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Filed Pursuant to Rule 497(e)
Registration File No.: 33-62158
DEAN WITTER
LIMITED TERM MUNICIPAL TRUST
PROSPECTUS-MAY 30, 1995
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DEAN WITTER LIMITED TERM MUNICIPAL TRUST (THE "FUND") IS A NO-LOAD, OPEN-END
DIVERSIFIED MANAGEMENT INVESTMENT COMPANY WHOSE INVESTMENT OBJECTIVE IS TO
PROVIDE A HIGH LEVEL OF CURRENT INCOME THAT IS EXEMPT FROM FEDERAL INCOME TAX
CONSISTENT WITH THE PRESERVATION OF CAPITAL AND PRESCRIBED STANDARDS OF
QUALITY AND MATURITY. THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING
PREDOMINATELY IN INTERMEDIATE TERM, INVESTMENT GRADE MUNICIPAL SECURITIES
WITH AN ANTICIPATED AVERAGE DOLLAR-WEIGHTED MATURITY RANGE OF 7 TO 10 YEARS
AND A MAXIMUM AVERAGE DOLLAR-WEIGHTED MATURITY OF 12 YEARS. (SEE "INVESTMENT
OBJECTIVE AND POLICIES.")
Shares of the Fund are sold and redeemed at net asset value without the
imposition of a sales charge. In accordance with a Plan of Distribution
pursuant to Rule 12b-1 under the Investment Company Act of 1940 with Dean
Witter Distributors Inc. (the "Distributor"), the Fund authorizes the
Distributor or any of its affiliates, including Dean Witter InterCapital
Inc., to make payments, out of their own resources, for specific expenses
incurred in promoting the distribution of the Fund's shares.
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 May 30, 1995, 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.
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Risk Considerations .................................................. 7
Investment Restrictions ............................................... 9
Purchase of Fund Shares ............................................... 9
Shareholder Services .................................................. 10
Redemptions and Repurchases ........................................... 12
Dividends, Distributions and Taxes .................................... 13
Performance Information ............................................... 14
Additional Information ................................................ 14
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.
DEAN WITTER
LIMITED TERM MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR (800) 526-3143
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
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PROSPECTUS SUMMARY
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THE FUND The Fund is organized as a Massachusetts business trust, and is a no-load,
open-end diversified management investment company investing predominately
in intermediate term municipal bonds.
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SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page 14).
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OFFERING PRICE The price of the shares offered by this Prospectus is determined once daily
as of 4:00 p.m., New York time, on each day that the New York Stock
Exchange is open, and is equal to the net asset value per share without a
sales charge (see page 9).
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MINIMUM Minimum initial purchase through Distributor, $1,000; minimum subsequent
PURCHASE investment, $100 (see page 9).
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INVESTMENT The investment objective of the Fund is to provide investors with a high
OBJECTIVE level of current income, that is exempt from federal income tax consistent
with the preservation of capital and prescribed standards of quality and
maturity.
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INVESTMENT The Fund will invest at least 75% of its net assets in municipal securities
POLICIES rated A or better by Moody's Investors Service ("Moody's") or Standard &
Poor's Corporation ("S&P"). The municipal securities in the Fund's
portfolio will have an anticipated average dollar-weighted maturity range
of 7 to 10 years and a maximum average dollar-weighted maturity of 12 years
(see page 5).
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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-three investment companies and other
portfolios with assets of approximately $70.3 billion at April 30, 1995
(see page 5).
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MANAGEMENT FEE The Investment Manager receives a monthly fee at the annual rate of 0.50%
of the average daily net assets (see page 5).
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DIVIDENDS AND Dividends are declared daily and paid monthly. Capital gains distributions,
CAPITAL GAINS if any, are paid at least once a year or are retained for reinvestment by
DISTRIBUTIONS the Fund. Dividends and distributions are automatically invested in
additional shares at net asset value unless the shareholder elects to
receive cash (see page 13).
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DISTRIBUTOR AND Dean Witter Distributors Inc. (the "Distributor") sells shares of the Fund
PLAN OF through Dean Witter Reynolds Inc. ("DWR") and other selected broker-dealers
DISTRIBUTION pursuant to selected broker-dealer agreements. The Distributor has entered
into a Plan of Distribution pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Act") with the Fund authorizing the
Distributor or any of its affiliates, including the Investment Manager to
make payments, out of their own resources, for expenses incurred in
connection with the promotion or distribution of the Fund's shares (see
page 10).
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REDEMPTION Shares are redeemable at net asset value. An account may be involuntarily
redeemed if total value of the account is less than $100 (see page 12).
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SHAREHOLDER Automatic Investment of Dividends and Distributions (unless otherwise
SERVICES requested); Investment of Distributions Received in Cash; Exchange
Privilege; Systematic Withdrawal Plan; EasyInvest(Service Mark); (see page
12).
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RISKS The prices of interest-bearing securities are inversely affected by changes
in interest rates and, therefore, are subject to the risk of market price
fluctuations. The values of fixed-income securities also may be affected by
changes in the credit rating or financial condition of the issuing
entities. Certain of the tax-exempt securities in which the Fund may invest
without limit may subject certain investors to the federal, and any
applicable state, alternative minimum tax. (see page 7).
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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended March 31, 1995.
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases ................................ None
Maximum Sales Charge Imposed on Reinvested Dividends ..................... None
Deferred Sales Charge .................................................... None
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .......................................................... 0.50%
12b-1 Fees ............................................................... None
Other Expenses ........................................................... 0.26%
Total Fund Operating Expenses ............................................ 0.76%
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EXAMPLE 1 year 3 years 5 years 10 years
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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: ................................................ $8 $24 $42 $94
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE MORE 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."
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FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding throughout the period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, the notes thereto and the
unqualified report of independent accountants which are contained in the
Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's Annual Report to
Shareholders, which may be obtained without charge upon request from the
Fund.
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FOR THE PERIOD
FOR THE YEAR JULY 12, 1993*
ENDED MARCH THROUGH MARCH
31, 1995 31, 1994
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 9.61 $ 10.00
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Net investment income ................... 0.42 0.29
Net realized and unrealized loss ....... (0.05) (0.39)
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Total from investment operations ....... 0.37 (0.10)
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Dividends from net investment income ... (0.42) (0.29)
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Net asset value, end of period .......... $ 9.56 $ 9.61
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TOTAL INVESTMENT RETURN ................. 4.01% (1.11)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $85,499 $170,589
Ratios to average net assets: ...........
Expenses ............................... 0.76% 0.31%(2)(3)
Net investment income .................. 4.41% 3.92%(2)(3)
Portfolio turnover rate ................. 2 % 6 %(1)
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[FN]
* Commencement of operations.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were assumed or waived
by the Investment Manager, the above annualized expense and net
investment income ratios to average net assets would have been 0.75%
and 3.48%, respectively.
See Notes to Financial Statements
4
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THE FUND AND ITS MANAGEMENT
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Dean Witter Limited Term Municipal Trust (the "Fund") is a no-load,
open-end diversified management investment company. The Fund is a trust of
the type commonly known as a "Massachusetts business trust" and was organized
under the laws of The Commonwealth of Massachusetts on February 25, 1993.
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 a total of ninety-three investment companies,
thirty of which are listed on the New York Stock Exchange, with combined
total assets including this Fund of approximately $68.1 billion as of April
30, 1995. The Investment Manager also manages portfolios of pensions plans,
other institutions and individuals which aggregated approximately $2.2
billion at such date.
The Fund has retained the Investment Manager, pursuant to an Investment
Management Agreement, to provide administrative services, manage its business
affairs and manage the investment of the Fund's assets, including the placing
of orders for the purchase and sale of portfolio securities. InterCapital has
retained Dean Witter Services Company Inc. to perform the aforementioned
administrative services for the Fund. The Fund's Board of Trustees reviews
the various services provided by or under the direction of the Investment
Manager to ensure that the Fund's general investment policies and programs
are being properly carried out and that administrative services are being
provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.50% to the Fund's net assets determined as of the close of
each business day. For the fiscal year ended March 31, 1995, the Fund accrued
total compensation to the Investment Manager amounting to 0.50% of the Fund's
average daily net assets and the Fund's total expenses amounted to 0.76% of
the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is to provide a high level of current
income that is exempt from federal income tax consistent with the
preservation of capital and prescribed standards of quality and maturity. The
Fund will seek to achieve its investment objective by investing predominately
in intermediate term municipal securities. The investment objective is a
fundamental policy of the Fund and may not be changed without the approval of
the holders of a majority of the Fund's shares. There is no assurance that
the Fund's investment objective will be achieved.
The Fund will invest at least 75% of its net assets in (a) Municipal Bonds
which are rated at the time of purchase within the three highest grades by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"); (b) Municipal Notes which at the time of purchase are rated in the
two highest grades by Moody's or S&P, or, if not rated, have outstanding one
or more issues of Municipal Bonds rated as set forth in clause (a) of this
paragraph; and (c) Municipal Commercial Paper which at the time of purchase
are rated P-1 by Moody's or A-1 by S&P. The Fund may also invest up to 25% of
its net assets in municipal securities rated Baa by Moody's or BBB by S&P, or
if not rated, are determined by the Investment Manager to be the equivalent
of Baa/BBB or better. A description of municipal security ratings is
contained in the Appendix to the Statement of Additional Information.
The municipal securities in the Fund's portfolio will have an anticipated
average dollar-weighted maturity range of 7 to 10 years, with a maximum
average dollar-weighted maturity of 12 years. However, at least 80% of the
net assets of the Fund will be subject to an average dollar-weighted maturity
constraint of 15 years. When computing the average dollar-weighted maturity,
the Fund intends to treat investments which permit the holder to demand
payment of principal at any time or at specified intervals prior to the
stated final maturity as having a maturity equal to the next demand date. The
final maturity of these demand obligations will be no more than 25 years,
until such time as the Staff of the Securities and Exchange Commission has
determined the appropriateness of using maturity shortening techniques for
obligations with longer final maturities.
The foregoing percentage and rating limitations apply at the time of
acquisition of a security based on the last
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previous determination of the net asset value of the Fund. 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 the Fund will
not require elimination of any security from the Fund's portfolio. Therefore,
the Fund may hold securities which have been downgraded from ratings of Baa
or BBB or lower by Moody's or S&P. However such investments may not exceed 5%
of the net assets of the Fund. 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 the Fund).
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.
The two principal classifications of municipal obligations and commercial
paper are "general obligation" and "revenue" obligations or commercial paper.
General obligation bonds, notes or commercial paper are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Issuers of general obligation bonds, notes or
commercial paper include a state, its counties, cities, towns and other
governmental units. Revenue bonds, notes or commercial paper are payable from
the revenues derived from a particular facility or class of facilities or, in
some cases, from specific revenue sources. Revenue bonds, notes or commercial
paper are issued for a wide variety of purposes, including the financing of
electric, gas, water and sewer systems and other public utilities; industrial
development and pollution control facilities; single and multi-family housing
units; public buildings and facilities; air and marine ports, transportation
facilities such as toll roads, bridges and tunnels; and health and
educational facilities such as hospitals and dormitories. They rely primarily
on user fees to pay debt service, although the principal revenue source is
often supplemented by additional security features which are intended to
enhance the creditworthiness of the issuer's obligations. In some cases,
particularly revenue bonds issued to finance housing and public buildings, a
direct or implied "moral obligation" of a governmental unit may be pledged to
the payment of debt service. In other cases, a special tax or other charge
may augment user fees.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment 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.
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.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. 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, as and if issued" basis. An increase in the percentage
of the Fund's assets committed to the purchase of securities on a "when, as
and if issued" basis may increase the volatility of its net asset value.
HEDGING ACTIVITIES
Subject to applicable state law, the Fund 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. The Fund may invest in
financial futures contracts and related options thereon. The Fund 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 the Funds' portfolio securities. If the
Investment Manager anticipates that interest rates will decline, the Fund may
purchase a financial futures contract or a call option thereon to protect
against an increase in the price of the securities that the Fund intends to
purchase. These futures contracts and related options thereon will be used
only as a hedge against anticipated interest rate changes. A futures contract
sale creates an obligation by the Fund, as seller, to deliver the specific
type of instrument called for in the contract at a specified future time for
a specified price. A futures contract purchase would create an obligation by
the Fund, as purchaser, to take delivery of the specific type of financial
instrument at a specified future time at a specified price. The specific
securities delivered or taken, respectively, at
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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 financial futures contracts specify actual delivery
or receipt of securities, in most instances the contracts are closed out
before the settlement date without the making or taking of delivery of the
securities. Closing out of a futures contract is effected by entering into an
offsetting purchase or sale transaction.
Unlike a 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 Fund.
MUNICIPAL BOND INDEX FUTURES. The Fund 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 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.
The Fund may not 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 the Fund's total assets. The
Fund may not purchase or sell futures contracts or related options if
immediately thereafter more than one-third of the net assets of the Fund
would be hedged.
OPTIONS. The Fund may purchase or sell (write) options on debt securities as
a means of achieving additional return or hedging the value of the Fund's
portfolio. The Fund would only buy options listed on national securities
exchanges. The Fund, will not purchase options on behalf of the Fund if, as a
result, the aggregate cost of all outstanding options exceeds 10% of the
Fund's total assets.
LENDING OF PORTFOLIO SECURITIES. The Fund will not lend portfolio securities
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 the Fund.
RISK CONSIDERATIONS
MUNICIPAL SECURITIES AND RATINGS. The value of the Fund's portfolio
securities and, therefore, the Fund's net asset value per share, may increase
or decrease due to various factors, principally changes in prevailing
interest rates and the ability of the issuers of the Fund's portfolio
securities to pay interest and principal on such obligations on a timely
basis. Generally, a rise in interest rates will result in a decrease in the
Fund's net asset value per share, while a drop in interest rates will result
in an increase in the Fund's net asset value per share.
Under normal conditions, at least 80% of the total assets of the Fund will
be invested in securities, the interest on which is exempt from federal
income taxes. However, the Fund may invest more than 20% of its total assets
in taxable money market instruments 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. Certain of the tax-exempt
securities in which the Fund 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 the Fund may be taxable to such investors under any federal or
any applicable state alternative minimum tax. The Fund, therefore, may not be
a suitable investment for investors who are subject to the alternative
minimum tax. The suitability of the Fund for these investors will depend upon
a comparison of the after-tax yield likely to be provided from the Fund 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."
Investments in municipal bonds rated either Baa by Moody's or BBB by S&P
(investment grade bonds--the lowest rated permissible investments by the
Fund) have speculative characteristics and, therefore, changes in
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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.
LEASE OBLIGATIONS. Included within the revenue bonds category, as noted
above, are participations in lease obligations or installment purchase
contracts (hereinafter collectively called "lease obligations") of
municipalities. State and local governments, 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-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 fifteen 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.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. 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 the Fund's portfolio
securities. The risk of imperfect correlation will be increased by the fact
that the financial futures contracts in which the Fund 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. The correlation may be distorted by
the fact that the futures market is dominated by short-term traders seeking
to profit from the difference between a contract or security price objective
and their cost of borrowed funds. Such distortions are generally minor and
would diminish as the contract approached maturity.
Another risk is that the Investment Manager could be incorrect in its
expectations as to the direction or extent of various interest rate movements
or the time span within which the movements take place. For example, if the
Fund sold 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, the Fund would lose money on the
sale.
In addition to the risks that apply to all options transactions (see the
Statement of Additional Information for a description of the characteristics
of, and the risks of investing in, options on debt securities), there are
several special risks relating to options on futures. In particular, the
ability to establish and close out positions on 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.
FOR ADDITIONAL RISK DISCLOSURE, PLEASE REFER TO THE "INVESTMENT OBJECTIVE
AND POLICIES" AND "PORTFOLIO CHARACTERISTICS" SECTIONS OF THE PROSPECTUS AND
TO THE "INVESTMENT PRACTICES AND POLICIES" SECTION OF THE STATEMENT OF
ADDITIONAL INFORMATION.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. The Fund is managed within
InterCapital's Municipal Fixed Income Group, which manages 39 tax-exempt
municipal bond funds, with approximately
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$10.6 billion in assets. Ms. Katherine H. Stromberg is the Fund's portfolio
manager. Ms. Stromberg has been a municipal bond portfolio manager for more
than 15 years. Prior to joining InterCapital in October 1991, Ms. Stromberg
was Vice President of Kidder Peabody Asset Management Inc. In determining
which securities to purchase for the Fund or hold in the Fund's portfolio,
the Investment Manager will rely on information from various sources,
including research, analysis and appraisals of brokers and dealers, including
Dean Witter Reynolds Inc. ("DWR", a broker-dealer affiliate of the Investment
Manager); the views of the Trustees of the Fund and others regarding economic
developments and interest rate trends; and the
Investment Manager's own analysis of factors it deems relevant.
Brokerage commissions are not normally charged on the purchase or sale of
municipal obligations, but such transactions may involve costs in the form of
spreads between bid and asked prices. Pursuant to an order of the Securities
and Exchange Commission, the Fund may effect principal transactions in
certain taxable money market instruments with DWR. In addition, the Fund may
incur brokerage commissions on futures' and options' transactions conducted
through DWR. It is not anticipated that the portfolio trading engaged in by
the Fund will result in its portfolio turnover rate exceeding 100%.
INVESTMENT RESTRICTIONS
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The investment restrictions listed below are among the restrictions, a
complete listing of which is contained in the Statement of Additional
Information, which have been adopted by the Fund as fundamental policies.
Under the Investment Company Act of 1940, as amended (the "Act"), a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act.
For purposes of the following restrictions: (a) an "issuer" of a security
is the entity whose assets and revenues are committed to the payment of
interest and principal on that particular security, provided that the
guarantee of a security will be considered a separate security and provided
further that a guarantee of a security shall not be deemed to be a security
issued by the guarantor if the value of all securities issued or guaranteed
by the guarantor and owned by the Fund does not exceed 10% of the value of
the total assets of the Fund; (b) a "taxable security" is any security the
interest on which is subject to federal income tax; and (c) all percentage
limitations apply immediately after a purchase or initial investment, and any
subsequent change in any applicable percentage resulting from market
fluctuations does not require elimination of any security from the portfolio.
The Fund may not:
1. With respect to 75% of its total assets, purchase securities of any
issuer if, immediately thereafter, more than 5% of the value of its total
assets are in the securities of any one issuer (other than obligations
issued, or guaranteed by, the United States Government, its agencies or
instrumentalities).
2. With respect to 75% of its total assets, purchase more than 10% of all
outstanding taxable debt securities of any one issuer (other than debt
securities issued, or guaranteed as to principal and interest by, the United
States Government, its agencies or instrumentalities).
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry (industrial development and pollution control
bonds are grouped into industries based upon the business in which the
issuers of such obligations are engaged). This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities or to domestic bank obligations.
PURCHASE OF FUND SHARES
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The Fund offers it shares for sale to the public on a continuous basis at
the offering price without the imposition of a sales charge. The offering
price will be the net asset value per share next determined following receipt
of an order (see "Determination of Net Asset Value"). Pursuant to a
Distribution Agreement between the Fund and Dean Witter Distributors Inc.
(the "Distributor"), an affiliate of the Investment Manager, shares of the
Fund are distributed by the Distributor and are offered by DWR and other
broker-dealers which have entered into selected broker-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 and subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter Limited Term
Municipal Trust, 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 of another
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Selected Broker-Dealer. In the case of investments pursuant to Systematic
Payroll Deduction Plans, the Fund, in its discretion, may accept investments
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 purchased will not be issued unless a request is made by the
shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor or a Selected
Broker-Dealer on a normal five business day (three business day beginning
June 7, 1995) settlement basis; that is, payment is due on the fifth business
day (third business day beginning June 7, 1995) (settlement date) after the
order is placed with the Distributor or Selected Broker-Dealer. Since DWR or
any other Selected Broker-Dealer may forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
income dividends if their order is received by the close of business on the
day prior to the record date for such dividends and distributions.
Sales personnel of a Selected Broker-Dealer are compensated for shares of
the Fund sold by them by the Distributor or any of its affiliates and/or by a
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive non-cash compensation in the form of trips to
educational seminars and merchandise as special sales incentives. The Fund
and the Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1 under
the Act with the Distributor whereby the Distributor is authorized to utilize
its own resources or those of its affiliates, including InterCapital, to
finance certain services and activities in connection with the distribution
of the Fund's shares. The principal activities and services which may be
provided by the Distributor, DWR, its affiliates and other Selected
Broker-Dealers under the Plan include: (1) compensation to, and expenses of,
account executives and other employees of DWR and other Selected
Broker-Dealers, including overhead and telephone expenses; (2) sales
incentives and bonuses to sales representatives and to marketing personnel in
connection with promoting sales of the Fund's shares; (3) expenses incurred
in connection with promoting sales of the Fund's shares; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio,
newspaper, magazine and other media advertisements.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time on each day that the New York Stock Exchange is open by
taking the value of all assets of the Fund, subtracting all of its respective
liabilities, dividing by the number of shares outstanding and adjusting to
the nearest cent. The net asset value per share of the Fund 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.
Certain of the Fund's portfolio securities (other than short-term taxable
debt securities, futures and options) may be valued by an outside independent
pricing 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. A
more detailed discussion of valuation procedures is in the Fund's Statement
of Additional Information.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the
shareholder requests that they be paid in cash.
EASYINVEST(SERVICE MARK). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Fund's Transfer Agent for
investment in shares of the Fund.
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SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current 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. 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 could 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, and generally, for state and
local tax purposes.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
EXCHANGE PRIVILEGE. An "Exchange Privilege", that is, the privilege of
exchanging shares of certain Dean Witter Funds for shares of the Fund, exists
whereby shares of various Dean Witter Funds which are open-end investment
companies sold with either a front-end (at time of purchase) sales charge
("FESC funds") or a contingent deferred sales charge ("CDSC funds") may be
redeemed at their next calculated net asset value and the proceeds of the
redemption may be used to purchase shares of the Fund, shares of Dean Witter
Tax-Free Daily Income Trust, Dean Witter U.S. Government Money Market Trust,
Dean Witter Liquid Asset Fund Inc., Dean Witter California Tax-Free Daily
Income Trust and Dean Witter New York Municipal Money Market Trust (which
five funds are hereinafter called "money market funds") and shares of Dean
Witter Short- Term U.S. Treasury Trust, Dean Witter Short-Term Bond Fund,
Dean Witter Balanced Income Fund and Dean Witter Balanced Growth Fund
(collectively, the Fund, the money market funds, Dean Witter Short-Term U.S.
Treasury Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced Income
Fund and Dean Witter Balanced Growth Fund are referred to herein as the
"Exchange Funds"). An exchange from an FESC fund or a CDSC fund 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 an FESC fund or a CDSC fund, shares of the FESC fund
or the CDSC fund are redeemed at their next calculated net asset value and
exchanged for shares of the money market fund at their net asset value
determined the following business day. Subsequently, shares of the Exchange
Funds received in an exchange for shares of an FESC fund (regardless of the
type of fund originally purchased) may be redeemed and exchanged for shares
of the other Exchange Funds, FESC funds or CDSC funds (however, shares of
CDSC funds, including shares acquired in exchange for (i) shares of FESC
funds or (ii) shares of the Exchange Funds which were acquired in exchange
for shares of FESC funds, may not be exchanged for shares of FESC funds).
Additionally, shares of the Exchange Funds received in an exchange for shares
of a CDSC fund (regardless of the type of fund originally purchased) may be
redeemed and exchanged for shares of the other Exchange Funds or CDSC funds.
Ultimately, any applicable contingent deferred sales charge ("CDSC") will
have to be paid upon redemption of shares originally purchased from a CDSC
fund. (If shares of the Exchange Funds received in exchange for shares
originally purchased from a CDSC fund are exchanged for shares of another
CDSC fund having a different CDSC schedule than that of the CDSC fund from
which the Exchange Funds shares were acquired, the shares will be subject to
the higher CDSC schedule.) During the period of time the shares originally
purchased from a CDSC fund remain in the Exchange Funds (calculated from the
last day of the month in which the Exchange Funds shares were acquired), the
holding period (for the purpose of determining the rate of CDSC) is frozen.
If those shares are subsequently reexchanged for shares of a CDSC fund, the
holding period previously frozen when the first exchange was made resumes on
the last day of the month in which shares of CDSC fund are reacquired. Thus,
the CDSC is based upon the period of time the shareholder was invested in a
CDSC fund. Exchanges involving FESC funds or CDSC funds may be made after the
shares of the FESC fund or CDSC 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.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of the Fund and its other shareholders, investors should be
aware that the Fund and each of the other Dean
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<PAGE>
Witter Funds may in their discretion limit or otherwise restrict the number
of times this Exchange Privilege may be exercised by any investor. Any such
restriction will be made by the Fund on a prospective basis only, upon notice
to the shareholder not later than ten days following such shareholder's most
recent exchange. Also, the Exchange Privilege may be terminated or revised at
any time by the Fund and/or any of such Dean Witter Funds for which shares of
the Fund may be exchanged, upon such notice as may be required by applicable
regulatory agencies. Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their account executive
regarding restrictions or exchanging of shares of the Fund pledged in the
Margin Account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement 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 has realized a capital gain or loss. However, the
ability to deduct capital losses on an exchange may be limited in situations
where there is an exchange of shares within ninety days after the shares are
purchased. The Exchange Privilege is only available in states where an
exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the above
Dean Witter Funds (for which the Exchange Privilege is available) pursuant to
this Exchange Privilege by contacting their DWR or an 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) 526-3143 (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 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
experience of the other Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at its
respective current net asset value per share (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, the shares may be redeemed by surrendering the
certificates with a written request for redemption along with any additional
documentation required by the Transfer Agent, to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303.
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 by DWR and other
Selected Broker-Dealers.
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
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<PAGE>
Transfer Agent of the certificate and/or written request in good order. Such
payment may be postponed or the right of redemption suspended under unusual
circumstances. 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.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, on 60 days'
notice and at net asset value, the shares (other than shares held in an
Individual Retirement Account or custodial account under Section 403(b)(7) of
the Internal Revenue Code) of any shareholder whose shares have a value of
less than $100 as a result of redemptions or repurchases, or such lesser
amount as may be fixed by the Trustees. However, before the Fund redeems such
shares and sends the proceeds to the shareholder, it will notify the
shareholder that the value of the shares is less than $100 and allow him or
her sixty days to make an additional investment in an amount which will
increase the value of his or her account to $100 or more before the
redemption is processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends on each day the
New York Stock Exchange is open for business. Such dividends are payable
monthly. The Fund intends to distribute substantially all of its daily net
investment income on an annual basis. Dividends from net short-term capital
gains, if any, will be paid at least once each year. The Fund may, however,
determine either to distribute or to retain all or part of any net long-term
capital gains in any year for reinvestment. 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 the shareholder
in the prior year. Shareholders may instruct the Transfer Agent (in writing)
to have their dividends paid out monthly in cash. Processing of dividend
checks begins immediately following the monthly payment date. Shareholders
who have requested to receive dividends in cash will normally be sent their
monthly dividend check during the first ten days of the following month.
TAXES. Because the Fund intends to distribute substantially all of its net
investment income and net capital gains, if any, to shareholders, and intends
to otherwise comply with all the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), to qualify as a regulated
investment company ("RIC"), it is not expected that the Fund will be required
to pay any federal income tax.
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by maintaining, as of the close of each quarter of its taxable
year, at least 50% of the value of its total assets in tax-exempt securities.
If the fund qualifies as a RIC and satisfies such requirement, dividends from
net investment income to shareholders, whether taken in cash or reinvested in
additional Fund shares, will be excludable from gross income for federal
income tax purposes to the extent net interest income is represented by
interest on tax-exempt securities. Exempt-interest dividends are included,
however, in determining what portion, if any, of a person's Social Security
benefits are subject to federal income tax.
The Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. This alternative minimum tax
applies to interest received on "private activity bonds" (in general, bonds
that benefit non-governmental entities) issued after August 7, 1986 which,
although tax-exempt, are used for purposes other than those generally
performed by governmental units (e.g., bonds used for commercial or housing
purposes). Income received on such bonds is classified as a "tax preference
item", under the alternative minimum tax, for both individual and corporate
investors. There is no percentage limitation with respect to the Fund's
investments in such "private activity bonds," with the result that a portion
of the exempt-interest dividends paid by the Fund may be an item of tax
preference to shareholders subject to the alternative minimum tax. In
addition, certain corporations which are subject to the alternative minimum
tax may have to include a portion of exempt-interest dividends in calculating
their alternative minimum taxable income in situations where the "adjusted
current earnings" of the corporation exceeds its alternative minimum taxable
income.
The Fund will mail to shareholders a statement indicating the percentage
of the dividend distributions for
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<PAGE>
each taxable year which constitutes exempt-interest dividends and the
percentage, if any, that is taxable, and the percentage, if any, of the
exempt-interest dividends which constitutes an item of tax preference.
Shareholders will normally be subject to federal personal income tax on
market discount on certain taxable and tax-exempt fixed-income securities,
dividends paid from interest income derived from taxable securities and on
distributions of net capital gains. 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 the
Fund's shares and regardless of whether the distribution is received in
additional shares or cash. To avoid being subject to a 31% 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. Interest on indebtedness
incurred by shareholders or related parties to purchase or carry shares of an
investment company paying exempt-interest dividends, such as the Fund, will
not be deductible by the investor for federal income tax purposes.
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.
The foregoing relates 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 franchise
taxes if received by a corporation doing business in various states, and to
state and local taxes. Shareholders should consult their tax advisers as to
the applicability of the above to their own tax situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund advertises its "yield" and "effective yield"
and/or its "total return" in advertisements. Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Fund refers to the income generated by an investment in the
Fund over a given seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that seven-day period is assumed to
be generated each seven-day period within a 365-day period and is shown as a
percentage of the investment. The "effective yield" for a seven-day period is
calculated similarly but, when annualized, the income earned by an investment
in the Fund is assumed to be reinvested each week within a 365-day period.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. The Fund may also quote
tax-equivalent yield which is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to the yield
determined as described above.
The "average annual total return" of the Fund refers to a figure
reflecting the average annualized percentage increase (or decrease) in the
value of an initial investment in the Fund of $1,000 over a period of one
year, as well as the life of the Fund. Average annual total return reflects
all income earned by the Fund, any appreciation or depreciation of the assets
of the Fund and all expenses incurred by the Fund for the stated periods. It
also assumes reinvestment of all dividends and distributions paid by the
Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. The Fund from time to time may also advertise its performance relative
to certain performance rankings (such as Lipper Analytical Services Inc.) and
indices compiled by independent organizations (such as the Lehman Brothers
Municipal Bond Index and Sub-indices).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Fund, requires that
Fund documents include such disclaimer and
14
<PAGE>
provides for indemnification and reimbursement of expenses out of the Fund's
property for any shareholder held personally liable for the obligations of
the Fund. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Fund itself
would be unable to meet its obligations. Given the above limitations on
shareholder personal liability and the nature of the Fund's assets and
operations, the possibility of the Fund being unable to meet its obligations
is remote and in the opinion of Massachusetts counsel to the Fund, the risk
to Fund shareholders of personal liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, 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 option 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 recent report by the Investment Company Institute
Advisory Group on Personal Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund or the Distributor or to the Transfer Agent at the telephone numbers
or addresses, as are set forth on the front cover of this Prospectus.
15
<PAGE>
DEAN WITTER
LIMITED TERM MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Jack F. Bennett
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
Katherine H. Stromberg
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust 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.
