or death of any Trustee, his legal representative
shall execute and deliver on his behalf such documents as the remaining
Trustees shall require as provided in the preceding sentence.
Section 2.4. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy existing by reason of an
increase in the number of Trustees, subject to the provisions of Section 16(a)
of the 1940 Act, the remaining Trustees or, prior to the public offering of
Shares of the
3
Trust, if only one Trustee shall then remain in office, the remaining Trustee,
shall fill such vacancy by the appointment of such other person as they or he,
in their or his discretion, shall see fit, made by a written instrument signed
by a majority of the remaining Trustees or by the remaining Trustee, as the
case may be. Any such appointment shall not become effective, however, until
the person named In the written instrument of appointment shall have accepted
in writing such appointment and agreed in writing to be bound by the terms of
the Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the
number of Trustees. Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in this Section 2.4, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by the
Declaration. A written instrument certifying the existence of such vacancy
signed by a majority of the Trustees shall be conclusive evidence of the
existence of such vacancy.
Section 2.5. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case
shall less than two (2) Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the Commonwealth of
Massachusetts, in any and all states of the United States of America, In the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities wheresoever
in the world they may be located as they deem necessary, proper or desirable in
order to promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Investments. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of negotiable or nonnegotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, options, commodities, commodity futures contracts and related
options, currencies, currency futures and forward contracts, and other
securities, investment contracts and other instruments of any kind,
including, without limitation, those issued, guaranteed or sponsored by any
and all Persons including, without limitation, states, territories and
possessions of the United States, the District of Columbia and any of the
political subdivisions, agencies or instrumentalities thereof, and by the
United States Government or its agencies or instrumentalities, foreign or
international instrumentalities, or by any bank or savings institution, or
by any corporation or organization organized under the laws of the United
States or of any state, territory or possession thereof, and of
corporations or organizations organized under foreign laws, or in "when
issued" contracts for any such securities, or retain Trust assets in cash
and from time to time change the investments of the assets of the Trust;
and to exercise any and all rights, powers and privileges of ownership or
interest in respect of any and all
4
Such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and privileges in
respect of any of said instruments; and the Trustees shall be deemed to
have the foregoing powers with respect to any additional securities in
which the Trust may invest should the Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by any
law limiting the investments which may be made by fiduciaries.
Section 3.3. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust, or in the name of
any other Person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is appropriately protected. The
right, title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section
6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 3.5. Borrowing Money; Lending Trust Assets. Subject to the
Fundamental Policies, the Trustee shall have power to borrow money or otherwise
obtain credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Trust, to endorse, guarantee, or
undertake the performance of any obligation, contract or engagement of any
other Person and to lend Trust assets.
Section 3.6. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient.
Section 3.7. Collection and Payment. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay all
claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 3.8. Expenses. Subject to Section 6.9 hereof, the Trustees shall
have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of all the Trustees. The
5
Trustees may adopt By-Laws not inconsistent with this Declaration to provide
for the conduct of the business of the Trust and may amend or repeal such By-
Laws to the extent such power is not reserved to the Shareholders.
Section 3.10. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series thereof; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) remove Trustees or fill vacancies in or add to their number, elect and
remove such officers and appoint and terminate such agents or employees as they
consider appropriate, and appoint from their own number, and terminate, any one
or more committees which may exercise some or all of the power and authority of
the Trustees as the Trustees may determine; (d) purchase, and pay for out of
Trust Property or the property of the appropriate Series of the Trust,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted to be taken by any
such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (e) establish pension, profit-sharing, Share purchase, and
other retirement, incentive and benefit plans for any Trustees, officers,
employees and agents of the Trust; (f) to the extent permitted by law,
indemnify any person with whom the Trust or any Series thereof has dealings,
including any Investment Adviser, Distributor, Transfer Agent and selected
dealers, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
fiscal year of the Trust or any Series thereof and the method by which its
accounts shall be kept; and (i) adopt a seal for the Trust but the absence of
such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
Section 3.11. Principal Transactions. Except in transactions permitted by
the 1940 Act or any rule or regulation thereunder, or any order of exemption
issued by the Commission, or effected to implement the provisions of any
agreement to which the Trust is a party, the Trustees shall not, on behalf of
the Trust, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Trust or any Series thereof
to, any Trustee or officer of the Trust or any firm of which any such Trustee
or officer is a member acting as principal, or have any such dealings with any
Investment Adviser, Distributor or Transfer Agent or with any Affiliated Person
of such Person; but the Trust or any Series thereof may employ any such Person,
or firm or company in which such Person is an Interested Person, as broker,
legal counsel, registrar, transfer agent, dividend disbursing agent or
custodian upon customary terms.
Section 3.12. Litigation. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series thereof
to pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, to dismiss any
action, suit, proceeding, dispute, claim, or demand, derivative or otherwise,
brought by any person, including a Shareholder in its own name or the name of
the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf of the Trust.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Section 4.1. Investment Adviser. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time enter
into one or more investment advisory or management contracts or, if the
Trustees establish multiple Series, separate investment advisory or management
contracts with respect to one or more Series whereby the other party or parties
to any such contracts shall undertake to furnish the Trust or such Series such
management, investment advisory, administration,
6
accounting, legal, statistical and research facilities and services,
promotional or marketing activities, and such other facilities and services, if
any, as the Trustees shall from time to time consider desirable and all upon
such terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of the Declaration, the Trustees may authorize
the Investment Advisers, or any of them, under any such contracts (subject to
such general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales, loans or exchanges of portfolio securities
and other investments of the Trust on behalf of the Trustees or may authorize
any officer, employee or Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of such Investment Advisers, or any of
them (and all without further action by the Trustees). Any such purchases,
sales, loans and exchanges shall be deemed to have been authorized by all of
the Trustees. The Trustees may, in their sole discretion, call a meeting of
Shareholders in order to submit to a vote of Shareholders at such meeting the
approval or continuance of any such investment advisory or management contract.
If the Shareholders of any one or more of the Series of the Trust should fail
to approve any such investment advisory or management contract, the Investment
Adviser may nonetheless serve as Investment Adviser with respect to any Series
whose Shareholders approve such contract.
Section 4.2. Administrative Services. The Trustees may in their discretion
from time to time contract for administrative personnel and services whereby
the other party shall agree to provide the Trustees or the Trust administrative
personnel and services to operate the Trust on a daily or other basis, on such
terms and conditions as the Trustees may in their discretion determine. Such
services may be provided by one or more persons or entities.
Section 4.3. Distributor. The Trustees may in their discretion from time
to time enter into one or more contracts, providing for the sale of Shares to
net the Trust or the applicable Series of the Trust not less than the net asset
value per Share (as described in Article VIII hereof) and pursuant to which the
Trust may either agree to sell the Shares to the other parties to the
contracts, or any of them, or appoint any such other party its sales agent for
such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the provisions of this Article IV, including, without limitation, the
provision for the repurchase or sale of shares of the Trust by such other party
as principal or as agent of the Trust.
Section 4.4. Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such
terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
Section 4.5. Custodian. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at least five
million dollars ($5,000,000) to serve as Custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the By-Laws of the Trust.
Section 4.6. Parties to Contract. Any contract of the character described
in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other contract
may be entered into with any Person, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship; nor shall any Person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust
under or by reason of said contract or accountable for any profit realized
directly or indirectly therefrom, provided that the contract when entered into
was not inconsistent with the provisions of this Article IV. The same Person
may be the other party to any contracts entered into pursuant to Sections 4.1,
4.2, 4.3, 4.4 or 4.5 above or otherwise, and any individual may be financially
interested or otherwise affiliated with Persons who are parties to any or all
of the contracts mentioned in this Section 4.6.
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ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with the Trust Property or the affairs of the
Trust, save only that arising from bad faith, willful misfeasance, gross
negligence or reckless disregard for his duty to such Person; and all such
Persons shall look solely to the Trust Property, or to the Property of one or
more specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee, officer, employee or agent, as such, of
the Trust is made a party to any suit or proceeding to enforce any such
liability, he shall not, on account thereof, be held to any personal liability.
The Trust shall indemnify and hold each Shareholder harmless from and against
all claims and liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability; provided that, in the event the
Trust shall consist of more than one Series, Shareholders of a particular
Series who are faced with claims or liabilities solely by reason of their
status as Shareholders of that Series shall be limited to the assets of that
Series for recovery of such loss and related expenses. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other right to which
such Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
this own bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties.
Section 5.3. Indemnification. (a) The Trustees shall provide for
indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series,
of any person who is, or has been, a Trustee, officer, employee or agent of the
Trust against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been a
Trustee, officer, employee or agent and against amounts paid or incurred by him
in the settlement thereof, in such manner as the Trustees may provide from time
to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
Section 5.4. No Bond Required of Trustees. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments, etc.
No purchaser, lender, transfer agent or other Person dealing with the Trustees
or any officer, employee or agent of the Trust or a Series thereof shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by the Trustees or by said officer, employee or agent or be liable
for the application of money or property paid, loaned or delivered to or on the
order of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking, and every other act or thing whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their
8
capacity as officers, employees or agents of the Trust or a Series thereof.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees shall
recite that the same is executed or made by them not individually, but as
Trustees under the Declaration, and that the obligations of the Trust or a
Series thereof under any such instrument are not binding upon any of the
Trustees or Shareholders, individually, but bind only the Trust Estate (or, in
the event the Trust shall consist of more than one Series, in the case of any
such obligation which relates to a specific Series, only the Series which is a
party thereto), and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not affect the validity of
such obligation, contract instrument, certificate, Share, security or
undertaking and shall not operate to bind the Trustees or Shareholders
individually. The Trustees shall at all times maintain insurance for the
protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to
cover possible tort liability, and such other insurance as the Trustees in
their sole judgment shall deem advisable.
Section 5.6. Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser,
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may
also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.01 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the authority to establish and
designate one or more Series of classes or shares. Each share of any Series
shall represent an equal proportionate share in the assets of that Series with
each other Share in that Series. The Trustees may divide or combine the shares
of any Series into a greater or lesser number of shares in that Series with-
out thereby changing the proportionate interests in the assets of that Series.
Subject to the provisions of Section 6.9 hereof, the Trustees may also
authorize the creation of additional series of shares (the proceeds of which
may be invested in separate, independently managed portfolios) and additional
classes of shares within any series. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend in Shares or a
split in Shares, shall be fully paid and nonassessable.
Section 6.2. Rights of Shareholders. The ownership of the Trust Property
of every description and the right to conduct any business herein before
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition of division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in the Declaration specifically set forth. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion
or exchange rights, except as the Trustees may determine with respect to any
series of Shares.
Section 6.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4. Issuance of Shares. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares of any Series,
in addition to the then issued and outstanding Shares and Shares held in the
9
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares. The Trustees may from time
to time divide or combine the Shares of any Series into a greater or lesser
number without thereby changing the proportionate beneficial interests in that
Series. Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole Shares and/or fractions of a Share as described in the
Prospectus.
Section 6.5. Register of Shares. A register shall be kept in respect of
each Series at the principal office of the Trust or at an office of the
Transfer Agent which shall contain the names and addresses of the Shareholders
and the number of Shares of each Series held by them respectively and a record
of all transfers thereof. Such register may be in written form or any other
form capable of being converted into written form within a reasonable time for
visual inspection. Such register shall be conclusive as to who are the holders
of the Shares and who shall be entitled to receive dividends or distributions
or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder
shall be entitled to receive payment of any dividend or distribution, nor to
have notice given to him as herein or in the By-Laws provided, until he has
given his address to the Transfer Agent or such other officer or agent of the
Trustees as shall keep the said register for entry thereon. It is not
contemplated that certificates will be issued for the Shares; however, the
Trustees, in their discretion, may authorize the issuance of Share certificates
and promulgate appropriate rules and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder or by his agent thereunto duly
authorized in writing, upon delivery to the Trustees or the Transfer Agent of a
duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded
on the register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes
hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law, except as may otherwise be provided by
the laws of the Commonwealth of Massachusetts.
Section 6.7. Notices. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust. Annual reports and
proxy statements need not be sent to a shareholder if: (i) an annual report and
proxy statement for two consecutive annual meetings, or (ii) all, and at least
two, checks (if sent by first class mail) in payment of dividends or interest
and shares during a twelve month period have been mailed to such shareholder's
address and have been returned undelivered. However, delivery of such annual
reports and proxy statements shall resume once a Shareholder's current address
is determined.
Section 6.8. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof, (ii) for
the removal of Trustees as provided in Section 2.3 hereof, (iii) with respect
to any investment advisory or management contract as provided in Section 4.1,
(iv) with respect to termination of the Trust as provided in Section 9.2, (v)
with respect to any amendment of the Declaration to the extent and as provided
in Section 9.3, (vi) with respect to any merger, consolidation or sale of
assets as provided in Section 9.4, (vii) with respect to incorporation of the
Trust to the
10
extent and as provided in Section 9.5, (viii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders
(provided that Shareholders of a Series are not entitled to vote in connection
with the bringing of a derivative or class action with respect to any matter
which only affects another other Series or its Shareholders), (ix) with respect
to any plan adopted pursuant to Rule 12b-1 (or any successor rule) under the
1940 Act and (x) with respect to such additional matters relating to the Trust
as may be required by law, the Declaration, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as and
when the Trustees may consider necessary or desirable. Each whole Share shall
be entitled to one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote,
except that Shares held in the treasury of the Trust as of the record date, as
determined in accordance with the By-Laws, shall not be voted. On any matter
submitted to a vote of Shareholders, all Shares shall be voted by individual
Series except (1) when required by the 1940 Act, Shares shall be voted in the
aggregate and not by individual Series; and (2) when the Trustees have
determined that the matter affects only the interests of one or more Series,
then only the Shareholders of such Series shall be entitled to vote thereon.
The Trustees may, in conjunction with the establishment of any further Series
or any classes of Shares, establish conditions under which the several series
or classes of Shares shall have separate voting rights or no voting rights.
There shall be no cumulative voting in the election of Trustees. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, the Declaration or the By-Laws to be taken by
Shareholders. The By-Laws may include further provisions for Shareholders'
votes and meetings and related matters.
Section 6.9. Series or Classes of Shares. The following provisions are
applicable regarding the Series of Shares of the Trust established in Section
6.1 hereof and shall be applicable if the Trustees shall establish additional
Series or shall divide the shares of any Series into two or more classes, also
as provided in Section 6.1 hereof, and all provisions relating to the Trust
shall apply equally to each Series thereof except as the context requires:
(a) The number of authorized shares and the number of shares of each
Series or of each class that may be issued shall be unlimited. The Trustees
may classify or reclassify any unissued shares or any shares previously
issued and reacquired of any Series or class into one or more Series or one
or more classes that may be established and designated from time to time.
The Trustees may hold as treasury shares (of the same or some other Series
or class), reissue for such consideration and on such terms as they may
determine, or cancel any shares of any Series or any class reacquired by the
Trust at their discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Declaration with respect to any one
or more Series which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional Series and the
power of the Trustees to invest and reinvest assets applicable to any other
Series shall be as set forth in the instrument of the Trustees establishing
such series which is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular Series or class together with all assets in which
such consideration is invested or reinvested, all income, earnings, profits,
and proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series or class for all purposes, subject only to
the rights of creditors, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Series or class, the Trustees
shall allocate them among any one or more of the Series or classes
established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable. Each such
allocation by the Trustees shall be conclusive and binding upon the
shareholders of all Series or classes for all purposes. No holder of Shares
of any Series shall have any claim on or right to any assets allocated or
belonging to any other Series.
11
(d) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series and all expenses,
costs, charges and reserves attributable to that Series. All expenses and
liabilities incurred or arising in connection with a particular Series, or in
connection with the management thereof, shall be payable solely out of the
assets of that Series and creditors of a particular Series shall be entitled to
look solely to the property of such Series for satisfaction of their claims.
Any general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular Series shall
be allocated and charged by the Trustees to and among any one or more of the
series established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the holders of all Series for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the shareholders.
(e) The power of the Trustees to pay dividends and make distributions shall
be governed by Section 8.2 of this Declaration with respect to any one or more
Series or classes which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional Series or classes.
With respect to any other Series or class, dividends and distributions on
shares of a particular Series or class may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of shares of that Series or class, from
such of the income and capital gains, accrued or realized, from the assets
belonging to that Series or class, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series or class.
All dividends and distributions on shares of a particular Series or class shall
be distributed pro rata to the holders of that Series or class in proportion to
the number of shares of that Series or class held by such holders at the date
and time of record established for the payment of such dividends or
distributions.
(f) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and dividend
rights, of each class and Series of Shares.
(g) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares of any
Series or class shall have the right to convert or exchange said Shares into
Shares of one or more Series of Shares in accordance with such requirements and
procedures as may be established by the Trustees.
(h) The establishment and designation of any Series or class of shares in
addition to those established in Section 6.1 hereof shall be effective upon the
execution by a majority of the then Trustees of an instrument setting forth
such establishment and designation and the relative rights, preferences, voting
powers, restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption of such Series or class, or as otherwise provided
in such instrument. At any time that there are no shares outstanding of any
particular Series or class previously established and designated, the Trustees
may by an instrument executed by a majority of their number abolish that Series
or class and the establishment and designation thereof. Each Instrument
referred to in this paragraph shall have the status of an amendment to this
Declaration.
(i) Shareholders of a Series shall not be entitled to participate in a
derivative or class action with respect to any matter which only affects
another Series or its Shareholders.
(j) Each Share of a Series of the Trust shall represent a beneficial
Interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of distributions of income and
capital gains made with respect to such Series. In the event of the liquidation
of a particular Series, the Shareholders of that Series which has been
established and designated and which is being liquidated shall be entitled to
receive, when and as declared by the Trustees, the excess of the assets
belonging to that Series over the liabilities belonging to that Series. The
holders of Shares of any Series shall not be entitled hereby to any
distribution upon liquidation of any other Series. The assets so distributable
to the
12
Shareholders of any Series shall be distributed among such Shareholders in
proportion to the number of Shares of that Series held by them and recorded on
the books of the Trust. The liquidation of any particular Series in which there
are Shares then outstanding may be authorized by an instrument in writing,
without a meeting, signed by a majority of the Trustees then in office, subject
to the approval of a majority of the outstanding voting securities of that
Series, as that phrase is defined in the 1940 Act.
ARTICLE VII
REDEMPTIONS
Section 7.1. Redemptions. Each Shareholder of a particular Series shall
have the right at such times as may be permitted by the Trust to require the
Trust to redeem all or any part of his Shares of that Series, upon and subject
to the terms and conditions provided in this Article VII. The Trust shall, upon
application of any Shareholder or pursuant to authorization from any
Shareholder, redeem or repurchase from such Shareholder outstanding shares for
an amount per share determined by the Trustees in accordance with any
applicable laws and regulations; provided that (a) such amount per share shall
not exceed the cash equivalent of the proportionate interest of each share or
of any class or Series of shares in the assets of the Trust at the time of the
redemption or repurchase and (b) if so authorized by the Trustees, the Trust
may, at any time and from time to time charge fees for effecting such
redemption or repurchase, at such rates as the Trustees may establish, as and
to the extent permitted under the 1940 Act and the rules and regulations
promulgated thereunder, and may, at any time and from time to time, pursuant to
such Act and such rules and regulations, suspend such right of redemption. The
procedures for effecting and suspending redemption shall be as set forth in the
Prospectus from time to time. Payment will be made in such manner as described
in the Prospectus.
Section 7.2. Redemption at the Option of the Trust. Each Share of the
Trust or any Series of the Trust shall be subject to redemption at the option
of the Trust at the redemption price which would be applicable if such Share
were then being redeemed by the Shareholder pursuant to Section 7.1: (i) at any
time, if the Trustees determine in their sole discretion that failure to so
redeem may have materially adverse consequences to the holders of the Shares of
the Trust or of any Series, or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount as may from time to
time be determined by the Trustees and set forth in the then current Prospectus
of the Trust. Upon such redemption the holders of the Shares so redeemed shall
have no further right with respect thereto other than to receive payment of
such redemption price.
Section 7.3. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 7.4 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or of
any Series thereof, the rights of Shareholders (including those who shall have
applied for redemption pursuant to Section 7.1 hereof but who shall not yet
have received payment) to have Shares redeemed and paid for by the Trust or a
Series thereof shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on
deposit. The redemption price of Shares for which redemption applications have
not been revoked shall be the net asset value of such Shares next determined as
set forth in Section 8.1 after the termination of such suspension, and payment
shall be made within seven (7) days after the date upon which the application
was made plus the period after such application during which the determination
of net asset value was suspended.
Section 7.4. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which
disposal by the Trust or a Series thereof of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust or a
Series thereof fairly to determine
13
the value of its net assets, or (iv) during any other period when the
Commission may for the protection of security holders of the Trust by order
permit suspension of the rights of redemption or postponement of the date of
payment or redemption; provided that applicable rules and regulations of the
Commission shall govern as to whether the conditions prescribed in (ii), (iii)
or (iv) exist. Such suspension shall take effect at such time as the Trust
shall specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no right
of redemption or payment on redemption until the Trust shall declare the
suspension at an end, except that the suspension shall terminate in any event
on the first day on which said stock exchange shall have reopened or the period
specified in (ii) or (iii) shall have expired (as to which in the absence of an
official ruling by the Commission, the determination of the Trust shall be
conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the net asset value existing after the termination of the suspension.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1. Net Asset Value. The net asset value of each outstanding
Share of each Series of the Trust shall be determined on such days and at such
time or times as the Trustees may determine. The method of determination of net
asset value shall be determined by the Trustees and shall be as set forth in
the Prospectus. The power and duty to make the daily calculations may be
delegated by the Trustees to any Investment Advisor, the Custodian, the
Transfer Agent or such other person as the Trustees by resolution may
determine. The Trustees may suspend the daily determination of net asset value
to the extent permitted by the 1940 Act.
Section 8.2. Distributions to Shareholders. The Trustees shall from time
to time distribute ratably among the Shareholders of the Trust or of any Series
such proportion of the net income, earnings, profits, gains, surplus (including
paid-in surplus), capital, or assets of the Trust or of such Series held by
the Trustees as they may deem proper. Such distribution may be made in cash or
property (including without limitation any type of obligations of the Trust or
of such Series or any assets thereof), and the Trustees may distribute ratably
among the Shareholders of the Trust or of that Series additional Shares
issuable hereunder in such manner, at such times, and on such terms as the
Trustees may deem proper. Such distributions may be among the Shareholders of
record (determined in accordance with the Prospectus) of the Trust or of such
Series at the time of declaring a distribution or among the Shareholders of
record of the Trust or of such Series at such later date as the Trustees shall
determine. The Trustees may always retain from the net income, earnings,
profits or gains of the Trust or of such Series such amount as they may deem
necessary to pay the debts or expenses of the Trust or of such Series or to
meet obligations of the Trust or of such Series, or as they may deem desirable
to use in the conduct of its affairs or to retain for future requirements or
extensions of the business. The Trustees may adopt and offer to Shareholders of
the Trust or of any Series such dividend reinvestment plans, cash dividend
payout plans or related plans as the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
Section 8.3. Determination of Net Income. The Trustees shall have the
power to determine the net income of any Series of the Trust and from time to
time to distribute such net income ratably among the Shareholders as dividends
in cash or additional Shares of such Series issuable hereunder. The
determination of net income and the resultant declaration of dividends shall be
as set forth in the Prospectus. The Trustees shall have full discretion to
determine whether any cash or property received by any Series of the Trust
shall be treated as income or as principal and whether any item of expense
shall be charged to the income or the principal account, and their
determination made in good faith shall
14
be conclusive upon the Shareholders. In the case of stock dividends received,
the Trustees shall have full discretion to determine, in the light of the
particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal.
Section 8.4. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to enable the Trust to comply with any provision of the 1940 Act, or any rule
or regulation thereunder, including any rule or regulation adopted pursuant to
Section 22 of the 1940 Act by the Commission or any securities association
registered under the Securities Exchange Act of 1934, or any order of exemption
issued by said Commission, all as in effect now or hereafter amended or
modified. Without limiting the generality of the foregoing, the Trustees may
establish classes or additional Series of Shares in accordance with
Section 6.9.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article IX.
Section 9.2. Termination of Trust. (a) The Trust or any Series may be
terminated (i) by the affirmative vote of the holders of not less than two-
thirds of the Shares outstanding and entitled to vote at any meeting of
Shareholders of the Trust or the appropriate Series thereof, (ii) by an
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of not less than two-thirds of such Shares of
the Trust or the appropriate Series thereof, or by such other vote as may be
established by the Trustees with respect to any class or Series of Shares, or
(iii) with respect to a Series as provided in Section 6.9(h). Upon the
termination of the Trust or the Series:
(i) The Trust or the Series shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust or
the Series and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust or
the Series, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property or
Trust Property allocated or belonging to such Series to one or more persons
at public or private sale for consideration which may consist in whole or
in part of cash, securities or other property of any kind, discharge or pay
its liabilities, and to do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property or Trust Property allocated or belonging to such Series shall
require Shareholder approval in accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property allocated or
belonging to such Series, in cash or in kind or partly each, among the
Shareholders of the Trust according to their respective rights.
Section 9.3. Amendment Procedure. (a) This Declaration may be amended by a
Majority Shareholder Vote, at a meeting of Shareholders, or by written consent
without a meeting. The Trustees may also amend this Declaration without the
vote or consent of Shareholders (i) to change the name of the Trust or any
Series or classes of Shares, (ii) to supply any omission, or cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, (iii) if
they deem it necessary to conform this Declaration to the requirements of
applicable federal or state laws or regulations or the requirements of the
Internal Revenue Code, or to eliminate or reduce any federal, state or local
taxes which are or may be payable by the Trust or the Shareholders, but the
Trustees shall not be liable for failing to do so, or (iv) for any other
purpose which does not
15
adversely affect the rights of any Shareholder with respect to which the
amendment is or purports to be applicable.
(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust or of any Series of the Trust by
reducing the amount payable thereon upon liquidation of the Trust or of such
Series of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders of two-
thirds of the Shares of the Trust or of such Series outstanding and entitled to
vote, or by such other vote as may be established by the Trustees with respect
to any Series or class of Shares. Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment and
reciting that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and executed by a majority
of the Trustees or certified by the Secretary or any Assistant Secretary of the
Trust, shall be conclusive evidence of such amendment when lodged among the
records of the Trust. Unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective when lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property or Trust Property allocated or
belonging to such Series, including its good will, upon such terms and
conditions and for such consideration when and as authorized, at any meeting of
Shareholders called for the purpose, by the affirmative vote of the holders of
not less than two-thirds of the Shares of the Trust or such Series outstanding
and entitled to vote, or by an instrument or instruments in writing without a
meeting, consented to by the holders of not less than two-thirds of such
Shares, or by such other vote as may be established by the Trustees with
respect to any series or class of Shares; provided, however, that, if such
merger, consolidation, sale, lease or exchange is recommended by the Trustees,
a Majority Shareholder Vote shall be sufficient authorization; and any such
merger, consolidation, sale, lease or exchange shall be deemed for all purposes
to have been accomplished under and pursuant to the laws of the Commonwealth of
Massachusetts.
Section 9.5. Incorporation. With approval of a Majority Shareholder Vote,
or by such other vote as may be established by the Trustees with respect to any
Series or class of Shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over
all of the Trust Property or the Trust Property allocated or belonging to such
Series or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property or the Trust Property allocated or belonging to such Series to any
such corporation, trust, partnership, association or organization in exchange
for the shares or securities thereof or otherwise, and to lend money to,
subscribe for the shares or securities of, and enter into any contracts with
any such corporation, trust, partnership, association or organization in which
the Trust or such Series holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
16
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit or cause the officers of
the Trust to submit to the Shareholders a written financial report of each
Series of the Trust, including financial statements which shall at least
annually be certified by independent public accountants.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Filing. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem
appropriate. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by a Trustee or by the Secretary or any Assistant
Secretary of the Trust stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the Trustees and
shall, upon filing with the Secretary of the Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
Section 11.2. Resident Agent. The Prentice-Hall Corporation System, Inc.,
84 State Street, Boston, Massachusetts 02109 is the resident agent of the Trust
in the Commonwealth of Massachusetts.
Section 11.3. Governing Law. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State.
Section 11.4. Counterparts. The Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.5. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Trust, certifying to: (a)
the number or identity of Trustees or Shareholders, (b) the due authorization
of the execution of any instrument or writing, (c) the form of any vote passed
at a meeting of Trustees or Shareholders, (d) the fact that the number of
Trustees or Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration, (e) the form of any
By-Laws adopted by or the identity of any officers elected by the Trustees, or
(f) the existence of any fact or facts which in any manner relate to the
affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their
successors.
Section 11.6. Provisions in Conflict with Law or Regulations. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation to
the extent necessary to eliminate such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any
manner affect such provision in any other jurisdiction or any other provision
of the Declaration in any jurisdiction.
17
Section 11.7. Use of the name "Dean Witter." Dean Witter Reynolds Inc.
("DWR") has consented to the use by the Trust of the identifying name "Dean
Witter," which is a property right of DWR. The Trust will only use the name
"Dean Witter" as a component of its name and for no other purpose, and will not
purport to grant to any third party the right to use the name "Dean Witter" for
any purpose. DWR, or any corporate affiliate of the parent of DWR, may use or
grant to others the right to use the name "Dean Witter", or any combination or
abbreviation thereof, as all or a portion of a corporate or business name or
for any commercial purpose, including a grant of such right to any other
investment company. At the request of DWR or its parent, the Trust will take
such action as may be required to provide its consent to the use by DWR or its
parent, or any corporate affiliate of DWR's parent, or by any person to whom
DWR or its parent or an affiliate of DWR's parent shall have granted the right
to the use, of the name "Dean Witter," or any combination or abbreviation
thereof. Upon the termination of any investment advisory or investment
management agreement into which DWR and the Trust may enter, the Trust shall,
upon request by DWR or its parent, cease to use the name "Dean Witter" as a
component of its name, and shall not use the name, or any combination or
abbreviation thereof, as a part of its name or for any other commercial
purpose, and shall cause its officers, trustees and shareholders to take any
and all actions which DWR or its parent may request to effect the foregoing and
to reconvey to DWR or its parent any and all rights to such name.
18
IN WITNESS WHEREOF, the undersigned have executed this Declaration of Trust
this 26 day of October, 1990.
/s/ Charles A. Fiumefreddo /s/ Andrew J. Melton, Jr.
- ---------------------------- ------------------------------
Charles A. Fiumefreddo, as Andrew J. Melton, Jr., as
Trustee not individually Trustee and not individually
Two World Trade Center Five World Trade Center
New York, New York 10048 New York, New York 10048
/s/ Sheldon Curtis
- ----------------------------
Sheldon Curtis, as Trustee
and not individually
Two World Trade Center
New York, New York 10048
STATE OF NEW YORK
} :ss.:
COUNTY OF NEW YORK
On this 26 day of October, 1990,ANDREW J. MELTON, JR., CHARLES A.
FIUMEFREDDO and SHELDON CURTIS, known to me and known to be the individuals
described in and who executed the foregoing instrument, personally appeared
before me and they severally acknowledged the foregoing instrument to be their
free act and deed.
/s/ Barry Fink
------------------------------
Notary Public
BARRY FINK
Notary Public State of New York
No. 41-4711960
Qualified in Suffolk County
Certificate filed in New York County
Commission Expires Dec. 31, 1990
My commission expires: 12/31, 1990
19
IN WITNESS WHEREOF, the undersigned has executed this instrument this 29th
day of October, 1990.
/s/ David M. Elwood
--------------------------------
as Trustee
and not individually
One Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. Boston, MA
10/29, 1990
Then personally appeared the above-named David M. Elwood who acknowledged
the foregoing instrument to be his free act and deed.
before me.
/s/ Joan E. Parker
---------------------------------
Notary Public
My commission expires: 10/22/93
20
<PAGE>
CERTIFICATE
The undersigned hereby certifies that he is the Secretary of Dean Witter
Multi-State Municipal Series Trust (the "Trust"), an unincorporated business
trust organized under the laws of The Commonwealth of Massachusetts, that
annexed hereto is an Instrument Establishing and Designating Additional
Series of Shares of the Trust adopted by a majority of the Trustees of the
Trust on April 16, 1991, as provided in Section 6.9(h) of the said
Declaration, said Instrument to take effect immediately, and I do hereby
further certify that such Instrument has not been amended and is on the date
hereof in full force and effect.
Dated this 18th day of April 1991.
/s/ Sheldon Curtis
-----------------------------------
Sheldon Curtis
Secretary
(Seal)
340B
<PAGE>
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
INSTRUMENT ESTABLISHING AND DESIGNATING
ADDITIONAL SERIES OF SHARES
WHEREAS, Dean Witter Multi-State Municipal Series Trust (the "Trust") was
established by the Declaration of Trust dated October 29, 1990, as amended
from time to time (the "Declaration"), under the laws of the Commonwealth of
Massachusetts; and
WHEREAS, Section 6.9(h) of the Declaration provides that the establishment
and designation of any additional Series of Shares shall be effective upon
the execution by a majority of the then Trustees of an instrument setting
forth such establishment and designation and the relative rights,
preferences, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of such Series, or as otherwise
provided in such instrument, which instrument shall have the status of an
amendment to the Declaration, and the Trustees of the Trustees of the Trust
have deemed it advisable to establish an additional Series of Shares.
NOW, THEREFORE, pursuant to Section 6.9(h) of the Declaration, there are
hereby established and designated an additional Series of Shares, to be known
as the Arizona Series, which shall be subject to the same relative rights,
preferences, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption as provided in the
Declaration with respect to the initial Series of Shares (the California
Series, the Florida Series, the Massachusetts Series, the Michigan Series,
the Minnesota Series, the New Jersey Series, the New York Series, the Ohio
Series and the Pennsylvania Series), established in Section 6.1 of the
Declaration.
This instrument may be executed in more than one counterpart, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
IN WITNESS THEREOF, the undersigned, a majority of the Trustees of the
Trust, have executed this instrument this 16th day of April, 1991.
<TABLE>
<CAPTION>
<S> <C>
/s/ Jack F. Bennett /s/ John E. Jenck
- ----------------------------------- --------------------------------------
Jack F. Bennett, as Trustee John E. Jeuck, as Trustee
and not individually and not individually
/s/ Andrew J. Melton, Jr.
- ----------------------------------- --------------------------------------
Robert M. Gardiner, as Trustee Andrew J. Melton, Jr., as Trustee
and not individually and not individually
/s/ John R. Haire /s/ Albert T. Sommers
- ----------------------------------- --------------------------------------
John R. Haire, as Trustee Albert T. Sommers, as Trustee
and not individually and not individually
/s/ Paul Kolton /s/ Edward R. Telling
- ----------------------------------- --------------------------------------
Paul Kolton, as Trustee Edward R. Telling, as Trustee
and not individually and not individually
</TABLE>
Dean Witter Multi-State Municipal Series Trust
SELECTED DEALERS AGREEMENT
Gentlemen:
DW Distributors Inc. (the "Distributor") has a distribution agreement (the
"Distribution Agreement") with Dean Witter Multi-State Municipal Series Trust, a
Massachusetts business trust (the "Fund"), pursuant to which it acts as the
Distributor for the sale of the Fund's shares of beneficial interest, par value
$0.01 per share (the "Shares"). Under the Distribution Agreement, the
Distributor has the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended. You have
received a copy of the Distribution Agreement between us and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms used herein, including "Prospectus" and "Registration Statement" of
the Fund and "Selected Dealer" shall have the same meaning in this Agreement as
in the Distribution Agreement. As principal, we offer to sell shares to you, as
a Selected Dealer, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act as dealer for your own
account, and in no transaction shall you have any authority to act as agent for
the Fund, for us or for any other Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order plus any applicable sales
charge (the "public offering price"), as set forth in the current Prospectus.
The procedure relating to the handling of orders shall be subject to
instructions which we or the Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by the Distributor or the Fund in
the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the public offering price, and
subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares except
under circumstances that will result in compliance with the applicable Federal
and state securities laws and that in connection with sales and offers to sell
Shares you will furnish to each person to whom any such sale or offer is made a
copy of the Prospectus (as then amended or supplemented) and will not furnish to
any person any information relating to the Shares, which is inconsistent in any
respect with the information contained in the Prospectus (as then amended or
supplemented) or cause any advertisement to be published by radio or television
or in any newspaper or posted in any public place or use any sales promotional
material without our consent and the consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund and
personal services to Fund shareholders by paying you a portion of the applicable
sales charge and/or other commissions, which may be in the form of a gross sales
credit and/or an annual residual commission or service fee, under the terms and
in the percentage amounts as may be in effect from time to time by the
Distributor.
5. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding; e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
6. If any Shares sold to you under the terms of this Agreement are
repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and refund
to us, any sales charge or other commission received by you on such Shares.
7. No person is authorized to make any representations concerning the Shares
or the Fund except those contained in the current Prospectus and in such printed
information subsequently issued by us or
1
the Fund as information supplemental to such Prospectus. In purchasing Shares
through us you shall rely solely on the representations contained in the
Prospectus and supplemental information above mentioned. Any printed information
which we furnish you other than the Prospectus and the Fund's periodic reports
and proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
8. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus at or prior to the time of offering or
sale and you agree thereafter to deliver to such purchasers copies of the annual
and interim reports and proxy solicitation materials of the Fund. You further
agree to endeavor to obtain proxies from such purchasers. Additional copies of
the Prospectus, annual or interim reports and proxy solicitation materials of
the Fund will be supplied to you in reasonable quantities upon request.
9. You are hereby authorized (i) to place orders directly with the Fund or
its agent for shares of the Fund to be sold by us to you subject to the
applicable terms and conditions governing the placement of orders for the
purchase of Fund shares, as set forth in the Distribution Agreement, and (ii) to
tender shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in the Distribution Agreement.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for lack
of good faith and for obligations expressly assumed by us herein. Nothing
contained in this paragraph is intended to operate as, and the provisions of
this paragraph shall not in any way whatsoever constitute, a waiver by you of
compliance with any provision of the Securities Act of 1933, as amended, or of
the rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. All communications to us should be sent to the address shown below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. This Agreement should become effective as of the date of your
acceptance hereof, provided that you return to us promptly a signed and dated
copy.
DW DISTRIBUTORS, INC.
BY /s/ Sheldon Curtis
---------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
DW Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: Dean Witter Reynolds Inc.
--------------------------------
By: /s/ C. Fiumefreddo
---------------------------------------
Address: DWTC
-----------------------------------
New York, New York 10048
- -------------------------------------------
Date: January 4, 1993
-------------------------------------
2
CUSTODY AGREEMENT
Agreement made as of this 20th day of September, 1991, between DEAN WITTER
MULTI-STATE MUNICIPAL SERIES TRUST, a Massachusetts business trust organized and
existing under the laws of the Commonwealth of Massachusetts, having its
principal office and place of business at 2 World Trade Center, New York, New
York 10048 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal office and
place of business at 48 Wall Street, New York, New York 10286 (hereinafter
called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, shall have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all
Appendices and Certifications described in the Exhibits
delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether or not
such person is an Officer or employee of the Fund, duly authorized by
the Board of Trustees of the Fund to give Oral Instructions and
Written Instructions on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other Certificate as
may be received by the Custodian from time to time, provided that
each person who is designated in any such Certificate as an "Officer
of DWTC" shall be an Authorized Person only for purposes of Articles
XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and its
nominee or nominees.
<PAGE>
4. "Call Option" shall mean an exchange traded option with
respect to Securities other than Index, Futures Contracts, and
Futures Contract Options entitling the holder, upon timely exercise
and payment of the exercise price, as specified therein, to purchase
from the writer thereof the specified underlying instruments,
currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian which is actually received (irrespective of
constructive receipt) by the Custodian and signed on behalf of the
Fund by any two Officers. The term Certificate shall also include
instructions by the Fund to the Custodian communicated by a Terminal
Link.
6. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or
any broker-dealer reasonably believed by the Custodian to be
such a clearing member.
7. "Collateral Account" shall mean a segregated account so
denominated which is specifically allocated to a Series and pledged
to the Custodian as security for, and in consideration of, the
Custodian's issuance of any Put Option guarantee letter or similar
document described in paragraph 8 of Article V herein.
8. "Covered Call Option" shall mean an exchange traded option
entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer
thereof the specified underlying instruments, currency, or Securities
(excluding Futures Contracts) which are owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange
Commission, its successor or successors and its nominee or nominees.
The term "Depository" shall further mean and include any other person
authorized to act as a depository under the Investment Company Act of
1940, its successor or successors and its nominee or nominees,
specifically identified in a certified copy of a resolution of the
Fund's Board of Trustees specifically approving deposits therein by
the Custodian.
10. "Financial Futures Contract" shall mean the firm
commitment to buy or sell financial instruments on a U.S. com-
modities exchange or board of trade at a specified future time
at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures
Contract and/or Index Futures Contracts.
- 2 -
<PAGE>
12. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
13. "Investment Company Act of 1940" shall mean the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
14. "Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the
difference between the value of a particular index at the close of
the last business day of the contract and the price at which the
futures contract is originally struck.
15. "Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of
cash determined by reference to the difference between the exercise
price and the value of the index on the date of exercise.
16. "Margin Account" shall mean a segregated account in the name
of a broker, dealer, futures commission merchant, or a Clearing
Member, or in the name of the Fund for the benefit of a broker,
dealer, futures commission merchant, or Clearing Member, or
otherwise, in accordance with an agreement between the Fund, the
Custodian and a broker, dealer, futures commission merchant or a
Clearing Member (a "Margin Account Agreement"), separate and distinct
from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in
connection with such transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System or a Depository
shall be deemed to have been deposited in, or withdrawn from, a
Margin Account upon the Custodian's effecting an appropriate entry in
its books and records.
17. "Money Market Security" shall mean all instruments and
obligations commonly known as a money market instruments, where the
purchase and sale of such securities normally requires settlement in
federal funds on the same day as such purchase or sale, including,
without limitation, certain Reverse Repurchase Agreements, debt
obligations issued or guaranteed as to interest and/or principal by
the government of the United States or agencies or instrumentalities
thereof, any tax, bond or revenue anticipation note issued by any
state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase
agreements with respect to Securities and bank time deposits.
18. "O.C.C." shall mean the Options Clearing Corpora-
tion, a clearing agency registered under Section 17A of the
- 3 -
<PAGE>
Securities Exchange Act of 1934, its successor or successors, and its
nominee or nominees.
19. "Officers" shall mean the President, any Vice President, the
Secretary, the Clerk, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Clerk, any Assistant Treasurer, and any
other person or persons, whether or not any such other person is an
officer or employee of the Fund, but in each case only if duly
authorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix B or
such other Certificate as may be received by the Custodian from time
to time; provided that each person who is designated in any such
Certificate as holding the position of "Officer of DWTC" shall be an
Officer only for purposes of Articles XII and XIII hereof.
20. "Option" shall mean a Call Option, Covered Call Op-
tion, Index Option and/or a Put Option.
21. "Oral Instructions" shall mean verbal instructions actually
received (irrespective of constructive receipt) by the Custodian from
an Authorized Person or from a person reasonably believed by the
Custodian to be an Authorized Person.
22. "Put Option" shall mean an exchange traded option with
respect to instruments, currency, or Securities other than Index
Options, Futures Contracts, and Futures Contract Options entitling
the holder, upon timely exercise and tender of the specified
underlying instruments, currency, or Securities, to sell such
instruments, currency, or Securities to the writer thereof for the
exercise price.
23. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Fund sells Securities and agrees to repurchase
such Securities at a described or specified date and price.
24. "Security" shall be deemed to include, without limitation,
Money Market Securities, Call Options, Put Options, Index Options,
Index Futures Contracts, Index Futures Contract Options, Financial
Futures Contracts, Financial Futures Contract Options, Reverse
Repurchase Agreements, over the counter options on Securities, common
stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or
municipal governments and by public authorities, (including, without
limitation, general obligation bonds, revenue bonds, industrial bonds
and industrial development bonds), bonds, debentures, notes,
mortgages or other obligations, and any certificates, receipts,
warrants or other instruments representing rights to receive,
purchase, sell or subscribe
- 4 -
<PAGE>
for the same, or evidencing or representing any other rights or
interest therein, or rights to any property or assets.
25. "Senior Security Account" shall mean an account maintained
and specifically allocated to a Series under the terms of this
Agreement as a segregated account, by recorda- tion or otherwise,
within the custody account in which certain Securities and/or other
assets of the Fund specifically allocated to such Series shall be
deposited and withdrawn from time to time in accordance with
Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
26. "Series" shall mean the various portfolios, if any, of the
Fund as described from time to time in the current and effective
prospectus for the Fund, except that if the Fund does not have more
than one portfolio, "Series" shall mean the Fund or be ignored where
a requirement would be imposed on the Fund or the Custodian which is
unnecessary if there is only one portfolio.
27. "Shares" shall mean the shares of beneficial inter-
est of the Fund and its Series.
28. "Terminal Link" shall mean an electronic data transmission
link between the Fund and the Custodian requiring in connection with
each use of the Terminal Link the use of an authorization code
provided by the Custodian and at least two access codes established
by the Fund, provided, that the Fund shall have delivered to the
Custodian a Certificate substantially in the form of Appendix C.
29. "Transfer Agent" shall mean Dean Witter Trust
Company, a New Jersey limited purpose trust company, its suc-
cessors and assigns.
30. "Transfer Agent Account" shall mean any account in the name
of the Transfer Agent maintained with The Bank of New York pursuant
to a Cash Management and Related Services Agreement between The Bank
of New York and the Transfer Agent.
31. "Written Instructions" shall mean written communications
actually received (irrespective of constructive receipt) by the
Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person by telex or any
other such system whereby the receiver of such communications is able
to verify by codes or otherwise with a reasonable degree of certainty
the identity of the sender of such communication.
- 5 -
<PAGE>
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and moneys at any time owned by the Fund
during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, the Fund will deliver or cause to be delivered
to the Custodian all Securities and all moneys owned by it, at any
time during the period of this Agreement, and shall specify with
respect to such Securities and money the Series to which the same are
specifically allocated, and the Custodian shall not be responsible
for any Securities or money not so delivered. The Custodian shall
physically segregate, keep and maintain the Securities of the Series
separate and apart from each other Series and from other assets held
by the Custodian. Except as otherwise expressly provided in this
Agreement, the Custodian will not be responsible for any Securities
and moneys not actually received by it, unless the Custodian has been
negligent or has engaged in willful misconduct with respect thereto.
The Custodian will be entitled to reverse any credits of money made
on the Fund's behalf where such credits have been previously made and
moneys are not finally collected, unless the Custodian has been
negligent or has engaged in willful misconduct with respect thereto.
The Fund shall deliver to the Custodian a certified resolution of the
Board of Trustees of the Fund, substantially in the form of Exhibit A
hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all
Securities eligible for deposit therein, regardless of the Series to
which the same are specifically allocated and to utilize the
Book-Entry System to the extent possible in connection with its
performance hereunder, including, without limitation, in connection
with settlements of purchases and sales of Securities, loans of
Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in any
Depository, the Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund,
- 6 -
<PAGE>
substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing
basis until instructed to the contrary by a Certificate to deposit in
such Depository all Securities specifically allocated to such Series
eligible for deposit therein, and to utilize such Depository to the
extent possible with respect to such Securities in connection with
its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral. Securities and moneys deposited in either the Book-Entry
System or a Depository will be represented in accounts which include
only assets held by the Custodian for customers, including, but not
limited to, accounts in which the Custodian acts in a fiduciary or
representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series.
Prior to the Custodian's accepting, utilizing and acting with respect
to Clearing Member confirmations for Options and transactions in
Options for a Series as provided in this Agreement, the Custodian
shall have received a certified resolution of the Fund's Board of
Trustees, substantially in the form of Exhibit C hereto, approving,
authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate, to
accept, utilize and act in accordance with such confirmations as
provided in this Agreement with respect to such Series. All
securities are to be held or disposed of by the Custodian for, and
subject at all times to the instructions of, the Fund pursuant to the
terms of this Agreement. The Custodian shall have no power or
authority to assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement, and
shall have the sole power to release and deliver Securities held
pursuant to this Agreement.
2. The Custodian shall establish and maintain separate accounts,
in the name of each Series, and shall credit to the separate account
for each Series all moneys received by it for the account of the Fund
with respect to such Series. Such moneys will be held in such manner
and account as the Fund and the Custodian shall agree upon in writing
from time to time. Money credited to a separate account for a Series
shall be subject only to drafts, orders, or charges of the Custodian
pursuant to this Agreement and shall be disbursed by the Custodian
only:
(a) As hereinafter provided;
(b) Pursuant to Resolutions of the Fund's Board of Trustees
certified by an Officer and by the Secretary or Assistant Secretary
of the Fund setting forth the name and address of the person to whom
the payment is to be made, the Series account from which payment is
to be made, the purpose for which payment is to be made, and
declaring such purpose to
- 7 -
<PAGE>
be a proper corporate purpose; provided, however, that amounts
representing dividends or distributions with respect to
Shares shall be paid only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to
such Series and authorized by this Agreement; or
(d) Pursuant to Certificates to pay interest, taxes,
management fees or operating expenses (including, without limitation
thereto, Board of Trustees' fees and expenses, and fees for legal
accounting and auditing services), which Certificates set forth the
name and address of the person to whom payment is to be made, state
the purpose of such payment and designate the Series for whose
account the payment is to be made.
3. Promptly after the close of business on each day, the
Custodian shall furnish the Fund with confirmations and a summary, on
a per Series basis, of all transfers to or from the account of the
Fund for a Series, either hereunder or with any co-custodian or
sub-custodian appointed in accordance with this Agreement during said
day. Where Securities are transferred to the account of the Fund for
a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as
belonging to such Series in a fungible bulk of Securities registered
in the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian
shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the
Fund.
4. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, all Securities held by the Custodian hereunder,
which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by the
Custodian in that form; all other Securities held hereunder may be
registered in the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from time to
time determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or
nominees. The Fund agrees to furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form
for transfer, or to register in the name of its registered nominee or
in the name of the Book-Entry System or a Depository any Securities
which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in
the Book-Entry System or in a Depository in a separate account in the
name of such Series physically segregated at all times from those of
any other person or persons.
- 8 -
<PAGE>
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian
by itself, or through the use of the Book-Entry System or a
Depository with respect to Securities held hereunder and therein
deposited, shall with respect to all Securities held for the Fund
hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income and dividends due
or payable;
(b) Promptly give notice to the Fund and promptly present
for payment and collect the amount of money or other consideration
payable upon such Securities which are called, but only if either (i)
the Custodian receives a written notice of such call, or (ii) notice
of such call appears in one or more of the publications listed in
Appendix D annexed hereto, which may be amended at any time by the
Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for
the Fund's account the amount payable upon all Securities
which mature;
(d) Promptly surrender Securities in temporary form
in exchange for definitive Securities;
(e) Promptly execute, as custodian, any necessary
declarations or certificates of ownership under the Federal Income
Tax Laws or the laws or regulations of any other taxing authority now
or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of a Series, all rights and similar securities issued with
respect to any Securities held by the Custodian for such Series
hereunder; and
(g) Promptly deliver to the Fund all notices, prox- ies,
proxy soliciting materials, consents and other written information
(including, without limitation, notices of tender offers and exchange
offers, pendency of calls, maturities of Securities and expiration of
rights) relating to Securities held pursuant to this Agreement which
are actually received by the Custodian, such proxies and other
similar materials to be executed by the registered holder (if
Securities are registered otherwise than in the name of the Fund),
but without indicating the manner in which proxies or consents are to
be voted.
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6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry
System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and
any other instruments whereby the authority of the Fund as owner of
any Securities held hereunder for the Series specified in such
Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the
Series specified in such Certificate in exchange for other Securities
or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any right,
warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities
received in exchange;
(c) Promptly deliver any Securities held hereunder for the
Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization
or sale of assets of any corporation, and receive and hold hereunder
specifically allocated to such Series in exchange therefor such
certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such
Securities as may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount
payable upon Securities which may be called as specified in the
Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any
instrument or certificate representing any Futures Contract, any
Option, or any Futures Contract Option until after it shall have
determined, or shall have received a Certificate from the Fund
stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than
the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply
with Section 17(f) of the Investment Company Act of 1940 in
connection with the purchase, sale, settlement, closing out or
writing of Futures Contracts, Options, or Futures Contract Options by
making payments or deliveries specified in Certificates in connection
with any such purchase, sale, writing, settlement or closing out upon
its receipt from a broker, dealer, or futures commission merchant of
a statement or confirmation reasonably believed by the Custodian to
be in the form customarily used by brokers, dealers, or future
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commission merchants with respect to such Futures Contracts, Options,
or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission
merchant, in book-entry form or otherwise, in the name of the
Custodian (or any nominee of the Custodian) as custodian for the
Fund, provided, however, that notwithstanding the foregoing, payments
to or deliveries from the Margin Account and payments with respect to
Securities to which a Margin Account relates, shall be made in
accordance with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision in this
Agreement to the contrary, make payment for any Futures Contract,
Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian
of such instrument or such certificate, and deliver any Futures
Contract, Option or Futures Contract Option for which such
instruments or such certificates are available only against receipt
by the Custodian of payment therefor. Any such instrument or
certificate delivered to the Custodian shall be held by the Custodian
hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of Securities by
the Fund, other than a purchase of an Option, a Futures Contract, or
a Futures Contract Option, the Fund shall deliver to the Custodian
(i) with respect to each purchase of Securities which are not Money
Market Securities, a Certificate, and (ii) with respect to each
purchase of Money Market Securities, a Certificate, Oral Instructions
or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of
the Securities; (c) the number of shares or the principal amount
purchased and accrued interest, if any; (d) the date of purchase and
settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or
the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom
payment is to be made. The Custodian shall, upon receipt of such
Securities purchased by or for the Fund, pay to the broker specified in
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the Certificate out of the moneys held for the account of such Series
the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
2. Promptly after each execution of a sale of Securities by the
Fund, other than a sale of any Option, Futures Contract, Futures
Contract Option, or any Reverse Repurchase Agreement, the Fund shall
deliver such to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each sale of Money Market Securities, a
Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the Series to which such
Securities were specifically allocated; (b) the name of the issuer
and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest, if any; (d) the date of sale and
settlement; (e) the sale price per unit; (f) the total amount payable
to the Fund upon such sale; (g) the name of the broker through whom
or the person to whom the sale was made, and the name of the clearing
broker, if any; and (h) the name of the broker to whom the Securities
are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the
broker in accordance with generally accepted street practices and as
specified in the Certificate upon receipt of the total amount payable
to the Fund upon such sale, provided that the same conforms to the
total amount payable as set forth in such Certificate, Oral
Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by
the Fund other than a closing purchase transaction the Fund shall
deliver to the Custodian a Certificate specifying with respect to
each Option purchased: (a) the Series to which such Option is
specifically allocated; (b) the type of Option (put or call); (c) the
instrument, currency, or Security underlying such Option and the
number of Options, or the name of the in the case of an Index Option,
the index to which such Option relates and the number of Index
Options purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the total amount
payable by the Fund in connection with such purchase; and (h) the
name of the Clearing Member through whom such Option was purchased.
The Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such
Clearing Member for the account of the Custodian (or any duly
appointed and registered nominee of the
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Custodian) as custodian for the Fund, out of moneys held for the
account of the Series to which such Option is to be specifically
allocated, the total amount payable upon such purchase to the
Clearing Member through whom the purchase was made, provided that the
same conforms to the total amount payable as set forth in such
Certificate.
2. Promptly after the execution of a sale of any Option
purchased by the Fund, other than a closing sale transaction,
pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to each such sale:
(a) the Series to which such Option was specifically allocated; (b)
the type of Option (put or call); (c) the instrument, currency, or
Security underlying such Option and the number of Options, or the
name of the issuer and the title and number of shares subject to such
Option or, in the case of a Index Option, the index to which such
Option relates and the number of Index Options sold; (d) the date of
sale; (e) the sale price; (f) the date of settlement; (g) the total
amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall
consent to the delivery of the Option sold by the Clearing Member
which previously supplied the confirmation described in preceding
paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund,
provided that the same conforms to the total amount payable as set
forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to
such Call Option: (a) the Series to which such Call Option was
specifically allocated; (b) the name of the issuer and the title and
number of shares subject to the Call Option; (c) the expiration date;
(d) the date of exercise and settlement; (e) the exercise price per
share; (f) the total amount to be paid by the Fund upon such
exercise; and (g) the name of the Clearing Member through whom such
Call Option was exercised. The Custodian shall, upon receipt of the
Securities underlying the Call Option which was exercised, pay out of
the moneys held for the account of the Series to which such Call
Option was specifically allocated the total amount payable to the
Clearing Member through whom the Call Option was exercised, provided
that the same conforms to the total amount payable as set forth in
such Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to
such Put Option: (a) the Series to which such Put Option was
specifically allocated; (b) the name of the issuer and the title and
number of shares subject to the Put Option; (c) the expiration date;
(d) the date of exercise
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and settlement; (e) the exercise price per share; (f) the total
amount to be paid to the Fund upon such exercise; and (g) the name of
the Clearing Member through whom such Put Option was exercised. The
Custodian shall, upon receipt of the amount payable upon the exercise
of the Put Option, deliver or direct a Depository to deliver the
Securities specifically allocated to such Series, provided the same
conforms to the amount payable to the Fund as set forth in such
Certificate.
5. Promptly after the exercise by the Fund of any Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to
such Index Option: (a) the Series to which such Index Option was
specifically allocated; (b) the type of Index Option (put or call);
(c) the number of Options being exercised; (d) the index to which
such Option relates; (e) the expiration date; (f) the exercise price;
(g) the total amount to be received by the Fund in connection with
such exercise; and (h) the Clearing Member from whom such payment is
to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Covered Call Option: (a) the Series for which such
Covered Call Option was written; (b) the name of the issuer and the
title and number of shares for which the Covered Call Option was
written and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund; (f) the
date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The
Custodian shall deliver or cause to be delivered, in exchange for
receipt of the premium specified in the Certificate with respect to
such Covered Call Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members dealing in Covered
Call Options and shall impose, or direct a Depository to impose, upon
the underlying Securities specified in the Certificate specifically
allocated to such Series such restrictions as may be required by such
receipts. Notwithstanding the foregoing, the Custodian has the right,
upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian
and not deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is exercised,
the Fund shall promptly deliver to the Custodian a Certificate
instructing the Custodian to deliver, or to direct the Depository to
deliver, the Securities subject to such Covered Call Option and
specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of
shares subject to the Covered Call Option; (c) the Clearing Member to
whom the underlying
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Securities are to be delivered; and (d) the total amount payable to
the Fund upon such delivery. Upon the return and/or cancellation of
any receipts delivered pursuant to paragraph 6 of this Article, the
Custodian shall deliver, or direct a Depository to deliver, the
underlying Securities as specified in the Certificate against payment
of the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series for which such Put Option
was written; (b) the name of the issuer and the title and number of
shares for which the Put Option is written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is
written; (g) the name of the Clearing Member through whom the premium
is to be received and to whom a Put Option guarantee letter is to be
delivered; (h) the amount of cash, and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; and (i) the
amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account
for such Series. The Custodian shall, after making the deposits into
the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the
Custodian on the date hereof, and deliver the same to the Clearing
Member specified in the Certificate against receipt of the premium
specified in said Certificate. Notwithstanding the foregoing, the
Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of
the representations contained therein.
9. Whenever a Put Option written by the Fund and described in
the preceding paragraph is exercised, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the Series to which
such Put Option was written; (b) the name of the issuer and title and
number of shares subject to the Put Option; (c) the Clearing Member
from whom the underlying Securities are to be received; (d) the total
amount payable by the Fund upon such delivery; (e) the amount of cash
and/or the amount and kind of Securities specifically allocated to
such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of
Securities, specifically allocated to such Series, if any, to be
withdrawn from the Senior Security Account. Upon the return and/or
cancellation of any Put Option guarantee letter or similar document
issued by the Custodian in connection with such Put Option, the
Custodian shall pay out of the moneys held for the account of the
Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as
set forth in such Certificate, against delivery of such
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<PAGE>
Securities, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to such Index Option: (a) the Series for which such Index
Option was written; (b) whether such Index Option is a put or a call;
(c) the number of options written; (d) the index to which such Option
relates; (e) the expiration date; (f) the exercise price; (g) the
Clearing Member through whom such Option was written; (h) the premium
to be received by the Fund; (i) the amount of cash and/or the amount
and kind of Securities, if any, specifically allocated to such Series
to be deposited in the Senior Security Account for such Series; (j)
the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Collateral Account for such Series; and (k) the amount of cash and/or
the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian
shall, upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account specified in
the Certificate, and either (1) deliver such receipts, if any, which
the Custodian has specifically agreed to issue, which are in
accordance with the customs prevailing among Clearing Members in
Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the
Margin Account specified in the Certificate.
11. Whenever an Index Option written by the Fund and described
in the preceding paragraph of this Article is exercised, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Index Option: (a) the Series for which such Index
Option was written; (b) such information as may be necessary to
identify the Index Option being exercised; (c) the Clearing Member
through whom such Index Option is being exercised; (d) the total
amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind
of Securities, if any, to be withdrawn from the Margin Account; and
(f) the amount of cash and/or amount and kind of Securities, if any,
to be withdrawn from the Senior Security Account for such Series; and
the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account for such Series. Upon the
return and/or cancellation of the receipt, if any, delivered pursuant
to the preceding paragraph of this Article, the Custodian shall pay
out of the moneys held for the account of the Series to which such
Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as
specified therein.
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12. Promptly after the execution of a purchase or sale by the
Fund of any Option identical to a previously written Option described
in paragraphs, 6, 8 or 10 of this Article in a transaction expressly
designated as a "Closing Purchase Transaction" or a "Closing Sale
Transaction", the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to the Option being purchased:
(a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was
written; (c) the instrument, currency, or Security subject to the
Option, or, in the case of an Index Option, the index to which such
Option relates and the number of Options held; (d) the exercise
price; (e) the premium to be paid by or the amount to be paid to the
Fund; (f) the expiration date; (g) the type of Option (put or call);
(h) the date of such purchase or sale; (i) the name of the Clearing
Member to whom the premium is to be paid or from whom the amount is
to be received; and (j) the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Collateral Account, a
specified Margin Account, or the Senior Security Account for such
Series. Upon the Custodian's payment of the premium or receipt of the
amount, as the case may be, specified in the Certificate and the
return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option
being liquidated through the Closing Purchase Transaction or the
Closing Sale Transaction, the Custodian shall remove, or direct a
Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to any Option purchased or written
by the Fund and described in this Article, the Custodian shall delete
such Option from the statements delivered to the Fund pursuant to
paragraph 3 Article III herein, and upon the return and/or
cancellation of any receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a
Certificate received in connection with such expiration, exercise, or
consummation.
14. Securities acquired by the Fund through the exercise of an
Option described in this Article shall be subject to Article IV
hereof.
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ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Futures Contract,
(or with respect to any number of identical Futures Contract(s)): (a)
the Series for which the Futures Contract is being entered; (b) the
category of Futures Contract (the name of the underlying index or
financial instrument); (c) the number of identical Futures Contracts
entered into; (d) the delivery or settlement date of the Futures
Contract(s); (e) the date the Futures Contract(s) was (were) entered
into and the maturity date; (f) whether the Fund is buying (going
long) or selling (going short) such Futures Contract(s); (g) the
amount of cash and/or the amount and kind of Securities, if any, to
be deposited in the Senior Security Account for such Series; (h) the
name of the broker, dealer, or futures commission merchant through
whom the Futures Contract was entered into; and (i) the amount of fee
or commission, if any, to be paid and the name of the broker, dealer,
or futures commission merchant to whom such amount is to be paid. The
Custodian shall make the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the moneys
specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security
Account for such Series the amount of cash and/or the amount and kind
of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required
to be made by the Fund to a broker, dealer, or futures commission
merchant with respect to an outstanding Futures Contract shall be
made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with
respect to an outstanding Futures Contract shall be received and
dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder
is retained by the Fund until delivery or settlement is made on such
Futures Contract, the Fund shall deliver to the Custodian prior to
the delivery or settlement date a Certificate specifying: (a) the
Futures Contract and the Series to which the same relates; (b) with
respect to an Index Futures Contract, the total cash settlement
amount to be paid
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<PAGE>
or received, and with respect to a Financial
Futures Contract, the Securities and/or amount of cash to be
delivered or received; (c) the broker, dealer, or futures commission
merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be
withdrawn from the Senior Security Account for such Series. The
Custodian shall make the payment or delivery specified in the
Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate specifying: (a) the
items of information required in a Certificate described in paragraph
1 of this Article, and (b) the Futures Contract being offset. The
Custodian shall make payment out of the money specifically allocated
to such Series of the fee or commission, if any, specified in the
Certificate and delete the Futures Contract being offset from the
statements delivered to the Fund pursuant to paragraph 3 of Article
III herein, and make such withdrawals from the Senior Security
Account for such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures
Contract Option by the Fund, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Futures Contract
Option: (a) the Series to which such Option is specifically
allocated; (b) the type of Futures Contract Option (put or call); (c)
the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise
price; (f) the dates of purchase and settlement; (g) the amount of
premium to be paid by the Fund upon such purchase; (h) the name of
the broker or futures commission merchant through whom such option
was purchased; and (i) the name of the broker, or futures commission
merchant, to whom payment is to be made. The Custodian shall pay out
of the moneys specifically allocated to such Series the total amount
to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same
conforms to the amount set forth in such Certificate.
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<PAGE>
2. Promptly after the execution of a sale of any Futures
Contract Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specifying with
respect to each such sale: (a) Series to which such Futures Contract
Option was specifically allocated; (b) the type of Future Contract
Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the
sale price; (f) the date of settlement; (g) the total amount payable
to the Fund upon such sale; and (h) the name of the broker of futures
commission merchant through whom the sale was made. The Custodian
shall consent to the cancellation of the Futures Contract Option
being closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option (put or call)
being exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the date of exercise; (e) the name of
the broker or futures commission merchant through whom the Futures
Contract Option is exercised; (f) the net total amount, if any,
payable by the Fund; (g) the amount, if any, to be received by the
Fund; and (h) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such
Series. The Custodian shall make, out of the moneys and Securities
specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security
Account as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series for which
such Futures Contract Option was written; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the Futures
Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the
Fund; (g) the name of the broker or futures commission merchant
through whom the premium is to be received; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account for such Series. The
Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically
allocated to such Series the deposits into the Senior Security
Account, if any, as specified in the Certificate. The deposits, if
any, to be made to the Margin Account shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account
Agreement.
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5. Whenever a Futures Contract Option written by the Fund which
is a call is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such
Futures Contract Option was specifically allocated; (b) the
particular Futures Contract Option exercised; (c) the type of Futures
Contract underlying the Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any,
payable to the Fund upon such exercise; (f) the net total amount, if
any, payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall, upon
its receipt of the net total amount payable to the Fund, if any,
specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in
the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the
Fund and which is a put is exercised, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the Series to which
such Option was specifically allocated; (b) the particular Futures
Contract Option exercised; (c) the type of Futures Contract
underlying such Futures Contract Option; (d) the name of the broker
or futures commission merchant through whom such Futures Contract
Option is exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by
the Fund upon such exercise; and (g) the amount and kind of
Securities and/or cash to be withdrawn from or deposited in, the
Senior Security Account for such Series, if any. The Custodian shall,
upon its receipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in
the Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
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7. Promptly after the execution by the Fund of a purchase of any
Futures Contract Option identical to a previously written Futures
Contract Option described in this Article in order to liquidate its
position as a writer of such Futures Contract Option, the Fund shall
deliver to the Custodian a Certificate specifying with respect to the
Futures Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is a
closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the
expiration date; (g) the name of the broker or futures commission
merchant to whom the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security
Account specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or
purchased by the Fund and described in this Article, the Custodian
shall (a) delete such Futures Contract Option from the statements
delivered to the Fund pursuant to paragraph 3 of Article III herein
and, (b) make such withdrawals from and/or in the case of an exercise
such deposits into the Senior Security Account as may be specified in
a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise
of a Futures Contract Option described in this Article shall be
subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities
by any Series of the Fund, the Fund shall deliver to the Custodian a
Certificate specifying: (a) the Series for which such short sale was
made; (b) the name of the issuer and the title of the Security; (c)
the number of shares or principal amount sold, and accrued interest
or dividends, if any; (d) the dates of the sale and settlement;
(e) the sale
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<PAGE>
price per unit; (f) the total amount credited to the Fund
upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin
Account and the name in which such Margin Account has been or is to
be established; (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in a Senior Security Account, and
(i) the name of the broker through whom such short sale was made. The
Custodian shall upon its receipt of a statement from such broker
confirming such sale and that the total amount credited to the Fund
upon such sale, if any, as specified in the Certificate is held by
such broker for the account of the Custodian (or any nominee of the
Custodian) as custodian of the Fund, issue a receipt or make the
deposits into the Margin Account and the Senior Security Account
specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any
short sale of Securities, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such closing
out: (a) the Series for which such transaction is being made; (b) the
name of the issuer and the title of the Security; (c) the number of
shares or the principal amount, and accrued interest or dividends, if
any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase
price per unit; (f) the net total amount payable to the Fund upon
such closing-out; (g) the net total amount payable to the broker upon
such closing-out; (h) the amount of cash and the amount and kind of
Securities to be withdrawn, if any, from the Margin Account; (i) the
amount of cash and/or the amount and kind of Securities, if any, to
be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The
Custodian shall, upon receipt of the net total amount payable to the
Fund upon such closing-out, and the return and/ or cancellation of
the receipts, if any, issued by the Custodian with respect to the
short sale being closed-out, pay out of the moneys held for the
account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the
Certificate.
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ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement
with respect to Securities and money held by the Custodian hereunder,
the Fund shall deliver to the Custodian a Certificate, or in the
event such Reverse Repurchase Agreement is a Money Market Security, a
Certificate, Oral Instructions, or Written Instructions specifying:
(a) the Series for which the Reverse Repurchase Agreement is entered;
(b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with whom
the Reverse Repurchase Agreement is entered; (d) the amount and kind
of Securities to be delivered by the Fund to such broker, dealer, or
financial institution; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be
deposited in a Senior Security Account for such Series in connection
with such Reverse Repurchase Agreement. The Custodian shall, upon
receipt of
the total amount payable to the Fund specified in the Certificate,
Oral Instructions, or Written Instructions make the delivery to the
broker, dealer, or financial institution and the deposits, if any, to
the Senior Security Account, specified in such Certificate, Oral
Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agreement
described in preceding paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate, Oral
Instructions, or Written Instructions to the Custodian specifying:
(a) the Reverse Repurchase Agreement being terminated and the Series
for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of
Securities to be received by the Fund and specifically allocated to
such Series in connection with such termination; (d) the date of
termination; (e) the name of the broker, dealer, or financial
institution with whom the Reverse Repurchase Agreement is to be
terminated; and (f) the amount of cash and/or the amount and kind of
Securities to be withdrawn from the Senior Securities Account for
such Series. The Custodian shall, upon receipt of the amount and kind
of Securities to be received by the Fund specified in the
Certificate, Oral Instructions, or Written Instructions, make the
payment to the broker, dealer, or financial institution and the
withdrawals, if any, from the Senior Security Account, specified in
such Certificate, Oral Instructions, or Written Instructions.
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<PAGE>
3. The Certificates, Oral Instructions, or Written Instructions
described in paragraphs 1 and 2 of this Article may with respect to
any particular Reverse Repurchase Agreement be combined and delivered
to the Custodian at the time of entering into such Reverse Repurchase
Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall
deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan: (a) the Series to which
the loaned Securities are specifically allocated; (b) the name of the
issuer and the title of the Securities, (c) the number of shares or
the principal amount loaned, (d) the date of loan and delivery, (e)
the total amount to be delivered to the Custodian against the loan of
the Securities, including the amount of cash collateral and the
premium, if any, separately identified, and (f) the name of the
broker, dealer, or financial institution
to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the total
amount designated in the Certificate as to be delivered against the
loan of Securities. The Custodian may accept payment in connection
with a delivery otherwise than through the Book-Entry System or a
Depository only in the form of a certified or bank cashier's check
payable to the order of the Fund or the Custodian drawn on New York
Clearing House funds.
2. In connection with each termination of a loan of Securities
by the Fund, the Fund shall deliver or cause to be delivered to the
Custodian a Certificate specifying with respect to each such loan
termination and return of Securities: (a) the Series to which the
loaned Securities are specifically allocated; (b) the name of the
issuer and the title of the Securities to be returned, (c) the number
of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any
offsetting credits as described in said Certificate), and (f) the
name of the broker, dealer, or financial institution from which the
Securities will be returned. The Custodian shall receive all
Securities returned from the broker, dealer, or financial institution
to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total
amount payable upon such return of Securities as set forth in the
Certificate.
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<PAGE>
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and
from time to time make such deposits thereto, or withdrawals
therefrom, as specified in a Certificate. Such Certificate shall
specify the Series for which such deposit or withdrawal is to be made
and the amount of cash and/or the amount and kind of Securities
specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the
event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the
principal amount of any particular Securities to be deposited by the
Custodian into, or withdrawn from, a Senior Securities Account, the
Custodian shall be under no obligation to make any such deposit or
withdrawal and shall promptly notify the Fund that no such deposit
has been made.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or
Clearing Member in whose name, or for whose benefit, the account was
established as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian in
any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on any
such property whenever the Custodian has made payment or delivery
pursuant to any Put Option guarantee letter or similar document or
any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are
less than the Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such deficiency shall be a
debt owed the Custodian by the Fund within the scope of Article XIV
herein.
5. On each business day the Custodian shall furnish the Fund
with a statement with respect to each Margin Account in which money
or Securities are held specifying as of the close of business on the
previous business day: (a) the name of the
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<PAGE>
Margin Account; (b) the amount and kind of Securities held therein;
and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission
merchant specified in the name of a Margin Account a copy of the
statement furnished the Fund with respect to such Margin Account.
6. The Custodian shall establish a Collateral Account and from
time to time shall make such deposits thereto as may be specified in
a Certificate. Promptly after the close of business on each business
day in which cash and/or Securities are maintained in a Collateral
Account for any Series, the Custodian shall furnish the Fund with a
statement with respect to such Collateral Account specifying the
amount of cash and/or the amount and kind of Securities held therein.
No later than the close of business next succeeding the delivery to
the Fund of such statement, the Fund shall furnish to the Custodian a
Certificate or Written Instructions specifying the then market value
of the Securities described in such statement. In the event such then
market value is indicated to be less than the Custodian's obligation
with respect to any outstanding Put Option guarantee letter or
similar document, the Fund shall promptly specify in a Certificate
the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Trustees of the Fund, certified by the
Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk,
either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date
of payment thereof, the record date as of which shareholders entitled
to payment shall be determined, the amount payable per Share of such
Series to the shareholders of record as of that date and the total
amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii)
authorizing with respect to the Series specified therein and the
declaration of dividends and distributions thereon the Custodian to
rely on Oral Instructions, Written Instructions, or a Certificate
setting forth the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the
amount payable per Share of such Series to the shareholders of record
as of that date and the total amount payable to the Dividend Agent on
the payment date.
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<PAGE>
2. Upon the payment date specified in such resolution, Oral
Instructions, Written Instructions, or Certificate, as the case may
be, the Custodian shall pay to the Transfer Agent Account out of the
moneys held for the account of the Series specified therein the total
amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or
cause to be delivered, to the Custodian a Certificate duly
specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
(b) The amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate
account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the name
of the Series for which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall
pay, out of the money held for the account of such Series, all
original issue or other taxes required to be paid by the Fund in
connection with such issuance upon the receipt of a Certificate
specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian
hereunder in connection with a redemption of any Shares, it shall
furnish, or cause to be furnished, to the Custodian a Certificate
specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting
forth the Series and number of Shares received by the Transfer Agent
for redemption and that such Shares are in good form for redemption,
the Custodian shall make payment to the Transfer Agent Account out of
the moneys held in the separate account in the name of the Series the
total amount specified in the Certificate issued pursuant to the
foregoing paragraph 4 of this Article.
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ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds
on behalf of any Series which results in an overdraft because the
moneys held by the Custodian in the separate account for such Series
shall be insufficient to pay the total amount payable upon a purchase
of Securities specifically allocated to such Series, as set forth in
a Certificate, Oral Instructions, or Written Instructions or which
results in an overdraft in the separate account of such Series for
some other reason, or if the Fund is for any other reason indebted to
the Custodian with respect to a Series, (except a borrowing for
investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the
provisions of paragraph 2 of this Article), such overdraft or
indebtedness shall be deemed to be a loan made by the Custodian to
the Fund for such Series payable on demand and shall bear interest
from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to the Federal Funds Rate plus
1/2%, such rate to be adjusted on the effective date of any change in
such Federal Funds Rate but in no event to be less than 6% per annum.
In addition, the Fund hereby agrees that the Custodian shall have a
continuing lien and security interest in the aggregate amount of such
overdrafts and indebtedness as may from time to time exist in and to
any property specifically allocated to such Series at any time held
by it for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's
behalf. The Fund authorizes the Custodian, in its sole discretion, at
any time to charge any such overdraft or indebtedness together with
interest due thereon against any money balance of account standing to
such Series' credit on the Custodian's books. In addition, the Fund
hereby covenants that on each Business Day on which either it intends
to enter a Reverse Repurchase Agreement and/ or otherwise borrow from
a third party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York
City time, advise the Custodian, in writing, of each such borrowing,
shall specify the Series to which the same relates, and shall not
incur any indebtedness, including pursuant to any Reverse Repurchase
Agreement, not so specified other than from the Custodian.
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<PAGE>
2. The Fund will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for investment
or for temporary or emergency purposes using Securities held by the
Custodian hereunder as collateral for such borrowings, a notice or
undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
each such borrowing: (a) the Series to which such borrowing relates;
(b) the name of the bank, (c) the amount and terms of the borrowing,
which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the
total amount payable to the Fund on the borrowing date, (g) the
market value of Securities to be delivered as collateral for such
loan, including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities, and (h)
a statement specifying whether such loan is for investment purposes
or for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified collateral
and the executed promissory note, if any, against delivery by the
lending bank of the total amount of the loan payable, provided that
the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank,
keep such collateral in its possession, but such collateral shall be
subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such
Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in
this paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the
Custodian shall receive from time to time such return of collateral
as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and
number of shares or the principal amount of any particular Securities
to be delivered as collateral by the Custodian, to any such bank, the
Custodian shall not be under any obligation to deliver any
Securities.
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ARTICLE XV
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of
its duties hereunder, and, except as hereinafter provided, neither
the Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act
or otherwise, either hereunder or under any Margin Account Agreement,
except for any such loss or damage arising out of its own negligence,
bad faith, or willful misconduct or that of its officers, employees,
or agents. The Custodian may, with respect to questions of law
arising hereunder or under any Margin Account Agreement, apply for
and obtain the advice and opinion of counsel to the Fund, at the
expense of the Fund, or of its own counsel, at its own expense, and
shall be fully protected with respect to anything done or omitted by
it in good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part
of the Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be li-
able for:
(a) The validity (but not the authenticity) of the issue of
any Securities purchased, sold, or written by or for the Fund, the
legality of the purchase, sale or writing thereof, or the propriety
of the amount paid or received therefor, as specified in a
Certificate, Oral Instructions, or Written Instructions;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor, as specified in a Certificate;
(c) The legality of the declaration or payment of
any dividend by the Fund, as specified in a resolution,
Certificate, Oral Instructions, or Written Instructions;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that
the cash collateral delivered to it by a broker, dealer, or financial
institution or held by it at any time as a result of such loan of
portfolio Securities of the
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Fund is adequate collateral for the Fund against any loss it might
sustain as a result of such loan, except that this sub-paragraph shall
not excuse any liability the Custodian may have for failing to act
in accordance with Article X hereof or any Certificate, Oral
Instructions, or Written Instructions given in accordance with this
Agreement. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or
notify the Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty or
obligation shall be the sole responsibility of the Fund. In addition,
the Custodian shall be under no duty or obligation to see that any
broker, dealer or financial institution to which portfolio Securities
of the Fund are lent pursuant to Article X of this Agreement makes
payment to it of any dividends or interest which are payable to or
for the account of the Fund during the period of such loan or at
the termination of such loan, provided, however, that the Custodian
shall promptly notify the Fund in the event that such dividends
or interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund,
except that this sub-paragraph shall not excuse any liability the
Custodian may have for failing to establish, maintain, make deposits
to or withdrawals from such accounts in accordance with this
Agreement. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be
entitled to receive from such broker, dealer, futures commission
merchant or Clearing Member, to see that any payment received by the
Custodian from any broker, dealer, futures commission merchant or
Clearing Member is the amount the Fund is entitled to receive, or to
notify the Fund of the Custodian's receipt or non-receipt of any such
payment.
3. The Custodian shall not be liable for, or considered to be
the Custodian of, any money, whether or not represented by any check,
draft, or other instrument for the payment of money, received by it
on behalf of the Fund until the Custodian actually receives such
money directly or by the final crediting of the account representing
the Fund's interest at the Book-Entry System or the Depository.
4. With respect to Securities held in a Depository, except as
otherwise provided in paragraph 5(b) of Article III hereof, the
Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to such
Securities, unless the Custodian shall have actually received timely
notice from the
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Depository in which such Securities are held. In no event shall
the Custodian have any responsibility or liability for the
failure of a Depository to collect, or for the late collection or
late crediting by a Depository of any amount payable upon Securities
deposited in a Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a
Certificate from the Fund of an overdue amount on Securities held in
a Depository the Custodian shall make a claim against the Depository
on behalf of the Fund, except that the Custodian shall not be under
any obligation to appear in, prosecute or defend any action suit or
proceeding in respect to any Securities held by a Depository which in
its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as
often as may be required, or alternatively, the Fund shall be
subrogated to the rights of the Custodian with respect to such claim
against the Depository should it so request in a Certificate. This
paragraph shall not, however, excuse any failure by the Custodian to
act in accordance with a Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund from
the Transfer Agent of the Fund nor to take any action to effect
payment or distribution by the Transfer Agent of the Fund of any
amount paid by the Custodian to the Transfer Agent of the Fund in
accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount if the Securities upon
which such amount is payable are in default, or if payment is refused
after the Custodian has timely and properly, in accordance with this
Agreement, made due demand or presentation, unless and until (i) it
shall be directed to take such action by a Certificate and (ii) it
shall be assured to its satisfaction of reimbursement of its costs
and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the
payable date and the Custodian failed to timely and properly make
such demand for payment and such failure is the reason for the
non-receipt of payment.
7. The Custodian may appoint one or more banking institutions as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians
including, but not limited to, banking institutions located in
foreign countries, of Securities and moneys at any time owned by the
Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian,
the Fund and the appointed institution.
- 33 -
<PAGE>
8. The Custodian agrees to indemnify the Fund against and save
the Fund harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising or incurred
because of the negligence, bad faith or willful misconduct of any
Sub-Custodian of the Securities and moneys owned by the Fund,
provided such Sub-Custodian is a banking institution located in a
foreign country and appointed by the Custodian pursuant to paragraph
7 of this Article.
9. The Custodian shall not be under any duty or obligation (a)
to ascertain whether any Securities at any time delivered to, or held
by it, for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such Series
under the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Fund, whether or not
involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian all reasonable out-of-pocket expenses
and such compensation as may be agreed upon from time to time between
the Custodian and the Fund. The Custodian may charge such
compensation, and any such expenses with respect to a Series incurred
by the Custodian in the performance of its duties under this
Agreement against any money specifically allocated to such Series.
The Custodian shall also be entitled to charge against any money held
by it for the account of a Series the amount of any loss, damage,
liability or expense, including counsel fees, for which it
shall be entitled to reimbursement under the provisions of this
Agreement attributable to, or arising out of, its serving as
Custodian for such Series. The expenses for which the Custodian shall
be entitled to reimbursement hereunder shall include, but are not
limited to, the expenses of sub-custodians and foreign branches of
the Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the
Fund. Notwithstanding the foregoing or anything else contained in
this Agreement to the contrary, the Custodian shall, prior to
effecting any charge for compensation, expenses, or any overdraft or
indebtedness or interest thereon, submit an invoice therefor to the
Fund.
11. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing, Oral
Instructions, or Written Instructions received by the Custodian and
reasonably believed by the Custodian to be genuine. The Fund agrees
to forward to the Custodian a Certificate or facsimile thereof
confirming Oral Instructions or Written Instructions in such manner
so that such Certificate or facsimile thereof is received by the
Custodian, whether by hand delivery, telecopier or other similar
device,
- 34 -
<PAGE>
or otherwise, by the close of business of the same day that
such Oral Instructions or Written Instructions are given to the
Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect
the validity of the transactions or enforceability of the
transactions thereby authorized by the Fund. The Fund agrees that the
Custodian shall incur no liability to the Fund in acting upon Oral
Instructions or Written Instructions given to the Custodian hereunder
concerning such transactions provided such instructions reasonably
appear to have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably
believed by the Custodian to be given in accordance with the terms
and conditions of any Margin Account Agreement. Without limiting the
generality of the foregoing, the Custodian shall be under no duty to
inquire into, and shall not be liable for, the accuracy of any
statements or representations contained in any such instrument or
other notice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member. This paragraph shall not excuse any failure by the
Custodian to have acted in accordance with any Margin Agreement it
has executed or any Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
13. The books and records pertaining to the Fund, as
described in Appendix E hereto, which are in the possession of
the Custodian shall be the property of the Fund. Such books
and records shall be prepared and maintained by the Custodian as
required by the Investment Company Act of 1940, as amended, and other
applicable securities laws and rules and regulations. The Fund, or
the Fund's authorized representatives, shall have access to such
books and records during the Custodian's normal business hours. Upon
the reasonable request of the Fund, copies of any such books and
records shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the Custodian
its expenses of providing such copies. Upon reasonable request of the
Fund, the Custodian shall provide in hard copy or on micro-film,
whichever the Custodian elects, any records included in any such
delivery which are maintained by the Custodian on a computer disc, or
are similarly maintained, and the Fund shall reimburse the Custodian
for its expenses of providing such hard copy or micro-film.
14. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, each Depository or O.C.C., and with
such reports on its own systems of internal accounting control as the
Fund may reasonably request from time to time.
- 35 -
<PAGE>
15. The Custodian shall furnish upon request annually to the
Fund a letter prepared by the Custodian's accountants with respect to
the Custodian's internal systems and controls in the form generally
provided by the Custodian to other investment companies for which the
Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save
the Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising out of, or
related to, the Custodian's performance of its obligations under this
Agreement, except for any such liability, claim, loss and demand
arising out of the Custodian's own negligence, bad faith, or willful
misconduct or that of its officers, employees, or agents.
17. Subject to the foregoing provisions of this Agreement, the
Custodian shall deliver and receive Securities, and receipts with
respect to such Securities, and shall make and receive payments only
in accordance with the customs prevailing from time to time among
brokers or dealers in such Securities and, except as may otherwise be
provided by this Agreement or as may be in accordance with such
customs, shall make payment for Securities only against delivery
thereof and deliveries of Securities only against payment therefor.
18. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Custodian.
ARTICLE XVI
TERMINATION
1. Except as provided in paragraph 3 of this Article, this
Agreement shall continue until terminated by either the Custodian
giving to the Fund, or the Fund giving to the Custodian, a notice in
writing specifying the date of such termination, which date shall be
not less than 60 days after the date of the giving of such notice. In
the event such notice or a notice pursuant to paragraph 3 of this
Article is given by the Fund, it shall be accompanied by a copy of a
resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund,
electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be eligible to serve as
a custodian for the securities of a management investment company
under the Investment Company Act of 1940. In the event such notice is
given by the Custodian, the Fund shall, on or before the termination
date, deliver to the Custodian a copy of a resolution of the Board of
Trustees
- 36 -
<PAGE>
of the Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor
custodian or custodians. In the absence of such designation by the
Fund, the Custodian may designate a successor custodian which shall
be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall
upon receipt of a notice of acceptance by the successor custodian on
that date deliver directly to the successor custodian all Securities
and moneys then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall
upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of all Securities
(other than Securities held in the Book-Entry System which cannot be
delivered to the Fund) and moneys then owned by the Fund be deemed to
be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry
System which cannot be delivered to the Fund to hold such Securities
hereunder in accordance with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate
this Agreement upon the date specified in a written notice
in the event of the "Bankruptcy" of The Bank of New York. As
used in this sub-paragraph, the term "Bankruptcy" shall mean The Bank
of New York's making a general assignment, arrangement or composition
with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of insolvency
or bankruptcy or the entry of a order for relief under any applicable
bankruptcy law or any other relief under any bankruptcy or insolvency
law or other similar law affecting creditors' rights, or if a
petition is presented for the winding up or liquidation of the party
or a resolution is passed for its winding up or liquidation, or it
seeks, or becomes subject to, the appointment of an administrator,
receiver, trustee, custodian or other similar official for it or for
all or substantially all of its assets or its taking any action in
furtherance or, or indicating its consent to approval of, or
acquiescence in, any of the foregoing.
- 37 -
<PAGE>
ARTICLE XVII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be
obligated to have or utilize the Terminal Link, and the provisions of
this Article shall apply if, but only if, the Fund in its sole and
absolute discretion elects to utilize the Terminal Link to transmit
Certificates to and to receive notices from the Custodian.
2. The parties hereto shall utilize the Terminal Link only for
the purpose of the Fund providing Certificates to the Custodian and
the Custodian providing notices to the Fund and only after the Fund
and the Custodian shall have established access codes and internal
safekeeping procedures to safeguard and protect the confidentiality
and availability of such access codes. Each use of the Terminal Link
by the Fund shall constitute a representation and warranty that at
least two such access codes have been utilized and that such
procedures have been established.
3. Each party shall obtain and maintain at its own cost and
expense all equipment and services, including, but not limited to
communications services, necessary for it to utilize the Terminal
Link, and the other party shall not be responsible for the
reliability or availability of any such equipment or services, except
that the Custodian shall not pay any communications costs of any line
leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as
part of, or through the Terminal and any proprietary data, software,
processes, information and documentation (other than any such which
are or become part of the public domain or are legally required
to be made available to the public) (collectively, the "Information"),
are the exclusive and confidential property of the Custodian.
The Fund shall, and shall cause others to which it discloses the
Information, to keep the Information confidential by using the same
care and discretion it uses with respect to its own confidential
property and trade secrets, and shall neither make nor permit any
disclosure without the express prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund
shall return to the Custodian any and all copies of the Information
which are in the Fund's possession or under its control, or which the
Fund distributed to third parties. The provisions of this Article
shall not affect the copyright status of any of the Information which
may be copyrighted and shall apply to all Information whether or not
copyrighted.
- 38 -
<PAGE>
6. The Custodian reserves the right to modify the Terminal Link
from time to time without notice to the Fund, except that the
Custodian shall give the Fund notice not less than 75 days in advance
of any modification which would materially adversely affect the
Fund's operation, and the Fund agrees not to modify or attempt to
modify the Terminal Link without the Bank's prior written consent.
The Fund acknowledges that the Terminal Link is the property of the
Custodian and, accordingly, the Fund agrees that any modifications to
the Terminal Link, whether by the Fund or the Custodian and whether
with or without the Custodian's consent, shall become the property of
the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it
utilizes or the Fund utilizes in connection with the Terminal Link
makes any warranties or representations, express or implied, in fact
or in law, including but not limited to warranties of merchantability
and fitness for a particular purpose.
8. Each party will, and will cause its officers and employees
to, treat the user and authorization codes, passwords and
authentication keys applicable to Terminal Link with extreme care.
Each party hereby irrevocably authorizes the other to act in
accordance with and rely on Certificates and notices received by it
through the Terminal Link. Each party acknowledges that it is its
responsibility to assure that only its authorized persons use the
Terminal Link on its behalf, and that a party shall not be
responsible nor liable for use of the Terminal Link on its behalf of
the other party by unauthorized persons except that the other party
shall be liable for such use thereof by unauthorized persons who have
obtained access thereto as a result of the bad faith or willful
misconduct of such party or any of its officers or employees.
9. Notwithstanding anything else in this Agreement to the
contrary, neither party shall have any liability to the other for any
losses, damages, injuries, claims, costs or expenses arising as a
result of a delay, omission or error in the transmission of a
Certificate or notice by use of the Terminal Link except for money
damages for those suffered as the result of the negligence, bad faith
or willfull misconduct of such party or its officers, employees or
agents in an amount not exceeding for any incident $100,000,
provided, however, that a party shall have no liability under this
Section 9 if the other party fails to comply with the provisions of
Section 11.
10. Without limiting the generality of the foregoing, it is
hereby agreed that in no event shall either party or any manufacturer
or supplier of its computer equipment, software or services relating
to the Terminal Link be responsible for
- 39 -
<PAGE>
any special, indirect, incidental or consequential damages which the
other party may incur or experience by reason of its use of the
Terminal Link even if such party, manufacturer or supplier has been
advised of the possibility of such damages, nor with respect to the
use of the Terminal Link shall either party or any such manufacturer or
supplier be liable for acts of God, or with respect to the following
to the extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of
communication facilities, labor difficulties or any other similar or
dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions
or interruptions in, or delay or unavailability of, the Terminal Link
as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the business day on which
discovery should have occurred through the exercise of reasonable
care and (iii) in the case of any error, the date of actual receipt
of the earliest notice which reflects such error, it being agreed
that discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the
Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Terminal Link.
12. Each party shall, as soon as practicable after its receipt
of a Certificate or of any notice transmitted by the Terminal Link,
verify to the other party by use of the Terminal Link its receipt of
such Certificate or notice, and in the absence of such verification a
party to whom a Certificate or notice is sent shall not be liable for
any failure to act in accordance with such Certificate or notice, and
the sending party may not claim that such Certificate or notice was
received by the other.
ARTICLE XVIII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two
of the present Officers of the Fund under its seal, setting forth the
names and the signatures of the present Authorized Persons. The Fund
agrees to furnish to the Custodian a new Certificate in similar form
in the event that any such present Authorized Person ceases to be an
Authorized Person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new Certificate shall be
received, the Custodian shall be entitled to rely and to act upon
Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to
the extent provided by this Agreement.
- 40 -
<PAGE>
2. Annexed hereto as Appendix B is a Certificate signed by two
of the present Officers of the Fund under its seal, setting forth the
names and the signatures of the present Officers of the Fund. The
Fund agrees to furnish to the Custodian a new Certificate in similar
form in the event any such present Officer ceases to be an Officer of
the Fund, or in the event that other or additional Officers are
elected or appointed. Until such new Certificate shall be received,
the Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered
Certificate to the extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, other than
any Certificate or Written Instructions, shall be sufficiently given
if addressed to the Custodian and mailed or delivered to it at its
offices at 90 Washington Street, New York, New York 10286, or at such
other place as the Custodian may from time to time designate in
writing.
4. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be
sufficiently given if addressed to the Fund and mailed or delivered
to it at its office at the address for the Fund first above written,
or at such other place as the Fund may from time to time designate in
writing.
5. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement and approved by a resolution of the Board
of Trustees of the Fund, except that Appendices A and B may be
amended unilaterally by the Fund without such an approving
resolution.
6. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the
Fund without the written consent of the Custodian, or by the
Custodian or The Bank of New York without the written consent of the
Fund, authorized or approved by a resolution of the Fund's Board of
Trustees. For purposes of this paragraph, no merger, consolidation,
or amalgamation of the Custodian, The Bank of New York, or the Fund
shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws
of the State of New York without giving effect to conflict of laws
principles thereof. Each party hereby consents to the jurisdiction of
a state or federal court situated in New York City, New York in
connection with any dispute arising hereunder and hereby waives its
right to trial by jury.
- 41 -
<PAGE>
8. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file
with the Secretary of The Commonwealth of Massachusetts, and notice
is hereby given that this instrument is executed on behalf of the
Board of Trustees of the Fund as Trustees and not individually and
that the obligations of this instrument are not binding upon any of
the Trustees or shareholders individually but are binding only upon
the assets and property of the Fund; provided, however, that the
Declaration of Trust of the Fund provides that the assets of a
particular Series of the Fund shall under no circumstances be charged
with liabilities attributable to any other Series of the Fund and
that all persons extending credit to, or contracting with or having
any claim against a particular Series of the Fund shall look only to
the assets of that particular Series for payment of such credit,
contract or claim.
- 42 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement 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 MULTI-STATE
MUNICIPAL SERIES TRUST
[SEAL] By:_______________________
Attest:
- -----------------------
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
- -----------------------
- 43 -
<PAGE>
APPENDIX A
I, , President and I,
of ,
a Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals have been duly authorized by the Board
of Trustees of the Fund in conformity with the Fund's Declaration of
Trust and By-Laws to give Oral Instructions and Written Instructions
on behalf of the Fund, except that those persons designated as being
an "Officer of DWTC" shall be an Authorized Person only for purposes
of Articles XII and XIII. The signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
- ----------------- ---------------- -----------------
<PAGE>
APPENDIX B
I, , President and I,
of , a
Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals for whom a position other than
"Officer of DWTC" is specified serve in the following positions with
the Fund and each has been duly elected or appointed by the Board of
Trustees of the Fund to each such position and qualified therefor in
conformity with the Fund's Declaration of Trust and By-Laws. With
respect to the following individuals for whom a position of "Officer
of DWTC" is specified, each such individual has been designated by a
resolution of the Board of Trustees of the Fund to be an Officer for
purposes of the Fund's Custody Agreement with The Bank of New York,
but only for purposes of Articles XII and XIII thereof and a
certified copy of such resolution is attached hereto. The signatures
of each individual below set forth opposite their respective names
are their true and correct signatures:
Name Position Signature
- -------------------- ------------------- -----------------
<PAGE>
APPENDIX C
The undersigned, hereby
certifies that he or she is the duly elected and acting
of (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Trustees of the
Fund at a meeting duly held on , 199 , at which a quorum at all
times present and that such resolutions have not been modified or rescinded
and are in full force an effect as of the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of , 199 (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to act in accordance with, and to rely
on instructions by the Fund to the Custodian communicated by a
Terminal Link as defined in the Custody Agreement.
RESOLVED, that the Fund shall establish access codes and grant
use of such access codes only to officers of the Fund as defined in
the Custody Agreement, and shall establish internal safekeeping
procedures to safeguard and protect the confidentiality and
availability of such access codes.
RESOLVED, that Officers of the Fund as defined in the Custody
Agreement shall, following the establishment of such access codes and
such internal safekeeping procedures, advise the Custodian that the
same have been established by delivering a Certificate, as defined in
the Custody Agreement, and the Custodian shall be entitled to rely
upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of
, as of the day of , 1991.
<PAGE>
APPENDIX D
I, Richard P. Lando, an Assistant Vice President with THE BANK OF
NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be
prepared and maintained by the Custodian and shall be the property of
the Fund:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts business
trust (the "Fund"), andfurther certifies that the following resolution was
adopted by theBoard of Trustees of the Fund at a meeting duly held on
, 1991, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of , 1991, (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis to
deposit in the Book-Entry System, as defined in the Custody Agreement,
all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to
utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and
returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1991.
---------------------------
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts business Trust (the "Fund"), and
further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1991, at
which a quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect as of
the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of , 1991, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as
it receives a Certificate, as defined in the Custody Agreement,
to the contrary to deposit in The Depository Trust Company
("DTC"), as a "Depository" as defined in the Custody Agreement,
all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to
utilize DTC to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1991.
--------------------------------
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts business Trust (the "Fund"), and
further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1991, at
which a quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect as of
the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of , 1991 (the "Custody Agreement") is authorized
and instructed on a continuous and ongoing basis until such time as
it receives a Certificate, as defined in the Custody Agreement,
to the contrary to deposit in the Participants Trust Company as
a Depository, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to
utilize the Participants Trust Company to the extent possible in
connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and
returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of , as of the day of , 1991.
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is the
duly elected and acting of , a Massachusetts
business trust (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1991, at which a quorum was
at all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of , 1991, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as
it receives a Certificate, as defined in the Custody Agreement,
to the contrary, to accept, utilize and act with respect to
Clearing Member confirmations for Options and transaction in
Options, regardless of the Series to which the same are
specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1991.
[SEAL]
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a Delaware
corporation (herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which InterCapital is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice);
(ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts
and other records required under the Investment Company Act of 1940, as
amended (the "Act"), the notification to the Fund and InterCapital of
available funds for investment, the reconciliation of account information and
balances among the Fund's custodian, transfer agent and dividend disbursing
agent and InterCapital, and the calculation of the net asset value of the
Fund's shares; (iii) provide the Fund with the services of persons competent
to perform such supervisory, administrative and clerical functions as are
necessary to provide effective operation of the Fund; (iv) oversee the
performance of administrative and professional services rendered to the Fund
by others, including its custodian, transfer agent and dividend disbursing
agent, as well as accounting, auditing and other services; (v) provide the
Fund with adequate general office space and facilities; (vi) assist in the
preparation and the printing of the periodic updating of the Fund's
registration statement and prospectus (and, in the case of an open-end Fund,
the statement of additional information), tax returns, proxy statements, and
reports to its shareholders and the Securities and Exchange Commission; and
(vii) monitor the compliance of the Fund's investment policies and
restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to
perform administrative services hereunder, it shall notify DWS in writing. If
DWS is willing to render such services, it shall notify InterCapital in
writing, whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to
time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of DWS shall be deemed to include officers
of DWS and persons employed or otherwise retained by DWS (including officers
and employees of InterCapital, with the consent of InterCapital) to furnish
services, statistical and other factual data, information with respect to
technical and scientific developments, and such other information, advice and
assistance as DWS may desire. DWS shall maintain each Fund's records and
books of account (other than those maintained by the Fund's transfer agent,
registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, DWS
shall surrender to InterCapital or to the Fund such of the books and records
so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as DWS may
reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation
or request of the Board of Directors/Trustees of the Fund.
1
<PAGE>
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of
a closed-end Fund) by applying the annual rate or rates set forth on Schedule
B to the net assets of each Fund. Except as hereinafter set forth, (i) in the
case of an open-end Fund, compensation under this Agreement shall be
calculated by applying 1/365th of the annual rate or rates to the Fund's or
the Series' daily net assets determined as of the close of business on that
day or the last previous business day and (ii) in the case of a closed-end
Fund, compensation under this Agreement shall be calculated by applying the
annual rate or rates to the Fund's average weekly net assets determined as of
the close of the last business day of each week. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before
the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth on Schedule B. Subject to the provisions
of paragraph 5 hereof, payment of DWS' compensation for the preceding month
shall be made as promptly as possible after completion of the computations
contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof
imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, or, in the case of
InterCapital Income Securities Inc. or Dean Witter Variable Investment Series
or any Series thereof, the expense limitation specified in the Fund's
Investment Management Agreement, the fee payable hereunder shall be reduced
on a pro rata basis in the same proportion as the fee payable by the Fund
under the Investment Management Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by
DWS, and such clerical help and bookkeeping services as DWS shall reasonably
require in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, DWS shall not be liable to the Fund or any of its
investors for any error of judgment or mistake of law or for any act or
omission by DWS or for any losses sustained by the Fund or its investors. It
is understood that, subject to the terms and conditions of the Investment
Management Agreement between each Fund and InterCapital, InterCapital shall
retain ultimate responsibility for all services to be performed hereunder by
DWS. DWS shall indemnify InterCapital and hold it harmless from any liability
that InterCapital may incur arising out of any act or failure to act by DWS
in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person
controlling, controlled by or under common control with DWS, and that DWS and
any person controlling, controlled by or under common control with DWS may
have an interest in the Fund. It is also understood that DWS and any
affiliated persons thereof or any persons controlling, controlled by or under
common control with DWS have and may have advisory, management,
administration service or other contracts with other organizations and
persons, and may have other interests and businesses, and further may
purchase, sell or trade any securities or commodities for their own accounts
or for the account of others for whom they may be acting.
9. This Agreement shall continue until April 30, 1995, and thereafter
shall continue automatically for successive periods of one year unless
terminated by either party by written notice delivered to the other party
within 30 days of the expiration of the then-existing period. Notwithstanding
the foregoing, this Agreement may be terminated at any time, by either party
on 30 days' written notice delivered to the other party. In the event that
the Investment Management Agreement between any Fund and InterCapital is
terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
2
<PAGE>
11. This Agreement may be assigned by either party with the written
consent of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By: /s/ Sheldon Curtis
-------------------------
Attest:
/s/ Lou Anne McInnis
- ----------------------------
DEAN WITTER SERVICES COMPANY INC.
By: /s/ Charles A. Fiumefreddo
-------------------------
Attest:
/s/ Barry Fink
- ----------------------------
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
AT APRIL 17, 1995
<TABLE>
<CAPTION>
OPEN-END FUNDS
<S> <C>
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter Balanced Growth Fund
7. Dean Witter Balanced Income Fund
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter California Tax-Free Income Fund
10. Dean Witter Capital Growth Securities
11. Dean Witter Convertible Securities Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter Diversified Income Trust
14. Dean Witter Dividend Growth Securities Inc.
15. Dean Witter European Growth Fund Inc.
16. Dean Witter Federal Securities Trust
17. Dean Witter Global Asset Allocation Fund
18. Dean Witter Global Dividend Growth Securities
19. Dean Witter Global Short-Term Income Fund Inc.
20. Dean Witter Global Utilities Fund
21. Dean Witter Health Sciences Trust
22. Dean Witter High Income Securities
23. Dean Witter High Yield Securities Inc.
24. Dean Witter Intermediate Income Securities
25. Dean Witter International Small Cap Fund
26. Dean Witter Limited Term Municipal Trust
27. Dean Witter Liquid Asset Fund Inc.
28. Dean Witter Managed Assets Trust
29. Dean Witter Mid-Cap Growth Fund
30. Dean Witter Multi-State Municipal Series Trust
31. Dean Witter National Municipal Trust
32. Dean Witter Natural Resource Development Securities Inc.
33. Dean Witter New York Municipal Money Market Trust
34. Dean Witter New York Tax-Free Income Fund
35. Dean Witter Pacific Growth Fund Inc.
36. Dean Witter Precious Metals and Minerals Trust
37. Dean Witter Premier Income Trust
38. Dean Witter Retirement Series
39. Dean Witter Select Dimensions Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Short-Term Bond Fund
42. Dean Witter Short-Term U.S. Treasury Trust
43. Dean Witter Strategist Fund
44. Dean Witter Tax-Exempt Securities Trust
45. Dean Witter Tax-Free Daily Income Trust
46. Dean Witter U.S. Government Money Market Trust
47. Dean Witter U.S. Government Securities Trust
48. Dean Witter Utilities Fund
49. Dean Witter Value-Added Market Series
50. Dean Witter Variable Investment Series
51. Dean Witter World Wide Income Trust
52. Dean Witter World Wide Investment Trust
CLOSED-END FUNDS
53. High Income Advantage Trust
54. High Income Advantage Trust II
55. High Income Advantage Trust III
56. InterCapital Income Securities Inc.
57. Dean Witter Government Income Trust
58. InterCapital Insured Municipal Bond Trust
59. InterCapital Insured Municipal Trust
60. InterCapital Insured Municipal Income Trust
61. InterCapital California Insured Municipal Income Trust
62. InterCapital Insured Municipal Securities
63. InterCapital Insured California Municipal Securities
64. InterCapital Quality Municipal Investment Trust
65. InterCapital Quality Municipal Income Trust
66. InterCapital Quality Municipal Securities
67. InterCapital California Quality Municipal Securities
68. InterCapital New York Quality Municipal Securities
</TABLE>
4
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES--APRIL 17, 1995
Monthly compensation calculated daily by applying the following annual
rates to a fund's net assets:
FIXED INCOME FUNDS
Dean Witter Balanced Income
Fund 0.60% to the net assets.
Dean Witter California
Tax-Free Income Fund 0.055% of the portion of daily net assets
not exceeding $500 million; 0.0525% of the
portion exceeding $500 million but not
exceeding $750 million; 0.050% of the
portion exceeding $750 million but not
exceeding $1 billion; and 0.0475% of the
portion of the daily net assets exceeding $1
billion.
Dean Witter Convertible
Securities Securities
Trust 0.060% of the portion of the daily net
assets not exceeding $750 million; .055% of
the portion of the daily net assets
exceeding $750 million but not exceeding $1
billion; 0.050% of the portion of the daily
net assets of the exceeding $1 billion but
not exceeding $1.5 billion; 0.0475% of the
portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.045% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $3 billion; and 0.0425% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter Diversified
Income Trust 0.040% of the net assets.
Dean Witter Federal
Securities Trust 0.055% of the portion of the daily net
assets not exceeding $1 billion; 0.0525% of
the portion of the daily net assets
exceeding $1 billion but not exceeding $1.5
billion; 0.050% of the portion of the daily
net assets exceeding $1.5 billion but not
exceeding $2 billion; 0.0475% of the portion
of the daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.045% of
the portion of daily net assets exceeding
$2.5 billion but not exceeding $5 billion;
0.0425% of the portion of the daily net
assets exceeding $5 billion but not
exceeding $7.5 billion; 0.040% of the
portion of the daily net assets exceeding
$7.5 billion but not exceeding $10 billion;
0.0375% of the portion of the daily net
assets exceeding $10 billion but not
exceeding $12.5 billion; and 0.035% of the
portion of the daily net assets exceeding
$12.5 billion.
Dean Witter Global
Short-Term
Income Fund 0.055% of the portion of the daily net
assets not exceeding $500 million; and
0.050% of the portion of the daily net
assets exceeding $500 million.
Dean Witter High Income
Securities 0.050% to the net assets.
Dean Witter High Yield
Securities Inc. 0.050% of the portion of the daily net
assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; 0.035% of the
portion of
B-1
<PAGE>
the daily net assets exceeding $1 billion
but not exceeding $2 billion; 0.0325% of the
portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and
0.030% of the portion of daily net assets
exceeding $3 billion.
Dean Witter Intermediate
Income Securities 0.060% of the portion of the daily net
assets not exceeding $500 million; 0.050% of
the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.040% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; and 0.030% of the
portion of the daily net assets exceeding $1
billion.
Dean Witter Limited Term
Municipal Trust 0.050% to the net assets.
Dean Witter Multi-State
Municipal
Series Trust (10) 0.035% to the net assets.
Dean Witter National
Municipal Trust 0.035% to the net assets.
Dean Witter New York
Tax-Free
Income Fund 0.055% to the net assets not exceeding $500
million and 0.0525% of the net assets
exceeding $500 million.
Dean Witter Premier
Income Trust 0.050% to the net assets.
Dean Witter Retirement
Series
Intermediate Income 0.065% to the net assets.
Dean Witter Retirement
Series
U.S. Government Securities
Trust 0.065% to the net assets.
Dean Witter Select
Dimensions
Series-North American
Government
Securities Portfolio 0.65% to the net assets.
Dean Witter Short-Term
Bond Fund 0.070% to the net assets.
Dean Witter Short-Term U.S.
Treasury Trust 0.035% to the net assets.
Dean Witter Tax-Exempt
Securities Trust 0.050% of the portion of the daily net
assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; and 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.25 billion;
.0325% of the portion of the daily net
assets exceeding $1.25 billion.
Dean Witter U.S. Government
Securities Trust 0.050% of the portion of such daily net
assets not exceeding $1 billion; 0.0475% of
the portion of such daily net assets
exceeding $1 billion but not exceeding $1.5
billion; 0.045% of the portion of such daily
net assets exceeding $1.5 billion but not
exceeding $2 billion; 0.0425% of the portion
of such daily net assets exceeding $2
billion but not exceeding $2.5 billion;
0.040% of that portion of such daily net
assets exceeding $2.5 billion but not
exceeding $5 billion; 0.0375% of that
portion
B-2
<PAGE>
of such daily net assets exceeding $5
billion but not exceeding $7.5 billion;
0.035% of that portion of such daily net
assets exceeding $7.5 billion but not
exceeding $10 billion; 0.0325% of that
portion of such daily net assets exceeding
$10 billion but not exceeding $12.5 billion;
and 0.030% of that portion of such daily net
assets exceeding $12.5 billion.
Dean Witter Variable
Investment
Series-High Yield 0.050% to the net assets.
Dean Witter Variable
Investment Series-Quality
Income 0.050% to the net assets.
Dean Witter World Wide
Income Trust 0.075% of the daily net assets up to $250
million; 0.060% of the portion of the daily
net assets exceeding $250 million but not
exceeding $500 million; 0.050% of the
portion of the daily net assets of the
exceeding $500 million but not exceeding
$750 milliion; 0.040% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; and 0.030% of the
daily net assets exceeding $1 billion.
Dean Witter Select Municipal
Reinvestment Fund 0.050% to the net assets.
EQUITY FUNDS
Dean Witter American Value
Fund 0.0625% of the portion of the daily net
assets not exceeding $250 million and 0.050%
of the portion of the daily net assets
exceeding $250 million.
Dean Witter Balanced Growth
Fund 0.60% to the net assets.
Dean Witter Capital Growth
Securities 0.065% to the portion of daily net assets
not exceeding $500 million; 0.055% of the
portion exceeding $500 million but not
exceeding $1 billion; 0.050% of the portion
exceeding $1 billion but not exceeding $1.5
billion; and 0.0475% of the net assets
exceeding $1.5 billion.
Dean Witter Developing
Growth Securities Trust 0.050 of the portion of daily net assets not
exceeding $500 million; and 0.0475% of the
portion of daily net assets exceeding $500
million.
Dean Witter Dividend Growth
Securities Inc. 0.0625% of the portion of the daily net
assets not exceeding $250 million; 0.050% of
the portion exceeding $250 million but not
exceeding $1 billion; 0.0475% of the portion
of daily net assets exceeding $1 billion but
not exceeding $2 billion; 0.045% of the
portion of daily net assets exceeding $2
billion but not exceeding $3 billion;
0.0425% of the portion of daily net assets
exceeding $3 billion but not exceeding $4
billion; 0.040% of the portion of daily net
assets exceeding $4 billion but not
exceeding $5 billion; 0.0375% of the portion
of the daily net assets exceeding $5 billion
but not exceeding $6 billion; 0.035% of the
portion of the daily net assets exceeding $6
billion but not exceeding $8 billion; and
0.0325% of the portion of the daily net
assets exceeding $8 billion.
B-3
<PAGE>
Dean Witter European Growth
Fund Inc. 0.060% of the portion of daily net assets
not exceeding $500 million; and 0.057% of
the portion of daily net assets exceeding
$500 million.
Dean Witter Global Asset
Allocation Fund 1.0% to the net assets.
Dean Witter Global Dividend
Growth Securities 0.075% to the net assets.
Dean Witter Global Utilities
Fund 0.065% to the net assets.
Dean Witter Health Sciences
Trust 0.10% to the net assets.
Dean Witter International
Small Cap Fund 0.075% to the net assets.
Dean Witter Managed Assets
Trust 0.060% to the daily net assets not exceeding
$500 million and 0.055% to the daily net
assets exceeding $500 million.
Dean Witter Mid-Cap Growth
Fund 0.75% to the net assets.
Dean Witter Natural Resource
Development Securities Inc. 0.0625% of the portion of the daily net
assets not exceeding $250 million and 0.050%
of the portion of the daily net assets
exceeding $250 million.
Dean Witter Pacific Growth
Fund Inc. 0.060% of the portion of daily net assets
not exceeding $1 billion; and 0.057% of the
portion of daily net assets exceeding $1
billion.
Dean Witter Precious Metals
and Minerals Trust 0.080% to the net assets.
Dean Witter Retirement
Series American Value 0.085% to the net assets.
Dean Witter Retirement
Series Capital Growth 0.085% to the net assets.
Dean Witter Retirement
Series Dividend Growth 0.075% to the net assets.
Dean Witter Retirement
Series Global Equity 0.10% to the net assets.
Dean Witter Retirement
Series Intermediate Income
Securities 0.065% to the net assets.
Dean Witter Retirement
Series Liquid Asset 0.050% to the net assets.
Dean Witter Retirement
Series Strategist 0.085% to the net assets.
Dean Witter Retirement
Series U.S. Government
Money Market 0.050% to the net assets.
Dean Witter Retirement
Series U.S. Government
Securities 0.065% to the net assets.
Dean Witter Retirement
Series Utilities 0.075% to the net assets.
B-4
<PAGE>
Dean Witter Retirement
Series Value Added 0.050% to the net assets.
Dean Witter Select
Dimensions Series-
American Value Portfolio 0.625% to the net assets.
Balanced Portfolio 0.75% to the net assets.
Core Equity Portfolio 0.85% to the net assets.
Developing Growth Portfolio 0.50% to the net assets.
Diversified Income Portfolio 0.40% to the net assets.
Dividend Growth Portfolio 0.625% to the net assets.
Emerging Markets Portfolio 1.25% to the net assets.
Global Equity Portfolio 1.0% to the net assets.
Utilities Portfolio 0.65% to the net assets.
Value-Added Market Portfolio 0.50% to the net assets.
Dean Witter Strategist Fund 0.060% of the portion of daily net assets
not exceeding $500 million; 0.055% of the
portion of the daily net assets exceeding
$500 million but not exceeding $1 billion;
and 0.050% of the portion of the daily net
assets exceeding $1 billion.
Dean Witter Utilities Fund 0.065% of the portion of daily net assets
not exceeding $500 million; 0.055% of the
portion exceeding $500 million but not
exceeding $1 billion; 0.0525% of the portion
exceeding $1 billion but not exceeding $1.5
billion; 0.050% of the portion exceeding
$1.5 billion but not exceeding $2.5 billion;
0.0475% of the portion exceeding $2.5
billion but not exceeding $3.5 billion;
0.045% of the portion of the daily net
assets exceeding $3.5 but not exceeding $5
billion; and 0.0425% of the portion of daily
net assets exceeding $5 billion.
Dean Witter Value-Added
Market Series 0.050% of the portion of daily net assets
not exceeding $500 million; and 0.45% of the
portion of daily net assets exceeding $500
million.
Dean Witter Variable
Investment Series-Capital
Growth 0.065% to the net assets.
Dean Witter Variable
Investment Series-Dividend
Growth 0.0625% of the portion of daily net assets
not exceeding $500 million; and 0.050% of
the portion of daily net assets exceeding
$500 million.
Dean Witter Variable
Investment Series-Equity 0.050% to the net assets.
Dean Witter Variable
Investment Series-European
Growth 0.060% to the net assets.
Dean Witter Variable
Investment Series-Managed 0.050% to the net assets.
Dean Witter Variable
Investment Series-Utilities 0.065% of the portion of daily net assets
exceeding $500 million and 0.055% of the
portion of daily net assets exceeding $500
million.
Dean Witter World Wide
Investment Trust 0.055% of the portion of daily net assets
not exceeding $500 million; and 0.05225% of
the portion of daily net assets exceeding
$500 million.
B-5
<PAGE>
MONEY MARKET FUNDS
Active Assets Account (4) 0.050% of the portion of the daily net
assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net
assets exceeding $1.5 billion but not
exceeding $2 billion; 0.030% of the portion
of the daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275% of
the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3
billion; and 0.025% of the portion of the
daily net assets exceeding $3 billion.
Dean Witter California
Tax-Free Daily Income Trust 0.050% of the portion of the daily net
assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net
assets exceeding $1.5 billion but not
exceeding $2 billion; 0.030% of the portion
of the daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275% of
the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3
billion; and 0.025% of the portion of the
daily net assets exceeding $3 billion.
Dean Witter Liquid Asset
Fund Inc. 0.050% of the portion of the daily net
assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.35 billion;
0.0325% of the portion of the daily net
assets exceeding $1.35 billion but not
exceeding $1.75 billion; 0.030% of the
portion of the daily net assets exceeding
$1.75 billion but not exceeding $2.15
billion; 0.0275% of the portion of the daily
net assets exceeding $2.15 billion but not
exceeding $2.5 billion; 0.025% of the
portion of the daily net assets exceeding
$2.5 billion but not exceeding $15 billion;
0.0249% of the portion of the daily net
assets exceeding $15 billion but not
exceeding $17.5 billion; and 0.0248% of the
portion of the daily net assets exceeding
$17.5 billion.
Dean Witter New York
Municipal Money Market
Trust 0.050% of the portion of the daily net
assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net
assets exceeding $1.5 billion but not
exceeding $2 billion; 0.030% of the portion
of the daily net assets exceeding $2 bil-
B-6
<PAGE>
lion but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3
billion; and 0.025% of the portion of the
daily net assets exceeding $3 billion.
Dean Witter Retirement
Series Liquid Assets 0.050% of the net assets.
Dean Witter Retirement
Series U.S. Government
Money Market 0.050% of the net assets.
Dean Witter Select
Dimensions Series- Money
Market Portfolio 0.50% to the net assets.
Dean Witter Tax-Free Daily
Income Trust 0.050% of the portion of the daily net
assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net
assets exceeding $1.5 billion but not
exceeding $2 billion; 0.030% of the portion
of the daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275% of
the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3
billion; and 0.025% of the portion of the
daily net assets exceeding $3 billion.
Dean Witter U.S. Government
Money Market Trust 0.050% of the portion of the daily net
assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets
exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the
daily net assets exceeding $750 million but
not exceeding $1 billion; 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net
assets exceeding $1.5 billion but not
exceeding $2 billion; 0.030% of the portion
of the daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275% of
the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3
billion; and 0.025% of the portion of the
daily net assets exceeding $3 billion.
Dean Witter Variable
Investment Series-Money
Market 0.050% to the net assets.
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
CLOSED-END FUNDS
Dean Witter Government
Income Trust 0.060% to the average weekly net assets.
High Income Advantage Trust 0.075% of the portion of the average weekly
net assets not exceeding $250 million;
0.060% of the portion of average weekly net
assets exceeding $250 million and not
exceeding $500 million; 0.050% of the
portion of average weekly net assets
exceeding $500 million and not exceeding
$750 million; 0.040% of the portion of
average weekly net assets exceeding
B-7
<PAGE>
$750 million and not exceeding $1 billion;
and 0.030% of the portion of average weekly
net assets exceeding $1 billion.
High Income Advantage
Trust II 0.075% of the portion of the average weekly
net assets not exceeding $250 million;
0.060% of the portion of average weekly net
assets exceeding $250 million and not
exceeding $500 million; 0.050% of the
portion of average weekly net assets
exceeding $500 million and not exceeding
$750 million; 0.040% of the portion of
average weekly net assets exceeding $750
million and not exceeding $1 billion; and
0.030% of the portion of average weekly net
assets exceeding $1 billion.
High Income Advantage
Trust III 0.075% of the portion of the average weekly
net assets not exceeding $250 million;
0.060% of the portion of average weekly net
assets exceeding $250 million and not
exceeding $500 million; 0.050% of the
portion of average weekly net assets
exceeding $500 million and not exceeding
$750 million; 0.040% of the portion of the
average weekly net assets exceeding $750
million and not exceeding $1 billion; and
0.030% of the portion of average weekly net
assets exceeding $1 billion.
InterCapital Income
Securities Inc. 0.050% to the average weekly net assets.
InterCapital Insured
Municipal Bond Trust 0.035% to the average weekly net assets.
InterCapital Insured
Municipal Trust 0.035% to the average weekly net assets.
InterCapital Insured
Municipal Income Trust 0.035% to the average weekly net assets.
InterCapital California
Insured Municipal Income
Trust 0.035% to the average weekly net assets.
InterCapital Quality
Municipal Investment Trust 0.035% to the average weekly net assets.
InterCapital New York
Quality Municipal
Securities 0.035% to the average weekly net assets.
InterCapital Quality
Municipal Income Trust 0.035% to the average weekly net assets.
InterCapital Quality
Municipal Securities 0.035% to the average weekly net assets.
InterCapital California
Quality Municipal
Securities 0.035% to the average weekly net assets.
InterCapital Insured
Municipal Securities 0.035% to the average weekly net assets.
InterCapital Insured
California Municipal
Securities 0.035% to the average weekly net assets.
B-8
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
January 9, 1996, relating to the financial statements and financial highlights
of Dean Witter Multi-State Municipal Series Trust (comprised of the Arizona
Series, California Series, Florida Series, Massachusetts Series, Michigan
Series, Minnesota Series, New Jersey Series, New York Series, Ohio Series and
Pennsylvania Series) 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
reference to us under the heading "Financial Highlights" in such Prospectus and
to the references to us under the headings "Independent Accountants" and
"Experts" in the Statement of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 19, 1996
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST
WHEREAS, Dean Witter Multi-State Municipal Series Trust (the "Fund")
is engaged in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, on January 15, 1991, the Fund and Dean Witter Reynolds Inc.
("DWR") entered into a separate Distribution Agreement, pursuant to which the
Fund employed DWR as distributor of the Fund's shares; and
WHEREAS, on January 15, 1991, the Fund adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act, and the Trustees then determined that
there was a reasonable likelihood that the Plan of Distribution would benefit
the Fund and its shareholders; and
WHEREAS, the Trustees believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to continue
to benefit the Fund and its shareholders; and
WHEREAS, the Fund and DWR desire to substitute DW Distributors Inc.
(the "Distributor") in the place of DWR as distributor of the Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will
continue to promote the sale of Fund shares and provide personal services to
Fund shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor have entered into a separate
Distribution Agreement dated as of this date, pursuant to which the Fund has
employed the Distributor in such capacity during the continuous offering of
shares of the Fund.
NOW, THEREFORE, the Fund hereby amends and restates the Plan of
Distribution previously adopted, and the Distributor hereby agrees to the terms
of said Plan of Distribution (the "Plan"), as amended and restated herein, in
accordance with Rule 12b-1 under the Act on the following terms and conditions:
1. The Fund is hereby authorized to utilize its assets to finance
certain activities in connection with the distribution of its shares.
2. Subject to the supervision of the Board of Trustees and the terms
of the Distribution Agreement, the Distributor is authorized to promote the
distribution of the Fund's shares and to provide related services through DWR,
its affiliates or other broker-dealers it may select, and its own Registered
Representatives. The Distributor, DWR, its affiliates and said broker-dealers
shall be reimbursed, directly or through the Distributor, as it may direct, as
provided in paragraph 4 hereof for their services and expenses, which may
include one or more of the following: (1) compensation to, and expenses of,
account executives and other employees, including overhead and telephone
expenses; (2) sales incentives and bonuses to sales representatives of the
Distributor, DWR, its affiliates and other broker-dealers, and to marketing
personnel in connection with promoting sales of shares of the Fund; (3) expenses
incurred in connection with promoting sales of shares of the Fund; (4) preparing
and distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio, newspaper,
magazine and other media advertisements.
3. The Distributor hereby undertakes to directly bear all costs of
rendering the services to be performed by it under this Plan and under the
Distribution Agreement, except for those specific expenses that the Board of
Trustees determines to reimburse as hereinafter set forth.
4. The Fund is hereby authorized to reimburse the Distributor, DWR,
its affiliates and other broker-dealers for distribution expenses incurred by
them specifically on behalf of the Fund. Reimbursement will be made through
payments at the end of each month in such amounts determined at the beginning of
each calendar year (in the case of reimbursement for expenses representing only
a gross credit to account executives of the Distributor and other broker-
dealers, including DWR) or calendar quarter (in the case of all other expenses)
by the Fund's Board of Trustees, including a majority of the Trustees who are
not "interested persons" of the Fund, as defined in the Act. The amount of each
monthly payment may in no event exceed an amount equal to a payment at the
annual rate of 0.15 of 1% of the average net assets of the Fund during the
month. In the event that the Distributor proposes that monies shall be
reimbursed for other than expenses representing a gross credit to account
executives, then in making quarterly determinations of the amounts that may be
expended by the Fund, the Distributor shall provide, and the Trustees shall
review, a quarterly budget of projected distribution expenses to be incurred by
the Distributor, DWR, its affiliates or other broker-dealers on behalf of the
Fund, together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Board of Trustees shall determine the particular
expenses that may be borne by the Fund, and in making such determination shall
consider the scope of the Distributor's commitment to promoting the distribution
of the shares of the Fund directly or through DWR, its affiliates or other
broker-dealers.
5. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to DWR, its affiliates or
other broker-dealers.
6. If, as of the end of any fiscal year, the actual expenses
incurred by the Distributor, DWR, its affiliates and other broker-dealers on
behalf of the Fund (including accrued expenses and amounts reserved for
incentive compensation and bonuses) are less than the amount of payments made by
the Fund pursuant to this Plan, the Distributor shall promptly make appropriate
reimbursement to the Fund. If, however, as of the end of any fiscal
year, the actual expenses of the Distributor, DWR, its affiliates and other
broker-dealers are greater than the amount of payments made by the Fund pursuant
to this Plan, the Fund will not reimburse the Distributor, DWR, its affiliates
or other broker-dealers for such expenses through payments accrued pursuant to
this Plan in the subsequent fiscal year.
7. The Distributor shall provide the Fund for review by the Board of
Trustees, and the Board of Trustees shall review, promptly after the end of each
fiscal quarter a written report regarding the distribution expenses incurred by
the Distributor, DWR, its affiliates or other broker-dealers on behalf of the
Fund during such fiscal quarter, which report shall include: (1) an itemization
of the types of expenses and the purposes therefor; (2) the amounts of such
expenses; and (3) a description of the benefits derived by the Fund.
8. This Plan, as amended and restated, shall become effective upon approval
by a vote of the Board of Trustees of the Fund, and of the Trustees who are not
"interested persons" of the Fund, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan, cast in person at
a meeting called for the purpose of voting on this Plan.
9. This Plan shall continue in effect until April 30, 1993, and from year to
year thereafter, provided such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 8 hereof.
This Plan may not be amended to increase materially the amount to be spent for
the services described herein unless such amendment is approved by a vote of at
least a majority of the outstanding voting securities of the Fund, as defined in
the Act, and no material amendments to this Plan shall be made unless approved
in the manner provided for approval in paragraph 8 hereof.
10. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Trustees who are not "interested persons"
of the Fund, as defined in the Act, and who have no direct or indirect financial
interest in the operation of this Plan or by a vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act, on not more
than 30 days' written notice to any other party to this Plan.
11. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons of the Fund shall be committed to the discretion
of the Trustees who are not interested persons.
12. The Fund shall preserve copies of this Plan and all reports made
pursuant to paragraph 7 hereof, for a period of not less than six years from the
date of this Plan or any such report, as the case may be, the first two years in
an easily accessible place.
13. This Plan shall be construed in accordance with the laws of the State of
New York and the applicable provisions of the Act. To the extent the applicable
law of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the Act, the latter shall control.
14. The Declaration of Trust establishing Dean Witter Multi-State Municipal
Series Trust, dated October 29, 1990, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Multi-State Municipal Series Trust refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of Dean Witter Multi-State
Municipal Series Trust shall be held to any personal liability, nor shall resort
be had to their private property for the satisfaction of any obligation or claim
or otherwise, in connection with the affairs of said Dean Witter Multi-State
Municipal Series Trust, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
Plan of Distribution, as amended and restated, as of the day and year set forth
below in New York, New York.
Dated: January 15, 1991
As amended on January 4, 1993 DEAN WITTER MULTI-STATE MUNICIPAL
SERIES TRUST
Attest: By: /s/ Sheldon Curtis
-------------------------
/s/ Barry Fink
- ----------------------------
DW DISTRIBUTORS INC.
Attest: /s/ Robert M. Scanlan By: /s/ David A. Hughey
-------------------------- -------------------------
DEAN WITTER REYNOLDS INC.
By: /s/ Charles A. Fiumefreddo
-------------------------
Attest:
/s/ Marilyn K. Cranney
- ----------------------------
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - ARIZONA
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,144.50 14.45% 1.00 14.45%
30-Apr-91 $1,389.40 38.94% 4.59 7.44%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - t
- ------------- ---------- --------- --------------------
<S> <C> <C> <C>
30-Nov-94 $1,144.50 1.00 14.45%
30-Apr-91 $1,362.50 4.59 6.98%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ---------- ----------- --------- ----------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,192.10 19.21% 1.00 19.21%
30-Apr-91 $1,447.30 44.73% 4.59 8.40%
</TABLE>
(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
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
30-Apr-91 44.73 $13,894 $70,013 $140,750
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - ARIZONA
FOR THE 30 DAY PERIOD ENDED NOVEMBER 30, 1995
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{ [(( 220,215.27-22,567.90)/4,723,531*11.09)+1] -1}
= 4.57%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.57% / (1-.4298)
= 8.01%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - CALIFORNIA
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,153.50 15.35% 1.00 15.35%
15-Jan-91 $1,444.50 44.45% 4.87 7.84%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - tb
- ------------- ---------- --------- ----------------------
<S> <C> <C> <C>
30-Nov-94 $1,153.50 1.00 15.35%
15-Jan-91 $1,419.30 4.87 7.45%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION> (D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ----------- ----------- ---------------- ------------------ ----------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,201.50 20.15% 1.00 20.15%
15-Jan-91 $1,504.70 50.47% 4.87 8.75%
</TABLE>
(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
*ORIGINAL VALUE $9,600, $48,375 & $97,250 RESPECTIVELY ADJUSTED FOR 4.0%, 3.25%
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
15-Jan-91 50.47 $14,445 $72,790 $146,332
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - CALIFORNIA
FOR THE 30 DAY PERIOD ENDED NOVEMBER 30, 1995
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{ [(( 560,547.92 - 55,270.04)/10,991,538.318 * 11.11)+1] -1}
= 5.02%
(B) TAX EQUIVALENT YIELD = SEC Yield / (1- stated tax rate)
= 5.02% / (1-.46244)
= 9.34%
(C) WITHOUT WAIVER OF FEES AND ASSUMPTION OF EXPENSES. NA
6
YIELD = 2{ [ ((a-b)/c d) + 1] -1}
6
= 2{ [(( 560,547.92 - 55,270.04)/10,991,538.318 * 11.11)+1] -1}
= 5.02%
(D) TAX EQUIVALENT YIELD = SEC Yield / (1- stated tax rate) NA
= 5.02% / (1-.46244)
= 9.34%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - FLORIDA
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,147.50 14.76% 1.00 14.76%
15-Jan-91 $1,441.00 44.10% 4.87 7.78%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - tb
- ------------- ---------- --------- ----------------------
<S> <C> <C> <C>
30-Nov-94 $1,147.60 1.00 14.76%
15-Jan-91 $1,407.00 4.87 7.26%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION> (D) (G)
$1,000* EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ ----------- -------------- ------------- --------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,195.40 20.15% 1.00 19.54%
15-Jan-91 $1,501.10 50.11% 4.87 8.69%
</TABLE>
(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
*ORIGINAL VALUE $9,600, $48,375 & $97,250 RESPECTIVELY ADJUSTED FOR 4.0%, 3.25%
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
15-Jan-91 50.11 $14,411 $72,616 $145,982
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - FLORIDA
FOR THE 30 DAY PERIOD ENDED NOVEMBER 30, 1995
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{ [((326,751.69 -36,222.99)/6,761,647.550 *11.33)+1] -1}
= 4.59%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.59% / (1-.3960)
= 7.60%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - MASSACHUSETTS
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ -
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,157.60 15.76% 1.00 15.76%
15-Jan-91 $1,475.50 47.55% 4.87 8.31%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - tb
- ------------- ---------- --------- ----------------------
<S> <C> <C> <C>
30-Nov-94 $1,154.30 1.00 15.43%
15-Jan-91 $1,409.40 4.87 7.30%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ---------- ----------- --------- ----------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,205.80 20.58% 1.00 20.58%
15-Jan-91 $1,537.00 53.70% 4.87 9.22%
</TABLE>
(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
*ORIGINAL VALUE $9,600, $48,375 & $97,250 RESPECTIVELY ADJUSTED FOR 4.0%, 3.25%
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
15-Jan-91 53.70 $14,755 $74,352 $149,473
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - MASSACHUSETTS
FOR THE 30 DAY PERIOD ENDED NOVEMBER 30, 1995
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{ [(( 77,985.33 - 6,934.32)/1,550,603.610 X 11.43)+1] -1}
= 4.86%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.86% / (1-.46848)
= 9.14%
(C) WITHOUT WAIVER OF FEES AND ASSUMPTION OF EXPENSES.
6
YIELD = 2{ [ ((a-b)/c d) + 1] -1}
6
= 2{ [ ((77,985.33-10,382.41)/1,550,603.610 X 11.43) + 1] -1}
= 4.62%
(D) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.62% / (1-.46848)
= 8.69%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - MICHIGAN
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,158.60 15.86% 1.00 15.86%
15-Jan-91 $1,464.20 46.42% 4.87 8.14%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - tb
- ------------- ---------- --------- ----------------------
<S> <C> <C> <C>
30-Nov-94 $1,155.60 1.00 15.56%
15-Jan-91 $1,412.00 4.87 7.34%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ---------- ----------- --------- ----------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,206.90 20.69% 1.00 20.69%
15-Jan-91 $1,525.20 52.52% 4.87 9.05%
</TABLE>
(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
*ORIGINAL VALUE $9,600, $48,375 & $97,250 RESPECTIVELY ADJUSTED FOR 4.0%, 3.25%
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
15-Jan-91 52.52 $14,642 $73,782 $148,326
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - MICHIGAN
FOR THE 30 DAY PERIOD ENDED OCTOBER 31, 1995
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{ [(( 98,844.33 - 8,623.56)/1,992,908.364 * 11.26)+1] -1}
= 4.87%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.87% / (1-.42258)
= 8.43%
(C) WITHOUT WAIVER OF FEES AND ASSUMPTION OF EXPENSES.
6
YIELD = 2{ [ ((a-b)/c d) + 1] -1}
6
YIELD = 2{ [ ((98,844.33-13,478.68)/1,992,908.364 * 11.26) + 1] -1}
= 4.61%
(D) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.61% / (1-.42258)
= 7.98%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - MINNESOTA
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,157.70 15.77% 1.00 15.77%
15-Jan-91 $1,410.00 41.00% 4.87 7.31%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - tb
- ------------- ---------- --------- ----------------------
<S> <C> <C> <C>
30-Nov-94 $1,152.30 1.00 15.23%
15-Jan-91 $1,300.10 4.87 5.53%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ---------- ----------- --------- ----------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,206.00 20.60% 1.00 20.60%
15-Jan-91 $1,468.80 46.88% 4.87 8.21%
</TABLE>
(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
*ORIGINAL VALUE $9,600, $48,375 & $97,250 RESPECTIVELY ADJUSTED FOR 4.0%, 3.25%
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
15-Jan-91 46.88 $14,100 $71,053 $142,841
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - MINNESOTA
FOR THE 30 DAY PERIOD ENDED NOVEMBER 30, 1995
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{ [(( 551027.88 - 4,589.37)/1062442.167 *11.05)+1] -1}
= 4.79%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.79% / (1-.44734)
= 8.67%
(C) WITHOUT WAIVER OF FEES AND ASSUMPTION OF EXPENSES.
6
YIELD = 2{ [ ((a-b)/c d) + 1] -1}
6
= 2{ [ ((51,027.88 - 9627.25)/1,062,442.167 *11.05) + 1] -1}
= 4.27.%
(D) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
=4.27% / (1-.44734)
=7.73%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - NEW JERSEY
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,148.10 14.81% 1.00 14.81%
15-Jan-91 $1,444.60 44.46% 4.87 7.84%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - t
- ------------- ---------- --------- ----------------------
<S> <C> <C> <C>
30-Nov-94 $1,148.10 1.00 14.81%
15-Jan-91 $1,410.80 4.87 7.32%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ---------- ----------- --------- ----------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,196.00 19.60% 1.00 19.60%
15-Jan-91 $1,504.70 50.47% 4.87 8.75%
</TABLE>
(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
*ORIGINAL VALUE $9,600, $48,375 & $97,250 RESPECTIVELY ADJUSTED FOR 4.0%, 3.25%
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
15-Jan-91 50.47 $14,445 $72,790 $146,332
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - NEW JERSEY
FOR THE 30 DAY PERIOD ENDED NOVEMBER 30, 1995
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{ [(( 227078.33 - 27218.93)/4464135.993 * 11.18)+1] -1}
= 4.85%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.85% / (1-.43447)
= 8.58%
(C) WITHOUT WAIVER OF FEES AND ASSUMPTION OF EXPENSES. N/A
6
YIELD = 2{ [ ((a-b)/c d) + 1] -1}
(D) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate) N/A
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - NEW YORK SERIES
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,165.40 16.54% 1.00 16.54%
15-Jan-91 $1,463.80 46.38% 4.87 8.13%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - tb
- ------------- ---------- --------- ----------------------
<S> <C> <C> <C>
30-Nov-94 $1,161.50 1.00 16.15%
15-Jan-91 $1,381.30 4.87 6.85%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ---------- ----------- --------- ----------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,214.00 21.40% 1.00 21.40%
15-Jan-91 $1,524.80 52.48% 4.87 9.04%
</TABLE>
(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
*ORIGINAL VALUE $9,600, $48,375 & $97,250 RESPECTIVELY ADJUSTED FOR 4.0%, 3.25%
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
15-Jan-91 52.48 $14,638 $73,762 $148,287
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - NEW YORK
FOR THE 30 DAY PERIOD ENDED NOVEMBER 30, 1995
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{ [(( 66654.83 - 5863)/1325326.949 * 11.33)+1] -1}
= 4.91%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.91% / (1-.43904)
= 8.75%
(C) WITHOUT WAIVER OF FEES AND ASSUMPTION OF EXPENSES.
6
YIELD = 2{ [ ((a-b)/c d) + 1] -1}
6
= 2{ [ ((66654.83 - 10992.18)/1325326.949 * 11.33) + 1] -1}
= 4.49%
(D) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.49/ (1-.43904)
= 8.00%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - OHIO
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,161.80 16.18% 1.00 16.18%
15-Jan-91 $1,451.20 45.12% 4.87 7.94%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - tb
- ------------- ---------- --------- ----------------------
<S> <C> <C> <C>
30-Nov-94 $1,158.70 1.00 15.87%
15-Jan-91 $1,352.40 4.87 6.39%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ---------- ----------- --------- ---------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,210.20 21.02% 1.00 21.02%
15-Jan-91 $1,511.60 51.16% 4.87 8.85%
</TABLE>
(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
*ORIGINAL VALUE $9,600, $48,375 & $97,250 RESPECTIVELY ADJUSTED FOR 4.0%, 3.25%
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
15-Jan-91 51.16 $14,511 $73,124 $147,003
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - OHIO
FOR THE 30 DAY PERIOD ENDED NOVEMBER 30, 1995
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{ [(( 105,066.04 - 9,347.99)/2,125,838.480 * 11.25)+1] -1}
= 4.85%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.85% / (1-.4413)
= 8.68%
(C) WITHOUT WAIVER OF FEES AND ASSUMPTION OF EXPENSES.
6
YIELD = 2{ [ ((a-b)/c d) + 1] -1}
6
= 2{ [(( 105,066.04 - 14,244.74)/2,125,838.480 * 11.25)+1] -1}
= 4.60%
(D) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.80% / (1-.4413)
= 8.23%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER MULTI-STATE MUNICIPAL SERIES TRUST - PENNSYLVANIA
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ---------- -------------- --------- -------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,148.60 14.86% 1.00 14.86%
15-Jan-91 $1,445.80 44.58% 4.87 7.86%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 YEARS - n COMPOUND RETURN - tb
- ------------- ---------- --------- ----------------------
<S> <C> <C> <C>
30-Nov-94 $1,148.60 1.00 14.86%
15-Jan-91 $1,398.00 4.87 7.12%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ---------- ----------- --------- ---------------------
<S> <C> <C> <C> <C>
30-Nov-94 $1,196.50 19.65% 1.00 19.65%
15-Jan-91 $1,506.00 50.60% 4.87 8.77%
</TABLE>
(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
*ORIGINAL VALUE $9,600, $48,375 & $97,250 RESPECTIVELY ADJUSTED FOR 4.0%, 3.25%
& 2.75% SALES CHARGES
<TABLE>
<CAPTION> (E) (F) (G)
$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>
15-Jan-91 50.60 $14,458 $72,853 $146,459
</TABLE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER MULTI - STATE MUNICIPAL SERIES TRUST - PENNSYLVANIA
FOR THE 30 DAY PERIOD ENDED NOVEMBER 30, 1995
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{ [(( 249,209.13-26,951.57)/4,971,363*11.30)+1] -1}
= 4.79%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.79% / (1-.4129)
= 8.16%
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> ARIZONA
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 47,458,891
<INVESTMENTS-AT-VALUE> 50,219,917
<RECEIVABLES> 1,087,455
<ASSETS-OTHER> 53,712
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 51,361,084
<PAYABLE-FOR-SECURITIES> 969,368
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101,224
<TOTAL-LIABILITIES> 1,070,592
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,770,249
<SHARES-COMMON-STOCK> 4,722,228
<SHARES-COMMON-PRIOR> 5,054,237
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (240,783)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,761,026
<NET-ASSETS> 50,290,492
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,953,928
<OTHER-INCOME> 0
<EXPENSES-NET> 319,767
<NET-INVESTMENT-INCOME> 2,634,161
<REALIZED-GAINS-CURRENT> 136,451
<APPREC-INCREASE-CURRENT> 5,859,879
<NET-CHANGE-FROM-OPS> 8,630,491
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,634,161)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,174,717
<NUMBER-OF-SHARES-REDEEMED> (9,843,250)
<SHARES-REINVESTED> 1,334,340
<NET-CHANGE-IN-ASSETS> 2,662,137
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (377,234)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 173,132
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 322,877
<AVERAGE-NET-ASSETS> 49,466,355
<PER-SHARE-NAV-BEGIN> 9.42
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> 1.23
<PER-SHARE-DIVIDEND> (.54)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.65
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> CALIFORNIA
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 108,137,119
<INVESTMENTS-AT-VALUE> 115,970,780
<RECEIVABLES> 1,956,285
<ASSETS-OTHER> 37,548
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 117,964,613
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 195,169
<TOTAL-LIABILITIES> 195,169
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114,059,754
<SHARES-COMMON-STOCK> 11,033,281
<SHARES-COMMON-PRIOR> 11,988,826
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (323,971)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,033,661)
<NET-ASSETS> 117,769,444
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,062,096
<OTHER-INCOME> 0
<EXPENSES-NET> 690,824
<NET-INVESTMENT-INCOME> 6,371,272
<REALIZED-GAINS-CURRENT> (247,082)
<APPREC-INCREASE-CURRENT> 15,149,432
<NET-CHANGE-FROM-OPS> 21,273,622
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,371,272)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 954,040
<NUMBER-OF-SHARES-REDEEMED> (2,223,029)
<SHARES-REINVESTED> 313,444
<NET-CHANGE-IN-ASSETS> 5,319,386
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (76,889)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 405,705
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 696,679
<AVERAGE-NET-ASSETS> 115,915,588
<PER-SHARE-NAV-BEGIN> 9.38
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 1.29
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> FLORIDA
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 68,622,214
<INVESTMENTS-AT-VALUE> 72,650,397
<RECEIVABLES> 1,385,644
<ASSETS-OTHER> 135,552
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74,171,593
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 113,532
<TOTAL-LIABILITIES> 113,532
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70,107,236
<SHARES-COMMON-STOCK> 6,804,211
<SHARES-COMMON-PRIOR> 7,444,462
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (77,358)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,028,183
<NET-ASSETS> 74,058,061
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,327,597
<OTHER-INCOME> 0
<EXPENSES-NET> 454,726
<NET-INVESTMENT-INCOME> 3,872,871
<REALIZED-GAINS-CURRENT> 297,548
<APPREC-INCREASE-CURRENT> 8,855,916
<NET-CHANGE-FROM-OPS> 13,026,335
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,872,871
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,040,055
<NUMBER-OF-SHARES-REDEEMED> (1,813,124)
<SHARES-REINVESTED> 132,818
<NET-CHANGE-IN-ASSETS> 2,600,455
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (374,906)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 253,653
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 454,726
<AVERAGE-NET-ASSETS> 72,472,300.26
<PER-SHARE-NAV-BEGIN> 9.60
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 1.28
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.88
<EXPENSE-RATIO> 0.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> MASSACHUSETTS
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 15,912,486
<INVESTMENTS-AT-VALUE> 16,628,284
<RECEIVABLES> 355,743
<ASSETS-OTHER> 22,416
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,006,443
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,980
<TOTAL-LIABILITIES> 51,980
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,203,386
<SHARES-COMMON-STOCK> 1,544,881
<SHARES-COMMON-PRIOR> 1,615,288
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 715,798
<NET-ASSETS> 16,954,463
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 969,532
<OTHER-INCOME> 0
<EXPENSES-NET> 82,335
<NET-INVESTMENT-INCOME> 887,197
<REALIZED-GAINS-CURRENT> 79,118
<APPREC-INCREASE-CURRENT> 2,071,069
<NET-CHANGE-FROM-OPS> 3,037,384
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 887,197
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 217,640
<NUMBER-OF-SHARES-REDEEMED> (335,507)
<SHARES-REINVESTED> 47,460
<NET-CHANGE-IN-ASSETS> 1,447,695
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 12,263
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,088
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 82,335
<AVERAGE-NET-ASSETS> 16,466,555
<PER-SHARE-NAV-BEGIN> 9.60
<PER-SHARE-NII> .57
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> NEW JERSEY
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