<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1995
REGISTRATION NO.: 33-62158
-------------------------------------------------------------------------------
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. 3
[X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
[X]
AMENDMENT NO. 4
-----------------
[X]
DEAN WITTER LIMITED TERM MUNICIPAL 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)
-----------------
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
------------------
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of the registration statement.
------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___immediately upon filing pursuant to paragraph (b)
X on May 30, 1995 pursuant to paragraph (b)
___60 days after filing pursuant to paragraph (b)
___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 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT FILED A RULE 24F-2 NOTICE FOR
ITS FISCAL PERIOD ENDING MARCH 31, 1995 WITH THE SECURITIES AND EXCHANGE
COMMISSION ON APRIL 20, 1995.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
------------------------------------------------------------------------------
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL 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. .... Performance Information; Financial Highlights
4. .... Investment Objective and Policies; The Fund and its
Management; Risk Considerations; 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. .... Shares of the Fund; Validity of Shares of Beneficial
Interest
19. .... Redemptions and Repurchases; Financial Statements;
19. .... Shareholder Services
20. .... Dividends, Distributions and Taxes
21. .... Not applicable
22. .... Dividends, Distributions and Taxes
23. .... Performance Information
</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>
DEAN WITTER
LIMITED TERM MUNICIPAL TRUST
PROSPECTUS- MAY 30, 1995
-----------------------------------------------------------------------------
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 .................................................. 8
Investment Restrictions ............................................... 10
Purchase of Fund Shares ............................................... 11
Shareholder Services .................................................. 12
Redemptions and Repurchases ........................................... 14
Dividends, Distributions and Taxes .................................... 15
Performance Information ............................................... 16
Additional Information ................................................ 17
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
<PAGE>
PROSPECTUS SUMMARY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
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.
--------------------------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $0.01 par value (see page 17).
--------------------------------------------------------------------------------------------
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 11).
--------------------------------------------------------------------------------------------
Minimum Minimum initial purchase through Distributor, $1,000; minimum subsequent
Purchase investment, $100 (see page 11).
--------------------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------------------
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).
--------------------------------------------------------------------------------------------
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).
--------------------------------------------------------------------------------------------
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).
--------------------------------------------------------------------------------------------
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 15).
--------------------------------------------------------------------------------------------
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 11).
--------------------------------------------------------------------------------------------
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 15).
--------------------------------------------------------------------------------------------
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).
--------------------------------------------------------------------------------------------
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 8).
--------------------------------------------------------------------------------------------
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
2
<PAGE>
SUMMARY OF FUND EXPENSES
-----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended March 31, 1995.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases ................................ None
Maximum Sales Charge Imposed on Reinvested Dividends ..................... None
Deferred Sales Charge .................................................... None
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
Management Fees .......................................................... 0.50%
12b-1 Fees ............................................................... None
Other Expenses ........................................................... 0.26%
Total Fund Operating Expenses ............................................ 0.76%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period: $8 $24 $42 $94
</TABLE>
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."
3
CAPITAL PRINTING SYSTEMS]
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 12, 1993*
ENDED MARCH THROUGH MARCH
31, 1995 31, 1994
-------------- --------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 9.61 $ 10.00
-------------- --------------
Net investment income .................... 0.42 0.29
Net realized and unrealized loss ........ (0.05) (0.39)
-------------- --------------
Total from investment operations ........ 0.37 (0.10)
-------------- --------------
Dividends from net investment income .... (0.42) (0.29)
-------------- --------------
Net asset value, end of period ........... $ 9.56 $ 9.61
============== ==============
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)
</TABLE>
* 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
<PAGE>
THE FUND AND ITS MANAGEMENT
-----------------------------------------------------------------------------
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
-----------------------------------------------------------------------------
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
5
<PAGE>
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 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
6
<PAGE>
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 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
7
<PAGE>
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 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 partici-
8
<PAGE>
pations 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.
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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 $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
-----------------------------------------------------------------------------
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).
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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 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;
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<PAGE>
(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.
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
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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 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
13
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<PAGE>
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.
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<PAGE>
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 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-in terest 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
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<PAGE>
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 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
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<PAGE>
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 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
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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.
18
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
Dean Witter Liquid Asset Fund Inc.
Dean Witter U.S. Government Money
Market Trust
Dean Witter Tax-Free Daily Income 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 Precious Metals and Minerals Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter International SmallCap Fund
Dean Witter Balanced Growth 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 High Income Securities
Dean Witter National Municipal Trust
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
ASSET ALLOCATION FUNDS
Dean Witter Managed Assets Trust
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
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
Stategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
<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.
Dean Witter
Limited Term
Municipal Trust
PROSPECTUS--MAY 30, 1995
<PAGE>
DEAN WITTER
LIMITED TERM
MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
MAY 30, 1995
-----------------------------------------------------------------------------
Dean Witter Limited Term Municipal Trust (the "Fund") is an open-end
diversified management investment company whose investment objective is to
provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital and prescribed standards of
quality and maturity. The Fund seeks to achieve its objective by investing
predominately in intermediate term high quality municipal securities with an
anticipated average dollar-weighted maturity range of 7 to 10 years and a
average maximum dollar-weighted maturity of 12 years. (See "Investment
Objective and Policies").
A Prospectus for the Fund dated May 30, 1995, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at its address or telephone numbers listed below
or from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean
Witter Reynolds Inc. at any of its branch offices. This Statement of
Additional Information is not a Prospectus. It contains information in
addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the
Prospectus.
Dean Witter
Limited Term Municipal Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or (800) 526-3143
<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 February 25, 1993.
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 advisory, administrative and management activities previously
performed by the InterCapital Division of Dean Witter Reynolds Inc. ("DWR"),
a broker-dealer affiliate of InterCapital. (As hereinafter used in this
Statement of Additional Information, the terms "InterCapital" and "Investment
Manager" refer to DWR's InterCapital Division prior to the internal
reorganization and to Dean Witter InterCapital Inc. thereafter. The daily
management of the Fund and research relating to the Fund's portfolio are
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".
InterCapital is also the investment manager (or investment adviser and
administrator) 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., InterCapital California
Insured Municipal Income Trust, InterCapital Insured Municipal Income Trust,
InterCapital Quality Municipal Income Trust, InterCapital Quality Municipal
Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, InterCapital Insured
Municipal Securities, InterCapital Insured California Municipal Securities,
Dean Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean
Witter National Municipal Trust, Dean Witter High Income Securities, Dean
Witter High Yield Securities Inc., Dean Witter Tax-Free Daily Income Trust,
Dean Witter Developing Growth Securities Trust, Dean Witter Tax-Exempt
Securities Trust, Dean Witter Natural Resource Development Securities Inc.,
Dean Witter Dividend Growth Securities Inc., Dean Witter American Value Fund,
Dean Witter U.S. Government Money Market Trust, Dean Witter Variable
Investment Series, Dean Witter World Wide Investment Trust, Dean Witter
Select Municipal Reinvestment Fund, Dean Witter U.S. Government Securities
Trust, Dean Witter California Tax-Free Income Fund, Dean Witter New York
Tax-Free Income Fund, Dean Witter Convertible Securities Trust, Dean Witter
Federal Securities Trust, Dean Witter Value-Added Market Series, High Income
Advantage Trust, High Income Advantage Trust II, High Income Advantage Trust
III, Dean Witter Government Income Trust, InterCapital Insured Municipal Bond
Trust, InterCapital Quality Municipal Investment Trust, Dean Witter Utilities
Fund, Dean Witter Strategist Fund, Dean Witter Managed Assets Trust, 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 and Dean Witter Short-Term U.S.
Treasury Trust, InterCapital Insured Municipal Trust, Dean Witter Diversified
Income Trust, Dean Witter Health Sciences Trust, Dean Witter Global Dividend
Growth Securities, and Dean Witter Retirement Series, Dean Witter
International SmallCap Fund, Dean Witter Mid Cap Growth Fund, Dean Witter
Select Dimensions Investment Series, Dean Witter Multi-State Municipal Series
Trust, Dean Witter Global Asset Allocation, Dean Witter Balanced Growth Fund,
Dean Witter Balanced Income Fund, Dean Witter Hawaii Municipal Trust,
Municipal Income Trust, Municipal Income Trust II, Municipal Income Trust
III, Municipal Income Opportunities Trust, Municipal Income Opportunities
Trust II, Municipal Income Opportunities Trust III, Prime Income Trust and
Municipal Premium Income Trust. The foregoing investment companies, together
with the Fund, are collectively referred to as the Dean Witter
3
<PAGE>
Funds. In addition, Dean Witter Services Company Inc., a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
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 North American Intermediate Income
Trust, TCW/DW Term Trust 2000, TWC/DW Emerging Markets Opportunities Trust,
TCW/DW Term Trust 2002, TCW/DW Income and Growth Fund, TCW/DW Small Cap
Growth Fund, TCW/DW Balanced Fund, TCW/DW Global Convertible Trust, TCW/DW
Total Return Trust 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.
The Investment Manager also serves as an investment adviser for Dean
Witter World Wide Investment Fund, an investment company organized under the
laws of Luxembourg, shares of which company may not be offered in the United
States or purchased by American citizens outside of the United States.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective.
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.
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 such 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 pays all expenses incurred in its operation. Expenses not
expressly assumed by the Investment Manager under the Agreement or by Dean
Witter Distributors Inc. ("Distributors" or the "Distributor"), the
Distributor of the Fund's shares (see "Purchase of Fund Shares") will be paid
by the Fund. The expenses borne by the Fund include, but are not limited to:
charges and expenses of any registrar; custodian, stock transfer and dividend
disbursing agent; brokerage commissions; taxes; engraving and printing of
share certificates; registration costs of the Fund and its shares under
federal and state securities laws; the cost and expense of printing,
including typesetting, and distributing Prospectuses and Statements of
Additional Information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any
outside service used for pricing of the Fund's shares;
4
<PAGE>
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 the Fund's 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; and all other costs of the Fund's
operations properly payable by the Fund.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.50% to the daily net assets of the Fund. For the period July
9, 1993 (commencement of operations) through December 31, 1993, the Fund did
not accrue any compensation to the Investment Manager. The Investment Manager
had undertaken to assume all operating expenses (except for brokerage
expenses) and to waive its compensation until December 31, 1993. If the
Investment Manager had not waived its compensation during this period, the
Fund would have accrued to the Investment Manager a total of $490,519 in fees
for the fiscal period ended March 31, 1994. For the period January 1, 1994
through March 31, 1994 (when fees were actually accrued), and for the fiscal
year ended March 31, 1995 the Fund accrued to the Investment Manager monthly
compensation under the Agreement in the amount of $226,830 and $589,450,
respectively.
Pursuant to the Agreement, total operating expenses of the Fund are
subject to applicable limitations under rules and regulations of states where
the Fund is authorized to sell its shares. Therefore, operating expenses of
the Fund 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 the Fund registered to be sold in California, is
as follows: If, in any fiscal year, the total operating expenses of a fund,
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 for
the amount of such excess. Such amount, if any, will be calculated daily and
credited on a monthly basis. The Fund did not exceed such limitation for the
fiscal year-end March 31, 1995.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
The Investment Manager 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 which totalled
approximately $140,000. The Fund has deferred and is amortizing these
organizational 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 was initially approved by the Trustees on June 3, 1993 and
by InterCapital as the sole shareholder on June 25, 1993. The Agreement may
be terminated 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 the Fund, 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).
By its terms, the Agreement had an initial term ending April 30, 1995, and
provides that it will continue from year to year thereafter, provided
continuance of the Agreement is approved at least annually by the vote of the
holders of a majority of the outstanding shares of the Fund, as defined in
the Act, or by the Trustees of the Fund; provided that in either event such
continuance is approved annually
5
<PAGE>
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 20, 1995, the Fund's Board of Trustees, including all of the
Independent Trustees, approved continuation of the Agreement until April 30,
1996.
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 investment management contract between the Investment
Manager and the Fund is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate
the name "Dean Witter" from its name if DWR or its parent company shall so
request.
TRUSTEES AND OFFICERS
-----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the 77 Dean Witter Funds and the 13 TCW/DW Funds are
shown below:
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
----------------------------------------- ---------------------------------------------------------------------
<S> <C>
Jack F. Bennett (71) Retired; Director or Trustee of the Dean Witter Funds; formerly Senior
Trustee Vice President and Director of Exxon Corporation (1975-January, 1989) and
Gordon Altman Butowsky Under Secretary of the U.S. Treasury for Monetary Affairs (1974-1975);
Weitzen Shalov & Wein Director of Philips Electronics N.V., Tandem Computers Inc. and Massachusetts
Counsel to the Independent Trustees Mutual Life Insurance Co.; director or trustee of various other not-for-profit
114 West 47th Street and business organizations.
New York, New York
Michael Bozic (54) President and Chief Executive Officer of Hills Department Stores (since
Trustee May, 1991); formerly Chairman and Chief Executive Officer (January,
c/o Hills Stores Inc. 1987-August, 1990) and President and Chief Operating Officer (August,
15 Dan Road 1990-February, 1991) of the Sears Merchandise Group of Sears, Roebuck and
Canton, Massachusetts Co.; Director or Trustee of the Dean Witter Funds; Director of Eaglemark
Financial Services, Inc., the United Negro College Fund and Domain Inc.
(home decor retailer).
Charles A. Fiumefreddo* (61) Chairman, Chief Executive Officer and Director of InterCapital, Dean Witter
Chairman, President Distributors Inc. and DWSC; Director and Executive Vice President of DWR;
Chief Executive Officer and Trustee Chairman, Director or Trustee, President and Chief Executive Officer of
Two World Trade Center the Dean Witter Funds; Chairman, Chief Executive Officer and Trustee of
New York, New York the TCW/DW Funds; Chairman and Director of Dean Witter Trust Company ("DWTC")
(since October, 1989); Director and/or officer of various DWDC subsidiaries
and affiliates; formerly Executive Vice President and Director of DWDC
(until February, 1993).
Edwin J. Garn (62) Director or Trustee of the Dean Witter Funds; formerly United States Senator
Trustee (R-Utah) (1974-1992) and Chairman, Senate Banking Committee (1980-1986);
c/o Huntsman Chemical Corporation 2000 formerly Mayor of Salt Lake City, Utah (1971-1974); formerly Astronaut,
Eagle Gate Tower Space Shuttle Discovery (April 12-19, 1985); Vice Chairman, Huntsman Chemical
Salt Lake City, Utah Corporation (since January, 1993); Member of the board of various civic
and charitable organizations.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
----------------------------------------- ---------------------------------------------------------------------
<S> <C>
John R. Haire (70) Chairman of the Audit Committee and Chairman of the Committee of the Independent
Trustee Directors or Trustees and Director or Trustee of the Dean Witter Funds;
Two World Trade Center Trustee of the TCW/DW Funds; formerly President, Council for Aid to Education
New York, New York (1978-October, 1989) and Chairman and Chief Executive Officer of Anchor
Corporation, an Investment Adviser (1964-1978); Director of Washington
National Corporation (insurance).
Dr. Manuel H. Johnson (46) Senior Partner, Johnson Smick International, Inc., a consulting firm (since
Trustee June, 1985); Koch Professor of International Economics and Director of
c/o Johnson Smick International, Inc. the Center for Global Market Studies at George Mason University (since
1133 Connecticut Avenue, N.W. September, 1990); Co-Chairman and a founder of the Group of Seven Council
Washington, D.C. (G7C), an international economic commission (since September, 1990); Director
or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds; 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 (1982-1988).
Paul Kolton (71) Director or Trustee of the Dean Witter Funds; Chairman of the Audit Committee
Trustee and Chairman of the Committee of the Independent Trustees and Trustee of
c/o Gordon Altman Butowsky the TCW/DW Funds; formerly Chairman of the Financial Accounting Standards
Weitzen Shalov & Wein Advisory Council; and Chairman and Chief Executive Officer of the American
Counsel to the Independent Trustees Stock Exchange; Director of UCC Investors Holding Inc. (Uniroyal Chemical
114 West 47th Street Company, Inc.); director or trustee of various not-for-profit organizations.
New York, New York
Michael E. Nugent (58) 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 (September, 1984-March, 1988); Director of various
New York, New York business organizations.
Philip J. Purcell* (51) 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 and/or
New York, New York officer of Various DWDC subsidiaries.
John L. Schroeder (64) Executive Vice President and Chief Investment Officer of the Home Insurance
Trustee Company (since August, 1991); Director or Trustee of the Dean Witter Funds;
c/o The Home Insurance Company Director of Citizens Utilities Company; formerly Chairman and Chief Investment
59 Maiden Lane Officer of Axe-Houghton Management and the Axe-Houghton Funds (April,
New York, New York 1983-June, 1991) and President of USF&G Financial Services, Inc. (June
1990-June, 1991).
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
----------------------------------------- ---------------------------------------------------------------------
<S> <C>
Sheldon Curtis (63) Senior Vice President, Secretary and General Counsel of InterCapital and
Vice President, Secretary DWSC; Senior Vice President, Assistant Secretary and Assistant General
and General Counsel Counsel of Dean Witter Distributors Inc.; Senior Vice President and Secretary
Two World Trade Center of DWTC (since October, 1989); Assistant Secretary of DWDC and DWR; and
New York, New York Vice President, Secretary and General Counsel of the Dean Witter Funds
and the TCW/DW Funds.
Katherine H. Stromberg (46) Vice President of InterCapital; Vice President of various Dean Witter Funds,
Vice President formerly, Vice President of Kidder Peabody Asset Management (from September,
Two World Trade Center 1985-October, 1991).
New York, New York
Thomas F. Galocia (49) First Vice President (since May, 1991) and Assistant Treasurer (since January,
Treasurer 1993) of InterCapital; First Vice President and Assistant Treasurer of
Two World Trade Center DWSC; Treasurer of the Dean Witter Funds and the TCW/DW Funds; previously
New York, New York Vice President of InterCapital.
<FN>
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
</TABLE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and
Director of DWTC, Edmund C. Puckhaber, Executive Vice President of
InterCapital, are Vice Presidents of the Fund and Marilyn K. Cranney and
Barry Fink, First Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Lawrence S. Lafer, Lou Anne D. McInnis and Ruth
Rossi, Vice Presidents and Assistant General Counsels of InterCapital and
DWSC, are Assistant Secretaries of the Fund.
BOARD OF TRUSTEES; RESPONSIBILITIES AND COMPENSATION OF INDEPENDENT TRUSTEES
As mentioned above under the caption "The Fund and its Management," the
Fund is one of the Dean Witter Funds, a group of investment companies managed
by InterCapital. As of the date of this Statement of Additional Information,
there are a total of 77 Dean Witter Funds, comprised of 117 portfolios. As of
April 30, 1995, the Dean Witter Funds had total net assets of approximately
$62.9 billion and more than five million shareholders.
The Board of Directors or Trustees, consisting of ten (10) directors or
trustees, is the same for each of the Dean Witter Funds. Some of the Funds
are organized as business trusts, others as corporations, but the functions
and duties of directors and trustees are the same. Accordingly, directors and
trustees of the Dean Witter Funds are referred to in this section as
Trustees.
Eight Trustees, that is, 80% 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. Five
of the eight Independent Trustees are also Independent Trustees of the TCW/DW
Funds. As of the date of this Statement of Additional Information, there are
a total of 13 TCW/DW Funds. Two of the Funds' Trustees, that is, the
management Trustees, are affiliated with InterCapital.
As noted in a federal court ruling, "[T]he independent directors . . . are
expected to look after the interests of shareholders by 'furnishing an
independent check upon management,' especially with respect to fees paid to
the investment company's sponsor." In addition to their general "watchdog"
duties, the Independent Trustees are charged with a wide variety of
responsibilities under the Act. In order to perform their duties effectively,
the Independent Trustees are required to review and understand large amounts
of material, often of a highly technical and legal nature.
8
<PAGE>
The Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; that is, people whose advice and counsel are valuable and 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 of the demands made on their time by the Funds. Indeed, to serve on
the Funds' Boards, certain Trustees who would be qualified and in demand to
serve on bank boards would be prohibited by law from serving at the same time
as a director of a national bank and as a Trustee of a Fund.
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. Since most of the Dean Witter Funds have
such a plan, and since all of the Funds' Boards have the same members, the
Independent Trustees effectively control the selection of other Independent
Trustees of all the Dean Witter Funds.
GOVERNANCE STRUCTURE OF THE DEAN WITTER FUNDS
While the regulatory system establishes both general guidelines and
specific duties for the Independent Trustees, the governance arrangements
from one investment company group to another vary significantly. In some
groups the Independent Trustees perform their role by attendance at periodic
meetings of the board of directors with study of materials furnished to them
between meetings. At the other extreme, an investment company complex may
employ a full-time staff to assist the Independent Trustees in the
performance of their duties.
The governance structure of the Dean Witter Funds lies between these two
extremes. The Independent Trustees and the Funds' Investment Manager alike
believe that these arrangements are effective and serve the interests of the
Funds' shareholders. 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.
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 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; advising the independent accountants
and management personnel that they have direct access to the Committee at all
times; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has established 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.
During the calendar year ended December 31, 1994, the three Committees
held a combined total of eleven meetings. The Committee meetings are
sometimes held away from the offices of InterCapital and sometimes in the
Board room of InterCapital. These meetings are held without management
directors or officers being present, unless and until they may be invited to
the meeting for purposes of furnishing information or making a report. These
separate meetings provide the Independent Trustees an opportunity to explore
in depth with their own independent legal counsel, independent auditors and
other independent consultants, as needed, the issues they believe should be
addressed and resolved in the interests of the Funds' shareholders.
9
<PAGE>
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 the issues, and arranges to have the
information furnished. He also arranges for the services of independent
experts to be provided to the Committees 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 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.
VALUE 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 is in the best
interests of all the Funds' shareholders. This arrangement 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. It is believed 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 likelihood 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, it is believed that 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 $1,200 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 $1,000 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
10
<PAGE>
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 28.75% of his or her
Eligible Compensation plus 0.4791666% 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 57.50% 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, 58 Dean Witter Funds have adopted the retirement
program.
(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.
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 March 31, 1995 and the estimated retirement benefits for
the Fund's Independent Trustees as of March 31, 1995.
<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
-------------------------------- ---------------------------------------------------------------
ESTIMATED
RETIREMENT CREDITED YEARS ESTIMATED ESTIMATED
AGGREGATE BENEFITS OF SERVICE AT PERCENTAGE OF ESTIMATED ANNUAL
COMPENSATION ACCRUED AS FUND RETIREMENT ELIGIBLE ELIGIBLE BENEFITS UPON
NAME OF INDEPENDENT TRUSTEE FROM THE FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION(2) RETIREMENT(3)
--------------------------- --------------- --------------- -------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack F. Bennett ............ $2,000 $1,111 8 46.0% $ 688 $ 316
Michael Bozic .............. 1,850 114 10 57.5% 1,950 1,121
Edwin J. Garn .............. 1,950 589 10 57.5% 1,950 1,121
John R. Haire .............. 4,950(4) 3,210 10 57.5% 2,375 1,366
Dr. Manuel H. Johnson ..... 1,950 233 10 57.5% 1,950 1,121
Paul Kolton ................ 1,700 1,348 10 57.0% 915 522
Michael E. Nugent .......... 1,800 441 10 57.5% 1,950 1,121
John L. Schroeder .......... 1,900 223 8 47.9% 1,950 934
<FN>
(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, $3,400 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($1,000).
</TABLE>
11
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1994 for
services to the 73 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Kolton and Nugent, the 13 TCW/DW Funds that were in operation at
December 31, 1994. 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/ 73 DEAN WITTER
OF 73 DEAN WITTER OF 13 TCW/DW TRUSTEES AND FUNDS AND 13
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS AUDIT COMMITTEES TCW/DW FUNDS
--------------------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Jack F. Bennett ............ $125,761 -- -- $125,761
Michael Bozic .............. 82,637 -- -- 82,637
Edwin J. Garn .............. 125,711 -- -- 125,711
John R. Haire .............. 101,061 $66,950 $225,563(5) 393,574
Dr. Manuel H. Johnson ..... 122,461 60,750 -- 183,211
Paul Kolton ................ 128,961 51,850 34,200(6) 215,011
Michael E. Nugent .......... 115,761 52,650 -- 168,411
John L. Schroeder .......... 85,938 -- -- 85,938
<FN>
(5) For the 73 Dean Witter Funds.
(6) For the 13 TCW/DW Funds.
</TABLE>
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
-----------------------------------------------------------------------------
PORTFOLIO SECURITIES
Taxable Securities. As discussed in the Prospectus, the Fund may invest up
to 20% of its total assets in taxable money market instruments, under any one
of the following circumstances: (a) pending investment of proceeds of the
sale of the Fund's shares or of portfolio securities, (b) pending settlement
of purchases of portfolio securities and (c) to maintain liquidity for the
purpose of meeting anticipated redemptions.
In addition, the Fund may temporarily invest more than 20% of its total
assets in taxable securities, or in tax-exempt securities subject to the
federal alternative minimum tax for individual shareholders, in order to
maintain a "defensive" posture when, in the opinion of the Investment
Manager, it is advisable to do so because of market conditions. The types of
taxable money market instruments in which the Fund 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 the foregoing portfolio securities.
Tax-Exempt Securities. 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. The tax-exempt securities in which the Fund
may invest include any or all of the following securities: fixed, variable,
or floating rate general obligation and revenue bonds (including municipal
lease obligations and resource recovery bonds); zero coupon and asset-backed
securities, inverse floaters; tax, revenue, or bond anticipation notes; and
tax-exempt commercial paper. In regard to the Moody's and S&P ratings
12
<PAGE>
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 the Fund.
Bonds rated Caa or Ca by Moody's may already be in default on payment of
interest or principal, while bonds rated C by Moody's, their lowest bond
rating, can be regarded as having extremely poor prospects of ever attaining
any real investment standing. Bonds rated CI by S&P, their lowest Bond
rating, are no longer making interest payments.
The payment of principal and interest by issuers of certain municipal
securities purchased by the Fund may be guaranteed by letters of credit or
other credit facilities offered by banks or other financial institutions.
Such guarantees will be considered in determining whether municipal
securities meet the investment quality requirements of the Fund. In addition,
some issues may contain provisions which permit the Fund to demand from the
issuer repayment of principal at some specified period(s) prior to maturity.
Municipal Bonds. Municipal bonds, as referred to in the Prospectus, are
debt obligations of a state, its cities, municipalities and municipal
agencies (all of which are generally referred to as "municipalities") which
generally have a maturity at the time of issue of one year or more, and the
interest from which is, in the opinion of bond counsel to the issuer at time
of original issuance, exempt from regular federal income tax. 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. The principal types of municipal notes include tax
anticipation notes, bond anticipation notes, revenue anticipation notes and
project notes, although there are other types of municipal notes, in which
the Fund may invest. Notes sold in anticipation of collection of taxes, a
bond sale or receipt of other revenues are usually general obligations of the
issuing municipality or agency.
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. 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.
13
<PAGE>
The two principal classifications of municipal bonds, notes and commercial
paper are "general obligation" and "revenue" bonds, notes or commercial
paper. General obligation bonds, notes or commercial paper are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Issuers of general obligation bonds, notes or
commercial paper include a state, its counties, cities, towns and other
governmental units. Revenue bonds, notes or commercial paper are payable from
the revenues derived from a particular facility or class of facilities or, in
some cases, from specific revenue sources. Revenue bonds, notes or commercial
paper are issued for a wide variety of purposes, including the financing of
electric, gas, water and sewer systems and other public utilities; industrial
development and pollution control facilities; single and multi-family housing
units; public buildings and facilities; air and marine ports; transportation
facilities such as toll roads, bridges and tunnels; and health and
educational facilities such as hospitals and dormitories. They rely primarily
on user fees to pay debt service, although the principal revenue source is
often supplemented by additional security features which are intended to
enhance the 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 securities 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.
Variable Rate Obligations. As stated in the Prospectus, the Fund may
invest in obligations of the type called "variable rate obligations". The
interest rate payable on a variable rate obligation is adjusted either at
predesignated periodic intervals or whenever there is a change in the market
rate of interest on which the interest rate payable is based. Other features
may include the right whereby the Fund may demand prepayment of the principal
amount of the obligation prior to its stated maturity (a "demand feature")
and the right of the issuer to prepay the principal amount prior to maturity.
The principal benefit of a variable rate obligation is that the interest rate
adjustment minimizes changes in the market value of the obligation. The
principal benefit to the Fund of purchasing obligations with a demand feature
is that liquidity, and the ability of the Fund to obtain repayment of the
full principal amount of the obligation prior to maturity, is enhanced.
Zero Coupon Securities. The Fund also may invest in zero coupon securities
which are debt securities issued or sold at a discount from their face value
which do not entitle the holder to any periodic payment of interest prior to
maturity or a specified redemption date (or cash payment date). The amount of
the discount varies depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of the security and
perceived credit quality of the issuer. Zero coupon securities also may take
the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interests in such stripped debt obligations and coupons. The
market prices of zero coupon securities generally are more volatile than the
market prices of interest-bearing securities and are likely to respond to a
greater degree to changes in interest rates than interest-bearing securities
having similar maturities and credit qualities.
Lending of Portfolio Securities. The Fund 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 Fund any income accruing thereon, and the
Fund may invest, the cash collateral in portfolio securities, thereby earning
additional income. The Fund will not lend the 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. Loans will be subject to termination by the
Fund, in the normal
14
<PAGE>
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 Fund 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 period ended March
31, 1995, the Fund did not loan its portfolio securities, and it has no
current intention to loan its portfolio securities in the foreseeable future.
When-Issued and Delayed Delivery Securities and Forward Commitments. As
discussed in the Prospectus, from time to time, in the ordinary course of
business, the Fund may purchase securities on a when-issued or delayed
delivery basis and 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. The securities so purchased are subject to
market fluctuation and no interest accrues to the purchaser during this
period. While the Fund will only purchase securities on a when-issued,
delayed delivery or forward commitment basis with the intention of acquiring
the securities, the Fund may sell the securities before the settlement date,
if it is deemed advisable. At the time the Fund makes the commitment to
purchase securities on a when-issued or delayed delivery basis, the Fund will
record the transaction and thereafter reflect the value, each day, of such
security in determining the net asset value of the Fund. At the time of
delivery of the securities, the value may be more or less than the purchase
price. The Fund will also establish a segregated account with the Fund's
custodian bank in which it will continuously maintain cash or U.S. Government
securities or other high grade debt portfolio securities equal in value to
commitments for such when-issued or delayed delivery securities; subject to
this requirement, the Fund may purchase securities on such basis without
limit. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued or delayed delivery basis may
increase the volatility of the Fund's net asset value. The Investment Manager
and the Trustees do not believe that the Fund's net asset value or income
will be adversely affected by its purchase of securities on such basis.
When, As and If Issued Securities. As discussed in the Prospectus, 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. The commitment for the purchase of any such
security will not be recognized in the portfolio of the Fund until the
Investment Manager determines that issuance of the security is probable. At
such time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At such time, the
Fund will also establish a segregated account with its custodian bank in
which it will continuously maintain cash or U.S. Government securities or
other high grade debt portfolio securities equal in value to recognized
commitments for such securities. Settlement of the trade will occur within
five business days of the occurrence of the subsequent event. The value of
the Fund's commitments to purchase the securities of any one issuer, together
with the value of all securities of such issuer owned by the Fund, may not
exceed 5% of the value of the Fund's total assets of the time the initial
commitment to purchase such securities is made (see "Investment
Restrictions"). Subject to the foregoing restrictions, the Fund may purchase
securities on such basis without limit. 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. The
Investment Manager and the Trustees do not believe that the net asset value
of the Fund will be adversely affected by its purchase of securities on such
basis. The Fund may also sell securities on a "when, as and if issued" basis
provided that the issuance of the security will result automatically from the
exchange or conversion of a security owned by the Fund at the time of the
sale.
Repurchase Agreements. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it
may otherwise be invested or used for payments of obligations of the Fund.
These agreements, which may be viewed as a type of secured lending by the
Fund, typically involve the acquisition by the Fund of debt securities from a
selling financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund
15
<PAGE>
will, sell back to the institution, and that the institution will repurchase,
the underlying security ("collateral"), which is held by the Fund's Custodian
at a specified price and at a fixed time in the future which is usually not
more than seven days from the date of purchase. The Fund will 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 will seek to
liquidate such collateral. However, the exercising of the Fund's right to
liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss.
It is the current policy of the Fund not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with
any other illiquid assets held by the Fund, amounts to more than 15% of the
net assets of the Fund. During the fiscal period ended March 31, 1995, the
Fund did not enter into repurchase agreements, and it is the Fund's current
intention not to invest in repurchase agreements in the foreseeable future.
HEDGING ACTIVITIES
The Fund 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 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 sales creates an
obligation by the Fund, as seller to deliver the specific type of instrument
called for in the contract at a specified future time for a specified price.
A futures contract purchase would create an obligation by the Fund, as
purchaser to take delivery of the specific type of financial instrument at a
specified future time at a specified price. The specific securities delivered
or taken, respectively, at settlement date, would not be determined until or
near that date. The determination would be in accordance with the rules of
the exchange on which the futures contract sale or purchase was effected.
Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is usually effected by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale
is effected by the Fund entering into a futures contract purchase for the
same aggregate amount of the specific type of financial instrument at the
same delivery date. If the price in the sale exceeds the price in the
offsetting purchase, the Fund is immediately paid the difference and thus
realizes a gain. If the offsetting purchase price exceeds the sale price, the
Fund pays the difference and realizes the loss. Similarly, the closing out of
a futures contract purchase is effected by the Fund entering into a futures
contract sale. If the offsetting sale price exceeds the purchase price, the
Fund realizes a gain, and if the offsetting sale price is less than the
purchase price, the Fund realizes a loss.
Unlike a futures contract which requires the parties to buy and sell a
security on a set date, an option on a futures contract entitles its holder
to decide on or before a future date whether to enter into such a contract.
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
Fund.
16
<PAGE>
The Fund is required to maintain margin deposits with brokerage firms
through which it effects futures contracts and options thereon. The initial
margin requirements vary according to the type of the underlying security. In
addition, due to current industry practice daily variations in gains and
losses on open contracts are required to be reflected in cash in the form of
variation margin payments. The Fund may be required to make additional margin
payments during the term of the contract.
Currently, futures contracts can be purchased on debt securities such as
U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6
1/2 and 10 years, Certificates of the Government 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.
Financial futures contracts are traded in an auction environment on the
floors of several Exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. Each Exchange
guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the Exchange membership
which is also responsible for handling daily accounting of deposits or
withdrawals of margin.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject
to futures contracts may correlate imperfectly with the behavior of the cash
prices of the Funds' 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 Investment Manager could be incorrect in
its expectations as to the direction or extent of various interest rate
movements or the time span within which the movements take place. For
example, if the Fund sold futures contracts for the sale of securities in
anticipation of an increase in interest rates, and then interest rates went
down instead, causing bond prices to rise, the Fund would lose money on the
sale.
Put and call options on financial futures have 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 the Fund (transactions in which the
Fund 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 may not enter into futures contracts or related options thereon
if immediately thereafter the amount committed to margin of all the Funds'
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 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 may not purchase or sell futures contracts or related
options thereon if immediately thereafter more than one-third of the Fund's
net assets would be hedged.
Municipal Bond Index Futures. The Fund 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
17
<PAGE>
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. The Fund's ability to utilize such contracts will
be dependent upon the development and maintenance of a liquid secondary
market for such contracts.
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 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 will only write covered call or covered put options. The Fund may
not write covered options in an amount exceeding 10% of the value of the
total assets of the Fund. A call option is "covered" if the Fund 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 holds a call
on the same security or futures contract as the call written where the
exercise price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, Treasury bills
or other high grade short-term debt obligations in a segregated account with
its custodian. A put option is "covered" if the Fund maintains cash, Treasury
bills or other high grade short-term obligations with a value equal to the
exercise price in a segregated account with its custodian, or else holds a
put on the same security or futures contract as the put written where the
exercise price of the put held is equal to or greater than the exercise price
of the put written.
If the Fund has written an option it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing
an option of the same series as the option previously written. However, once
the Fund has been assigned an exercise notice, the Fund will be unable to
effect a closing purchase transaction. Similarly, if the Fund is the holder
of an option it may liquidate its position by effecting a closing sale
transaction. This is accomplished by selling an option of the same series as
the option previously purchased. There can be no assurance that either a
closing purchase or sale transaction can be effected when the Fund so
desires.
The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; the Fund, will realize
a loss from a closing transaction if the price of the transaction is more
than the premium received from writing the option or is less than the premium
paid to purchase the option. Since call option prices generally reflect
increases in the price of the underlying security, any loss resulting from
the 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 only those options for
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<PAGE>
which there appears to be an active secondary market, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
option. In such event it might not be possible to effect closing transactions
in particular options, so that the Fund would have to exercise its options in
order to realize any profit and would incur brokerage commissions upon the
exercise of call options and upon the subsequent disposition of underlying
securities for the exercise of put options. If the Fund as a covered call
option writer is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.
PORTFOLIO MANAGEMENT
The Fund's portfolio turnover rate during the fiscal year ended March 31,
1995 was 1.54%. It is anticipated that the Fund's portfolio turnover rate
will not exceed 50% during the fiscal year ending March 31, 1996. A 50%
turnover rate would occur, for example, if 50% of the securities held in the
Fund's portfolio (excluding all securities whose maturities at acquisition
were one year or less) were sold and replaced within one year. However, 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 its total
assets in securities of any one governmental unit. Subject to investment
restriction number 3 in the Prospectus, the Fund may invest more than 25% of
the total assets in private activity bonds (a certain type of tax-exempt
municipal security).
The Fund may invest up to 15% of its net 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, the Fund may be unable to
dispose of such securities promptly at reasonable prices. It is the current
intention of the Fund not to invest in such obligations.
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.
19
<PAGE>
INVESTMENT RESTRICTIONS
-----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, which may not be changed without the vote of a majority
of the outstanding voting securities as defined in the Act. Such a majority
is defined as the lesser of (a) 67% of the shares of the Fund present at a
meeting of shareholders, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy or (b) more than 50%
of the outstanding shares of the Fund. For purposes of the following
restrictions and those recited in the Prospectus: (a) an "issuer" of a
security is the entity whose assets and revenues are committed to the payment
of interest and principal on that particular security, provided that the
securities guaranteed by separate entities 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 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 may not:
1. Invest in common stock.
2. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or trustee of the Fund or any officer or director of
the Investment Manager owns more than 1/2 of 1% of the outstanding
securities of such issuer, and such officers, trustees and directors who
own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.
3. Purchase or sell real estate or interests therein (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 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 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 Fund
(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 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.
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<PAGE>
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 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 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.
16. Invest more than 5% of the value of its total assets in
securities of issuers having a record, together with predecessors, of
less than three years of continuing operation. This restriction does not
apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities.
PORTFOLIO TRANSACTIONS AND BROKERAGE
-----------------------------------------------------------------------------
The Investment Manager is responsible for decisions to buy and sell
securities and commodities for the Fund, the selection of brokers and dealers
to effect the transactions, and the negotiation of brokerage commissions, if
any. The Fund expects that the primary market for the securities in which it
intends to invest will generally be the over-the-counter market. Securities
are generally traded in the over-the-counter market on a "net" basis with
dealers acting as principal for their own accounts without charging a stated
commission, although the price of the security usually includes a profit to
the dealer. Options and futures transactions will usually be effected through
a broker and a commission will be charged. The Fund also expects that
securities will be purchased at times in underwritten offerings where the
price includes a fixed amount of compensation, generally referred to as the
underwriter's concession or discount. On occasion, the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid. During the fiscal years ended March 31,
1994 and 1995, the Fund did not pay any brokerage commissions.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act
as investment manager or adviser to others. It is the practice of the
Investment Manager to cause purchase and sale transactions to be allocated
among the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client
accounts, the main factors considered are 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 porfolios of the Fund and other client accounts.
The policy of the Fund, regarding purchases and sales of securities 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. Although the Fund may purchase securities
from brokers or dealers acting as principal, who also provide research for
the advisor, it will not pay a mark-up in consideration for such services.
Such services may include, but are not limited to, any one or more of the
following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to
investment; wire services; and appraisals or evaluations of portfolio
securities.
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<PAGE>
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not, in every
case, benefit the Fund directly. While the receipt of such information and
services is useful in varying degrees and would generally reduce the amount
of research or services otherwise performed by the Investment Manager and
thereby reduce its expenses, it is of indeterminable value and the Fund will
not reduce the management fee it pays to the Investment Manager by any amount
that may be attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e. Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper. 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 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 years ended March 31, 1994 and 1995, the Fund paid no brokerage
commissions to DWR.
PURCHASE OF FUND SHARES
-----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers its shares for sale to the
public through Dean Witter Distributors Inc. (the "Distributor") on a
continous basis at an offering price equal to the net asset value per share
next determined following receipt of any order without a sales charge. (See
the Prospectus -- "Purchase of Fund Shares"). The Distributor is a
wholly-owned subsidiary of DWDC. The Distributor has entered into selected
broker-dealer agreements with DWR and other selected dealers ("Selected
Broker-Dealers") pursuant to which shares of the Fund are sold. The Trustees
of the Fund, including a majority of the Trustees who are not, and were not
at the time they voted, interested persons of the Fund, as defined in the Act
(the "Independent Trustees"), approved, at their meeting held on June 3,
1993, 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. 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 a meeting held on
April 20, 1995, the Trustees, including all of the Independent Trustees,
voted to approve the continuance of the Distribution Agreement until April
30, 1996.
The Distributor will bear 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 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
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<PAGE>
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") whereby the Distributor or any of its affiliates,
including InterCapital, is authorized to utilize their own resources to
finance certain activities in connection with the distribution of shares of
the Fund. The Plan was approved initially by the Trustees on June 3, 1993,
and by InterCapital as the Fund's sole shareholder on June 25, 1993,
whereupon the Plan went into effect. 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 the Distributor 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.
The Plan provides that the Fund authorizes the Distributor or any of its
affiliates, including InterCapital, to bear the expense of all promotional
and distribution related activities on behalf of the Fund. Among the
activities and services which may be provided under the Plan are: (1)
compensation to and expenses of account executives and other employees of the
Distributor 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.
Pursuant to the Selected Broker-Dealer Agreements between the Distributor
and DWR and other Selected Broker-Dealers, the account executives of DWR and
other Selected Broker-Dealers may be paid an annual fee based upon the
current value of the respective accounts for which they are the account
executives of record. The fee also reflects a payment made for expenses
associated with the servicing of shareholder's accounts, including the
expenses of operating branch offices in connection with the servicing of
shareholder's accounts, which expenses include lease costs, the salaries and
employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies and other
expenses relating to branch office servicing of shareholder accounts.
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.
At their meeting held April 20, 1995, the Trustees of the Fund, including
all of the Independent 12b-1 Trustees approved the continuance of the Plan.
The Plan will remain in effect until April 30, 1996, and from year to year
thereafter will continue in effect, provided such continuance is approved
annually by a vote of the Trustees, including a majority of the Independent
12b-1 Trustees. Assumption by the Fund of any distribution expenses under the
Plan must be approved by the shareholders, and all material amendments to the
Plan must be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of the
holders of a majority of the Independent 12b-1 Trustees or by a vote of a
majority of the outstanding voting securities (as defined in the Act) on not
more than 30 days written notice to any other party to the Plan. So long as
the Plan is in effect, the selection or nomination of the Independent 12b-1
Trustees is committed to the discretion of the Independent 12b-1 Trustees.
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<PAGE>
Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each fiscal
quarter, a written report regarding the distribution expenses incurred by the
Distributor 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
the Fund. In the Trustees' quarterly review of the Plan they will 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, has 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 Distributor or any of its affiliates, including
InterCapital.
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, 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 are thus valued for the Fund 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. Short-term
taxable debt securities with remaining maturities of 60 days or less at the
time of purchase are valued at amortized cost, unless the Trustees determine
such does not reflect the securities' fair value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Other short-term taxable debt securities will be valued on a mark to market
basis until such time as they reach a remaining maturity of 60 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' fair
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 as of the close of the commodities exchange on which
they trade unless the Trustees determine that such price does not reflect
their fair value, in which case they will be valued at their fair value as
determined by the Trustees. All other securities, including illiquid
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.
The net asset value per share 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 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.
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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.
Automatic Investment of Dividends and Distributions. Each purchase of
shares of the Fund is made upon the condition that the Transfer Agent is
thereby automatically appointed as agent of the investor to receive all
dividends and distributions on shares owned by the investor. Such dividends
and distributions will be paid 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 in shares of the Fund at net asset value per share.
Processing of dividend or distribution 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. At any time an investor may
request the Transfer Agent in writing to have subsequent dividends and/or
capital gains distributions paid to the investor in cash rather than shares.
In order to provide sufficient time to process the change, such requests must
be received by the Transfer Agent at least five business days prior to the
payment date of the dividend or the record date of the distribution. In case
of recently purchased shares for which registration instructions have not
been received on the payment or record date, cash payments will be made to
the Distributor or the dealer through whom shares were purchased which
payments will be forwarded to the shareholder, upon receipt of proper
instructions.
Investment of Dividends or Distributions Received in Cash. As discussed in
the Prospectus, 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 30 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.
EasyInvest(Service Mark). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund. Shares purchased through EasyInvest will be
added to the shareholder's existing account at the net asset value calculated
the same business day the transfer of funds is effected. For further
information or to subscribe to EasyInvest, shareholders should contact their
DWR or other selected broker-dealer account executive or the Transfer Agent.
Systematic Withdrawal Plan. As discussed in the Prospectus, a 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 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.
Dividends and capital gains distributions on shares held under the
Systematic Withdrawal Plan will be invested in additional full and fractional
shares at net asset value (without a sales charge). Shares will be credited
to an open account for the investor by the Transfer Agent; no share
certificates will be issued. A shareholder is entitled to a share certificate
upon written request to the Transfer Agent, although in that event the
shareholder's Systematic Withdrawal Plan will be terminated.
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, or amounts credited to a
shareholder's DWR or other selected broker-dealer brokerage account within
five business days after the date of redemption. The Withdrawal Plan may be
terminated at any time by the Fund.
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<PAGE>
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.
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time change the amount and interval of
withdrawal payments and the address to which checks are mailed through his or
her account executive or by written notification to the Transfer Agent. The
shareholder's signature on such notification must be guaranteed by an
eligible guarantor as described above. The shareholder may also terminate 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
Shareholder Investment Account. The shareholder may also redeem all or part
of the shares held in the Systematic Withdrawal Plan account (see
"Redemptions and Repurchases" in the Prospectus) at any time. Shareholders
wishing to enroll in the Withdrawal Plan should contact their account
executive or the Transfer Agent.
Targeted Dividends(Service Mark). In states where it is legally
permissible, shareholders may also have all income dividends and capital
gains distributions automatically invested in shares of any open-end Dean
Witter Funds for which InterCapital serves as investment manager other than
Dean Witter Limited Term Municipal Trust. Such investment will be made at the
net asset value per share (without sales charge) of the selected Dean Witter
Fund as of the close of business on the payment date of the dividend or
distribution, and will begin to earn dividends, if any, in the selected Dean
Witter Fund the next business day. Shareholders of the Fund must be
shareholders of the Dean Witter Fund targeted to receive investments from
dividends and distributions at the time they enter the Targeted Dividend
program. Nevertheless, investors should review the prospectus of the targeted
Dean Witter Fund before entering the program.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time
through the Shareholder Investment Account by sending a check in any amount,
not less than $100, payable to Dean Witter Limited Term Municipal Trust,
directly to the Fund's Transfer Agent. The investment proceeds will be
applied to the purchase of shares of the Fund at the net asset value per
share next computed after receipt of the check or purchase payment by the
Transfer Agent. The shares so purchased will be credited to the investor's
account.
Tax-Sheltered Retirement Plans. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent.
Exchange Privilege. As discussed in the Prospectus, an Exchange Privilege
exists whereby investors who have purchased shares of any of the Dean Witter
Funds sold with either a front-end (at time of purchase) sales charge ("FESC
funds") or a contingent deferred (at time of redemption) sales charge ("CDSC
funds") will be permitted, after the shares of the fund acquired by purchase
(not by exchange or dividend reinvestment) have been held for thirty days, to
redeem all or part of their shares in that fund and have the proceeds
invested in shares of the Fund, in shares of Dean Witter Short-Term Treasury
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced Income Fund,
Dean Witter Balanced Growth Fund and in shares of five Dean Witter Funds
which are money market funds (the Fund, Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced Income Fund,
Dean Witter Balanced Growth Fund and the five money market funds hereinafter
referred to as "Exchange Funds"). There is no waiting period for exchanges of
shares
26
<PAGE>
acquired by exchange or dividend reinvestment. 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 Exchange Funds, FESC funds or CDSC funds (however, shares of
CDSC funds, including shares acquired in exchange of (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 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. 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.)
The current prospectus for each of the Dean Witter Funds describes its
investment objective(s) and policies. Shareholders should obtain a copy and
read it carefully before investing. Exchanges are subject to the minimum
investment requirement and any other conditions imposed by each Fund. In the
case of any shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares on which the shareholder will 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.
When shares of any CDSC fund are exchanged for shares of the Exchange
Funds, the exchange is executed at no charge to the shareholder, without the
imposition of the CDSC at the time of the exchange. During the period of time
the shareholder remains in the Exchange Funds (calculated from the last day
of the month in which the Exchange Funds shares were acquired), the holding
period or "year since purchase payment made" is frozen. When shares are
redeemed out of the Exchange Funds, they will be subject to a CDSC which
would be based upon the period of time the shareholder held shares in a CDSC
fund. Shareholders acquiring shares of the Exchange Funds pursuant to this
exchange privilege may exchange those shares back into a CDSC fund from the
Exchange Funds, with no CDSC being imposed on such exchange. The holding
period previously frozen when shares were first exchanged for shares of the
Exchange Funds resumes on the last day of the month in which shares of a CDSC
fund are reacquired. Thus, a CDSC is imposed only upon an ultimate
redemption, based upon the time (calculated as described above) the
shareholder was invested in a CDSC fund. 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 CDSC upon their redemption.
When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund or for shares of the Exchange Funds, the date of purchase
of the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CDSC, the amount which represents the
current net asset value of shares at the time of the exchange which were (i)
purchased more than three or six years (depending on the CDSC schedule
applicable to the shares) prior to the exchange, (ii) originally acquired
through reinvestment of dividends
27
<PAGE>
or distributions and (iii) acquired in exchange for shares of FESC funds, or
for shares of other Dean Witter Funds for which shares of FESC funds have
been exchanged (all such shares called "Free Shares"), will be exchanged
first. Shares of Dean Witter American Value Fund acquired prior to April 30,
1984, shares of Dean Witter Dividend Growth Securities Inc. and Dean Witter
Natural Resource Development Securities Inc. acquired prior to July 2, 1984,
and shares of Dean Witter Strategist Fund acquired prior to November 8, 1989
are also considered Free Shares and will be the first Free Shares to be
exchanged. After an exchange, all dividends earned on shares in the Fund or
the money market fund will be considered Free Shares. If the exchanged amount
exceeds the value of such Free Shares, an exchange is made, on a
block-by-block basis, of non-Free Shares held for the longest period of time
(except that if shares held for identical periods of time but subject to
different CDSC schedules are held in the same Exchange Privilege Account, the
shares of that block that are subject to a lower CDSC rate will be exchanged
prior to the shares of that block that are subject to a higher CDSC rate).
Shares equal to any appreciation in the value of non-Free Shares exchanged
will be treated as Free Shares, and the amount of the purchase payments for
the non-Free Shares of the fund exchanged into will be equal to the lesser of
(a) the purchase payments for, or (b) the current net asset value of, the
exchanged non-Free Shares. If an exchange between funds would result in
exchange of only part of a particular block of non-Free Shares, then shares
equal to any appreciation in the value of the block (up to the amount of the
exchange) will be treated as Free Shares and exchanged first, and the
purchase payment for that block will be allocated on a pro rata basis between
the non-Free Shares of that block to be retained and the non-Free Shares to
be exchanged. The prorated amount of such purchase payment attributable to
the retained non-Free Shares will remain as the purchase payment for such
shares, and the amount of purchase payment for the exchanged non-Free Shares
will be equal to the lesser of (a) the prorated amount of the purchase
payment for, or (b) the current net asset value of, those exchanged non-Free
Shares. Based upon the procedures described in the CDSC fund Prospectus under
the caption "Contingent Deferred Sales Charge", any applicable CDSC will be
imposed upon the ultimate redemption of shares of any fund, regardless of the
number of exchanges since those shares were originally purchased.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of
other fund shares. In the absence of negligence on its part, neither the
Transfer Agent nor the Fund shall be liable for any redemption of Fund shares
caused by unauthorized telephone or telegraph instructions. Accordingly, in
such event the investor shall bear the risk of loss. The staff of the
Securities and Exchange Commission is currently considering the propriety of
such a policy.
With respect to exchanges, redemptions or repurchases, the Transfer Agent
shall be liable for its own negligence and not for the default or negligence
of its correspondents or for losses in transit. The Fund shall not be liable
for any default or negligence of the Transfer Agent, the Distributor or any
Selected Broker-Dealer.
The Distributor and any Selected Broker-Dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
Selected Broker-Dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment 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
28
<PAGE>
acquired their shares directly from that fund. As a result, certain services
normally available to shareholders of Dean Witter Short-Term U.S. Treasury or
money market funds, including the check writing feature, will not be
available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by 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 Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Short-Term
Bond Fund, Dean Witter Balanced Income Fund, Dean Witter Balanced Growth
Fund, Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter New York Municipal Money Market Trust, Dean Witter
California Tax-Free Daily Income Trust or Dean Witter U.S. Government Money
Market Trust, 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 or other selected broker-dealer 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, 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. 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 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.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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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, the Fund will pay federal
income tax thereon, and will notify shareholders that following such election
the shareholders will be required to include such undistributed gains in
determining their taxable income and may claim their share of the tax paid as
a credit against their individual federal income tax (but not the personal
income tax of a particular state).
As discussed in the Prospectus, 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 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, the Fund will amortize any premiums and
original issue discounts on securities owned. Additionally, with respect to
market discount on bonds purchased after April 30, 1993, a portion of any
capital gain realized upon disposition is recharacterized as investment
income. Capital gains or losses realized upon sale or maturity of such
securities will be based on their amortized cost.
Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses. 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 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.
Because the Fund intends to distribute all of its net investment income
and capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
it is not expected that the Fund will be required to pay any federal income
tax. Shareholders will normally have to pay federal income taxes, and any
applicable state and/or local income taxes, on the dividends and
distributions they receive from the Fund. Such dividends and distributions,
to the extent that they are derived from net investment income or short-term
capital gains, are taxable to the shareholder as ordinary income regardless
of whether the shareholder receives such payments in additional shares or in
cash. Any dividends declared in the last quarter of any year which are paid
in the following year prior to February 1 will be deemed received by the
shareholder in the prior year.
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, 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
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<PAGE>
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. The Fund may also be restricted in its ability to engage
in transactions involving futures contracts.
As discussed in the Prospectus, the Fund intends to qualify to pay
"exempt-interest dividends" to its shareholders by maintaining, as of the
close of each quarter of its taxable year, at least 50% of the value of its
total assets in tax-exempt securities. An exempt-interest dividend is that
part of dividend distributions made by the Fund which consists of interest
received by the Fund on tax-exempt securities upon which the shareholder
incurs no federal income taxes (apart from any possible application of the
alternative minimum tax).
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 Fund will mail to shareholders a statement indicating the percentage
of the dividend distributions for each 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 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 and whether the distribution
is received in additional shares or in cash. Since the Fund's income is
expected to be derived entirely from interest rather than dividends, 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 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 then sells those shares at a loss,
the loss will be treated as a long-term capital loss to the extent of the
capital gains distribution.
Interest on indebtedness incurred or continued by a shareholder to
purchase or carry shares of the Fund is not deductible to the extent
allocable to exempt-interest dividends of the Fund (which allocation does not
take into account capital gain distributions from the Fund). Furthermore,
entities or persons who are "substantial users" (or related persons) of
facilities financed by industrial development bonds should consult their tax
advisers before purchasing shares of the Fund. "Substantial user" is defined
generally by Income Tax Regulation 1.103-11 (b) as including a "non-exempt
person" who regularly uses in a trade or business a part of a facility
financed from the proceeds of industrial development bonds.
Federal Income Tax Status. From time to time, proposals have been
introduced before Congress for the purpose of restricting or eliminating the
federal income tax exemption for interest on municipal securities. It can be
expected that similar proposals may be introduced in the future. If such a
proposal were enacted, the availability of municipal securities for
investment by the Fund could be affected. In such event, the Fund would
re-evaluate its investment objective and policies.
Any dividends or 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
distribution. Furthermore, capital gains distributions are, and some portion
of the dividends
31
<PAGE>
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
Code, the Fund itself is not liable for any income or franchise tax in The
Commonwealth of Massachusetts.
PERFORMANCE INFORMATION
-----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. The
yield is calculated for any 30-day period as follows: the amount of interest
income for each security in the Fund's portfolio is determined in accordance
with regulatory requirements; the total for the entire portfolio constitutes
the Fund's gross income for the period. Expenses accrued during the period
are subtracted to arrive at "net investment income". The resulting amount is
divided by the product of the net asset value per share of the Fund on the
last day of the period multiplied by the average number of 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. Based on the
foregoing calculation, the Fund's annualized yield for the thirty (30) day
period ending March 31, 1995 was 4.46%.
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.
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. Based on the foregoing calculation and a Federal personal income
tax bracket of 39.6%, the Fund's annualized tax-equivalent yield for the
thirty (30) day period ending March 31, 1995 was 7.38%.
The Fund's "average annual total return" represents an annualization of
the Fund's total return over a particular period and is computed by finding
the annual percentage rate which will result in the ending redeemable value
of a hypothetical $1,000 investment made at the beginning of a one, five or
ten year period, or for the period from the date of commencement of the
Fund's operations, if shorter than any of the foregoing. For the purpose of
this calculation, it is assumed that all dividends and distributions are
reinvested. The formula for computing the average annual total return
involves a percentage obtained by dividing the ending redeemable value by the
amount of the initial investment, taking a root of the quotient (where the
root is equivalent to the number of years in the period) and subtracting 1
from the result. Based on the foregoing calculation, the Fund's average
annual total return for the fiscal year ended March 31, 1995 and for the
period July 12, 1993 (commencement of operations) through March 31, 1995
(fiscal year end) was 4.01% and 1.66%, respectively. Without the waiver of
fees and assumption of expenses by the Investment Manager, the average annual
total return would have been 1.35% for the period July 12, 1993 through March
31, 1995.
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. In addition, 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 made at the
32
<PAGE>
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for
computing aggregate total return involves a percentage obtained by dividing
the ending value by the initial $1,000 investment and subtracting 1 from the
result. Based on the foregoing calculation, the Fund's aggregate total return
for the period July 12, 1993 through the fiscal year ended March 31, 1995 and
for the period July 12, 1993 (commencement of operations) through March 31, 1994
(fiscal year end) was 2.87% and -1.11%, respectively. The Fund may also
advertise the growth of hypothetical investments of $10,000, $50,000 and
$100,000 in shares of the Fund by adding 1 to the Fund's aggregate total return
(expressed as a decimal) and multiplying by $10,000, $50,000 or $100,000 as the
case may be. Investments of $10,000, $50,000 and $100,000 in the Fund at
inception would have been $10,287, $51,435 and $102,870, respectively at
March 31, 1995.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indices compiled by independent
organizations.
SHARES OF THE FUND
-----------------------------------------------------------------------------
As discussed in the Prospectus, the shareholders of the Fund are entitled
to a full vote for each full share held. The Trustees, except for Messrs.
Bozic, Purcell and Schroeder, were elected by InterCapital as the sole
shareholder of the Fund. Messrs. Bozic, Purcell and Schroeder were elected by
the existing Trustees. The Trustees themselves have the power to alter the
number and the terms of office of the Trustees (as provided for in the
Declaration of Trust), and they may at any time lengthen or shorten their own
terms or make their terms of unlimited duration and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Fund. Under certain circumstances the
Trustees may be removed by action of the Trustees. The shareholders also have
the right under certain circumstances to remove the Trustees following a
meeting called for the purpose, requested in writing by recordholders of not
less than 10% of the Fund's outstanding shares. 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 elected,
while the holders of the remaining shares would be unable to elect any
Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders.) However, the Trustees have not
presently authorized any such additional series or classes of shares.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust.
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 concerning termination by action of the shareholders.
33
<PAGE>
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, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions 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 sub-account 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 will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent accountants together
with their report thereon, will be sent to shareholders each year.
The Fund's fiscal year ends on March 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's 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.
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 included in this Statement of
Additional Information and incorporated 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.
34
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1995
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (92.5%)
GENERAL OBLIGATION (14.5%)
$ 2,000 Wilmington, Delaware, Refg Ser 1993 B (FGIC) .................... 4.60 % 07/01/04 $ 1,846,060
2,000 District of Columbia, Refg Ser 1994 A (MBIA) .................... 4.95 06/01/05 1,838,860
1,000 Honolulu, Hawaii, Refg Ser 1993 B ............................... 5.00 10/01/03 979,010
2,000 Rosemont, Illinois, Ser 1993 B .................................. 5.30 12/01/04 1,948,240
2,000 Massachusetts, Refg Ser 1993 C .................................. 4.80 08/01/03 1,917,560
3,000 New York City, New York, Ser 1992 A ............................. 6.10 08/01/02 2,985,690
1,000 Massillon City School District, Ohio, Refg Ser 1994 (AMBAC) .... 4.70 12/01/05 912,580
----------- -------------
13,000 12,428,000
----------- -------------
EDUCATIONAL FACILITIES REVENUE (9.9%)
1,500 University of Delaware, Ser 1993 ................................ 4.90 11/01/02 1,456,485
2,000 Massachusetts Health & Educational Facilities Authority, Boston
College Ser K ................................................... 4.80 06/01/04 1,900,100
3,400 University of Minnesota, Ser 1993 A ............................. 4.80 08/15/03 3,261,824
2,000 New York State Dormitory Authority, State University Ser 1993 B 5.25 05/15/05 1,845,820
----------- -------------
8,900 8,464,229
----------- -------------
ELECTRIC REVENUE (7.0%)
1,000 Salt River Project Agricultural Improvement & Power District,
Arizona, Refg Ser 1993 B ........................................ 4.75 01/01/03 955,530
3,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 ................ 4.70 02/01/05 2,780,580
2,320 Snohomish County Public Utility District #1, Washington,
Generation Ser 1993 B (AMT) ..................................... 5.35 01/01/05 2,208,013
----------- -------------
6,320 5,944,123
----------- -------------
HOSPITAL REVENUE (7.0%)
2,000 California Statewide Communities Development Authority,
Cedars-Sinai Medical Center Ser 1993 ............................ 4.70 11/01/03 1,845,060
1,420 Michigan Hospital Finance Authority, McLaren Obligated Group Ser
1993 A .......................................................... 5.00 10/15/04 1,306,315
1,000 Murray, Utah, IHC Hospitals Inc Refg Ser 1993 (AMBAC) .......... 5.00 05/15/04 963,750
1,000 Fairfax County Industrial Development Authority, Virginia, Inova
Health System Foundation Refg Ser 1993 A ........................ 4.70 08/15/04 930,160
1,000 Wisconsin Health & Educational Facilities Authority, Hospital
Sisters Services Ser 1993 (MBIA Insured) ........................ 5.00 06/01/03 966,740
----------- -------------
6,420 6,012,025
----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (3.3%)
1,000 Massachusetts Industrial Finance Agency, Eastern Edison Co Refg
Ser 1993 ........................................................ 5.875 08/01/08 949,830
2,000 Greenwood, Wisconsin, Land O'Lakes Inc (AMT) .................... 5.50 09/01/03 1,912,860
----------- -------------
3,000 2,862,690
----------- -------------
MORTGAGE REVENUE - MULTI-FAMILY (2.3%)
2,130 Wisconsin Housing & Economic Development Authority, Ser 1993 B
(AMT) ........................................................... 5.10 11/01/03 1,989,164
----------- -------------
MORTGAGE REVENUE - SINGLE FAMILY (2.2%)
2,000 Connecticut Housing Finance Authority, 1993 Subser F-1 ......... 4.90 05/15/04 1,889,980
----------- -------------
</TABLE>
35
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1995 (continued)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
NURSING & HEALTH RELATED FACILITIES REVENUE (2.1%)
$2,000 Ohio Public Facilities Commission, Mental Health Ser II-93B .... 4.30 % 06/01/03 $1,785,240
----------- -------------
PUBLIC FACILITIES REVENUE (9.1%)
1,400 St Paul Housing & Redevelopment Authority, Minnesota, Civic
Center Ser 1993 ................................................. 4.80 11/01/03 1,323,490
2,000 Regional Convention & Sports Complex Authority, Missouri, Refg
Ser A 1993 ...................................................... 4.75 08/15/04 1,829,320
2,000 Ohio Building Authority, Correctional Refg 1994 Ser A .......... 4.65 10/01/04 1,846,200
1,945 Pittsburgh Stadium Authority, Pennsylvania, Refg Ser 1993 (MBIA) 4.85 10/01/04 1,842,732
1,000 Rhode Island Convention Center Authority, Refg Ser 1993 B (MBIA) 5.00 05/15/05 954,050
----------- -------------
8,345 7,795,792
----------- -------------
RESOURCE RECOVERY REVENUE (2.3%)
2,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) ................................................ 5.50 07/01/01 1,969,700
----------- -------------
STUDENT LOAN REVENUE (5.7%)
1,000 New England Education Loan Marketing Corporation, Massachusetts,
Ser 1992 G ...................................................... 5.20 08/01/02 974,360
2,000 Montana Higher Education Student Assistance Corporation, Senior
Ser 1993 B (AMT) ................................................ 5.10 12/01/01 1,968,800
2,000 South Carolina Education Assistance Authority, Ser 1993 A-1
(AMT) ........................................................... 5.00 09/01/03 1,908,600
----------- -------------
5,000 4,851,760
----------- -------------
TAX ALLOCATION REVENUE (6.7%)
1,960 Pleasanton Joint Powers Financing Authority, California,
Reassessment Ser 1993 A ......................................... 5.60 09/02/00 1,950,847
2,000 Sacramento Financing Authority, California, Refg Ser 1993 A
(AMBAC) ......................................................... 4.85 11/01/04 1,898,340
2,000 Santa Maria Redevelopment Agency, California, Town Center &
Westside Parking Refg Ser 1993 .................................. 4.75 06/01/03 1,888,380
----------- -------------
5,960 5,737,567
----------- -------------
TRANSPORTATION REVENUE (8.7%)
1,000 Alaska, International Airports Refg Ser I (AMT) (MBIA) ......... 5.10 10/01/03 961,970
1,000 Delaware River & Bay Authority, Delaware & New Jersey, Ser
1993** .......................................................... 4.50 01/01/04 916,190
2,000 Washington Metropolitan Area Transit Authority, District of
Columbia, Maryland and Virginia Refg Ser 1993 (FGIC)** ......... 4.90 01/01/05 1,885,680
2,000 Chicago, Illinois, Chicago - O'Hare Int'l Airport Refg Ser 1993
A ............................................................... 4.80 01/01/05 1,817,680
2,000 Harris County, Texas, Toll Road Refg Ser 1994 (AMBAC) .......... 4.85 08/15/05 1,887,560
----------- -------------
8,000 7,469,080
----------- -------------
WATER & SEWER REVENUE (9.4%)
1,000 Atlanta, Georgia, Water & Sewer Ser 1993 ........................ 4.50 01/01/04 916,840
2,000 Massachusetts Water Resources Authority, Ser 1993 C ............ 5.25 12/01/06 1,930,480
2,000 New York City Municipal Water Finance Authority, New York, Ser
1994 B .......................................................... 5.125 06/15/04 1,881,440
</TABLE>
36
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1995 (continued)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
$ 1,500 Pittsburgh Water & Sewer Authority, Pennsylvania, Refg Ser 1993
A (FGIC) ........................................................ 4.60 % 09/01/03 $ 1,408,005
2,000 Southeastern Public Service Authority, Virginia, Regional Solid
Waste Refg Ser 1993 A (MBIA) .................................... 4.70 07/01/04 1,871,240
----------- -------------
8,500 8,008,005
----------- -------------
OTHER REVENUE (2.3%)
2,000 Pennsylvania Intergovernmental Cooperation Authority, Special
Tax Ser 1993 (FGIC) ............................................. 5.05 06/15/04 1,941,080
----------- -------------
83,575 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $83,192,555) ................................... 79,148,435
----------- -------------
SHORT-TERM MUNICIPAL OBLIGATIONS (3.2%)
2,200 Phoenix, Arizona, Ser 1994-1 (Tender 04/03/95) .................. 4.50* 06/01/18 2,200,000
500 Gulf Coast Waste Disposal Authority, Texas, Amoco Oil Co Ser
1992 (Tender 04/03/95) .......................................... 4.40* 10/01/17 500,000
----------- -------------
2,700 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (IDENTIFIED COST $2,700,000) ................... 2,700,000
----------- -------------
$86,275 TOTAL INVESTMENTS (IDENTIFIED COST $85,892,555) (A) ....................... 95.7% 81,848,435
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................ 4.3 3,651,017
-------------
NET ASSETS ................................................................ 100.0% $85,499,452
=============
<FN>
------------
AMT Alternative Minimum Tax.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
* Variable or floating rate securities. Coupon rate shown reflects rate in
effect on March 31, 1995.
** Jointly issued.
(a) The aggregate cost for federal income tax purposes is $85,892,555; the
aggregate gross and net unrealized depreciation is $4,044,120.
</TABLE>
-------------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
March 31, 1995
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Alaska .............. 1.1%
Arizona ............. 3.7
California .......... 8.9
Connecticut ......... 2.2
Delaware ............ 3.9
District of Columbia 2.1
Georgia ............. 1.1
Hawaii .............. 1.1%
Illinois ............ 4.4
Maryland ............ 2.3
Massachusetts ....... 9.0
Michigan ............ 1.5
Minnesota ........... 5.4
Missouri ............ 2.1
Montana ............. 2.3%
New York ............ 7.9
Ohio ................ 5.3
Pennsylvania ........ 6.1
Rhode Island ........ 1.1
South Carolina ...... 2.2
Texas ............... 6.0
Utah ................ 1.1%
Virginia ............ 3.3
Washington .......... 2.6
Wisconsin ........... 5.7
Joint Issues ........ 3.3
------
Total ...............95.7%
======
-------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
37
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
March 31,1995
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $85,892,555) ............ $81,848,435
Cash ...................................... 207,767
Receivable for:
Investments sold ......................... 1,490,096
Interest ................................. 1,140,616
Shares of beneficial interest sold ...... 896,365
Deferred organizational expenses .......... 98,964
Prepaid expenses and other assets ........ 16,691
-------------
TOTAL ASSETS ............................ 85,698,934
-------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased 67,375
Investment management fee ................ 36,410
Dividends to shareholders ................ 21,438
Accrued expenses and other payables ...... 74,259
-------------
TOTAL LIABILITIES ....................... 199,482
-------------
NET ASSETS:
Paid-in-capital ........................... 97,910,471
Net unrealized depreciation ............... (4,044,120)
Accumulated net realized loss ............. (8,366,899)
-------------
NET ASSETS .............................. $85,499,452
=============
NET ASSET VALUE PER SHARE, 8,946,383
shares outstanding (unlimited shares
authorized of $.01 par value) ............ $9.56
=============
</TABLE>
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the year ended March 31, 1995
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $ 6,089,417
-------------
EXPENSES
Investment management fee ............. 589,450
Professional fees ..................... 75,978
Transfer agent fees and expenses ..... 63,713
Registration fees ..................... 55,049
Organizational expenses ............... 32,722
Trustees' fees and expenses ........... 29,776
Shareholder reports and notices ...... 29,385
Other ................................. 14,541
-------------
TOTAL EXPENSES ....................... 890,614
-------------
NET INVESTMENT INCOME ................ 5,198,803
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ..................... (8,283,452)
Net change in unrealized depreciation 5,381,579
-------------
NET LOSS ............................. (2,901,873)
-------------
NET INCREASE ......................... $ 2,296,930
=============
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 12, 1993*
ENDED MARCH THROUGH MARCH
31, 1995 31, 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .................................................... $ 5,198,803 $ 3,848,943
Net realized loss ........................................................ (8,283,452) (83,447)
Net change in unrealized depreciation .................................... 5,381,579 (9,425,699)
-------------- --------------
Net increase (decrease) ................................................. 2,296,930 (5,660,203)
-------------- --------------
Dividends to shareholders from net investment income ...................... (5,198,803) (3,848,943)
Net increase (decrease) from transactions in shares of beneficial interest (82,188,083) 179,998,554
-------------- --------------
Total increase (decrease) ............................................... (85,089,956) 170,489,408
NET ASSETS:
Beginning of period ...................................................... 170,589,408 100,000
-------------- --------------
END OF PERIOD ............................................................ $ 85,499,452 $170,589,408
============== ==============
<FN>
--------------
* Commencement of operations.
</TABLE>
See Notes to Financial Statements
38
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter Limited Term Municipal
Trust (the "Fund") is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund
was organized as a Massachusetts business trust on February 25, 1993 and had
no operations until July 12, 1993 other than matters relating to the sale of
10,000 shares of beneficial interest for $100,000 to Dean Witter InterCapital
Inc. (the "Investment Manager"). The Fund commenced operations on July 12,
1993.
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. When market quotations are not readily available, including
circumstances under which it is determined by the Adviser that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation
of debt securities for which market quotations are not readily available may
be based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors). 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 and premiums on securities purchased are amortized/accreted
over the life of the respective securities. Interest income is accrued daily.
C. Federal Income Tax Status -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Fund records
dividends and distributions to its shareholders on the record date. The
amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. Organizational Expenses -- The Investment Manager paid the
organizational expenses of the Fund in the amount of $139,572. The Fund
reimbursed the Investment Manager for $139,572,
39
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
-----------------------------------------------------------------------------
exclusive of $14,608 assumed by the Investment Manager. 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.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement (the "Agreement"), the Fund pays its Investment Manager a
management fee, accrued daily and payable monthly, by applying the annual
rate of 0.50% to the Fund's net assets determined as of the close of each
business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended March 31, 1995 aggregated
$1,700,000 and $83,687,464, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At March 31, 1995, the Fund had transfer agent fees
and expenses payable of approximately $7,600.
The Fund adopted an unfunded noncontributory defined benefit pension plan
covering all independent Trustees of the Fund who will have served as
independent Trustees for at least five years at the time of retirement.
Benefits under this plan are based on years of service and compensation
during the last five years of service. Aggregate pension costs for the year
ended March 31, 1995 included in Trustees' fees and expenses in the Statement
of Operations amounted to $12,000. At March 31, 1995, the Fund had an accrued
pension liability of $14,710 which is included in accrued expenses in the
Statement of Assets and Liabilities.
4. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, FOR THE PERIOD JULY 12, 1993*
1995 THROUGH MARCH 31, 1994
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold ...................... 5,996,771 $ 56,905,855 30,407,994 $ 308,424,328
Reinvestment of dividends 431,682 4,067,263 301,685 3,050,020
-------------- --------------- -------------- ---------------
6,428,453 60,973,118 30,709,679 311,474,348
Repurchased ............... (15,228,776) (143,161,201) (12,972,973) (131,475,794)
-------------- --------------- -------------- ---------------
Net increase (decrease) .. (8,800,323) $ (82,188,083) 17,736,706 $ 179,998,554
============== =============== ============== ===============
<FN>
---------------
* Commencement of operations.
</TABLE>
5. FEDERAL INCOME TAX STATUS -- At March 31, 1995, the Fund had net capital
loss carryovers of approximately $4,630,000 which will be available through
March 31, 2003 which may be used to offset future capital gains to the extent
provided by regulations. 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 Fund incurred and
will elect to defer net capital losses of approximately $3,737,000 during
fiscal 1995. At March 31, 1995, the Fund had temporary book/tax differences
primarily attributable to post-October losses.
40
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 12, 1993*
ENDED MARCH THROUGH MARCH
31, 1995 31, 1994
-------------- --------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 9.61 $ 10.00
-------------- --------------
Net investment income .................... 0.42 0.29
Net realized and unrealized loss ........ (0.05) (0.39)
-------------- --------------
Total from investment operations ........ 0.37 (0.10)
-------------- --------------
Dividends from net investment income .... (0.42) (0.29)
-------------- --------------
Net asset value, end of period ........... $ 9.56 $ 9.61
============== ==============
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)
</TABLE>
[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
41
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter Limited Term Municipal Trust
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
Limited Term Municipal Trust (the "Fund") at March 31, 1995, the results of
its operations for the year then ended, and the changes in its net assets and
the financial highlights for the year then ended and for the period July 12,
1993 (commencement of operations) through March 31, 1994, 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 owned at
March 31, 1995 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
May 10, 1995
-------------------------------------------------------------------------------
1995 FEDERAL TAX NOTICE (unaudited)
During the year ended March 31, 1995, the Fund paid to the shareholders $0.42
per share from net investment income. All of the Fund's dividends from net
investment income were exempt interest dividends, excludable from gross
income for Federal income tax purposes.
-------------------------------------------------------------------------------
42
<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.
43
<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 undeniable strength of the previous grades, MIG 1 and MIG 2, is
lacking. MIG 4 denotes adequate quality and means that the protection
commonly regarded as required of an investment security is present and that
while the notes are not distinctly or predominantly speculative, there is
specific risk.
VARIABLE RATE DEMAND OBLIGATIONS
A short-term rating, in addition to the Bond or MIG ratings, designated
VMIG may also be assigned to an issue having a demand feature. The assignment
of the VMIG symbol reflects such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. The VMIG rating criteria are identical to the MIG criteria
discussed above.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess
of nine months. These ratings apply to Municipal commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment
capacity of rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3
have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
MUNICIPAL BOND RATINGS
A Standard & Poor's municipal 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.
45
</TABLE>
<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>
45
<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.
46
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
Financial highlights for the period July 12, 1993
through March 31, 1994 and for the fiscal year
ended March 31, 1995................................. 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
Portfolio of Investments at March 31, 1995........... 35
Statement of assets and liabilities at
March 31, 1995....................................... 38
Statement of operations for the year ended
March 31, 1995....................................... 38
Statement of changes in net assets for the period
July 12, 1993 through March 31, 1994 and for the
fiscal year ended March 31, 1995..................... 38
Notes to Financial Statements........................ 39
Financial highlights for the period July 12, 1993
through March 31, 1994 and for the fiscal year
ended March 31, 1995................................. 41
(3) Financial statements included in Part C:
None
(b) Exhibits:
2. -- Amended and Restated By-Laws of the Registrant
9. -- Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Company
Inc.
11. -- Consent of Independent Accountants
16. -- Schedules for Computation of Performance Quotations
27. -- Financial Data Schedule
All other exhibits previously filed and 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 May 9, 1995
Shares of Beneficial Interest 3,424
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.
2
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.
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
3
(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 Managed Assets Trust
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
4
(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 Global Asset Allocation Fund
(51) Dean Witter Balanced Growth Fund
(52) Dean Witter Balanced Income Fund
(53) Dean Witter Hawaii Municipal Trust
The term "TCW/DW Funds" refers to the following registered investment
companies:
Open-End Investment Companies
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW North American Intermediate Income Trust
(8) TCW/DW Global Convertible Trust
(9) TCW/DW Total Return Trust
Closed-End Investment Companies
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(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.
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.
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.
6
Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
----------------- -------------------------------------------------
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.
Thomas H. Connelly
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.
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.
Anita Kolleeny
Senior Vice President Vice President of various 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.
7
Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
----------------- -------------------------------------------------
Rochelle G. Siegel
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 of the Dean Witter Funds and the TCW/DW
Treasurer 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; Assistant Secretary of DWR.
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
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Terence P. Brennan, II
Vice President
Douglas Brown
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
----------------- -------------------------------------------------
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
Russell Harper
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of Dean Witter Mid-Cap Growth Fund.
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
Stanley Kapica
Vice President
Michael Knox
Vice President Vice President of Dean Witter Convertible Securities
Trust.
9
Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
----------------- -------------------------------------------------
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paul LaCosta
Vice President Vice President of various Dean Witter Funds.
Lawrence S. Lafer Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
Lou Anne 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.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
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.
Jayne M. Wolff
Vice President Vice President of various Dean Witter 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
----------------- -------------------------------------------------
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 Managed Assets Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
11
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premium 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
(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 North American Intermediate Income Trust
(8) TCW/DW Global Convertible Trust
(9) TCW/DW Total Return 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.
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.
12
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.
13
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 24th day of May, 1995.
DEAN WITTER LIMITED TERM MUNICIPAL 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. 3 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,
Director and Chairman
By /s/ Charles A. Fiumefreddo 05/24/95
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 05/24/95
Thomas F. Caloia
(3) Majority of the Directors
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 05/24/95
Sheldon Curtis
Attorney-in-Fact
Jack F. Bennett Manuel H. Johnson
Michael Bozic Paul Kolton
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/ David M. Butowsky 05/24/95
David M. Butowsky
Attorney-in-Fact
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
EXHIBIT INDEX
Exhibit No. Description
2. -- Amended and Restated By-Laws of the Registrant
9. -- Form of Services Agreement between Dean Witter InterCapital
Inc. and Dean Witter Services CompanyInc.
11. -- Consent of Independent Accountants
16. -- Schedules for Computation of Performance
Quotations
27. -- Financial Data Schedule
<PAGE>
BY-LAWS
OF
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
(AMENDED AND RESTATED AS OF JANUARY 25, 1995)
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", and "Trustees" have the
respective meanings given them in the Declaration of Trust of Dean Witter
Limited Term Municipal Trust, formerly known as Dean Witter Intermediate Term
Municipal Trust, dated February 25, 1993.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting, except to the
extent otherwise required by Section 16(c) of the 1940 Act, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. Except to the extent otherwise
required by Section 16(c) of the 1940 Act, as made applicable to the Trust by
the provisions of Section 2.3 of the Declaration, the Secretary shall inform
such Shareholders of the reasonable estimated cost of preparing and mailing
such notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
1
<PAGE>
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Shareholders present or represented
by proxy and entitled to vote thereat shall have power to adjourn the meeting
from time to time. Any adjourned meeting may be held as adjourned without
further notice. At any adjourned meeting at which a quorum shall be present,
any business may be transacted as if the meeting had been held as originally
called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under the Corporations and Associations Law of
the State of Maryland.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the Chairman and shall
be called by the Chairman or the Secretary upon the written request of any
two (2) Trustees.
2
<PAGE>
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
3
<PAGE>
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists
of Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person
shall be entitled to indemnification for any liability, whether or not
there is an adjudication of liability, arising by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties
as described in Section 17(h) and (i) of the Investment Company Act of
1940 ("disabling conduct"). A person shall be deemed not liable by reason
of disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit
or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the
Trustee, officer, employee or agent of the Trust to repay the advance if
it is not ultimately determined that such person is entitled to be
indemnified by the Trust; and
4
<PAGE>
(3) either, (i) such person provides a security for his
undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
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SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. The Chairman. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders
and of the Trustees; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the
Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to the President or to one or more Vice Presidents
such of his powers and duties at such times and in such manner as he may deem
advisable; he shall be a signatory on all Annual and Semi-Annual Reports as
may be sent to Shareholders, and he shall perform such other duties as the
Trustees may from time to time prescribe.
(b) In the absence of the Chairman, the Board shall determine who shall
preside at all meetings of the Shareholders and the Board of Trustees.
SECTION 6.7. The President. The President shall perform such duties as the
Board of Trustees and the Chairman may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the Chairman, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
Chairman may from time to time prescribe.
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SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the Chairman.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
Chairman, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the Chairman, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
Chairman may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the Chairman, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the Chairman, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the Chairman, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the Chairman, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of
7
<PAGE>
the Trust by the Chairman, the President, or a Vice President, and
countersigned by the Secretary or an Assistant Secretary or the Treasurer and
an Assistant Treasurer of the Trust; shall be sealed with the seal; and shall
contain such recitals as may be required by law. Where any certificate is
signed by a Transfer Agent or by a Registrar, the signature of such officers
and the seal may be facsimile, printed or engraved. The Trust may, at its
option, determine not to issue a certificate or certificates to evidence
Shares owned of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
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ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
Shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
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ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Limited Term Municipal
Trust, dated February 25, 1993, a copy of which is on file in the office of
the Secretary of the Commonwealth of Massachusetts, provides that the name
Dean Witter Limited Term Municipal 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
Limited Term Municipal 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 Limited Term Municipal Trust, but the Trust Estate only shall be
liable.
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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.
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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.
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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:
.............................................
Attest:
..................................................
DEAN WITTER SERVICES COMPANY INC.
By:
.............................................
Attest:
..................................................
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SCHEDULE A
DEAN WITTER FUNDS
AT APRIL 17, 1995
<TABLE>
<CAPTION>
<S> <C>
OPEN-END FUNDS
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>
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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:
<TABLE>
<CAPTION>
FIXED INCOME FUNDS
<S> <C>
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
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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.
<CAPTION>
EQUITY FUNDS
<S> <C>
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.
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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-
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
<TABLE>
<CAPTION>
CLOSED-END FUNDS
<S> <C>
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
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
$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.
</TABLE>
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. 3 to the Registration Statement on Form N-1A (the
"Registration Statement") of our report dated May 10, 1995,
relating to the financial statements and financial highlights of
Dean Witter Limited Term Municipal Trust, which appears in such
Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus which constitutes
part of this Registration Statement. We also consent to the
references to us under the heading "Financial Highlights" in the
Prospectus and under the headings "Independent Accountants" and
"Experts" in the Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
May 24, 1995
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FOR THE 30 DAY PERIOD ENDED MARCH 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{ [(( 373,587.28 - 59,216.83)/8,938,964.074 X 9.56)+1] -1}
=4.46%
(B) TAX EQUIVALENT YIELD = SEC Yield - (1- stated tax rate)
= 4.46% / (1-.396)
= 7.38%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
_ -
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ---------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
<TABLE>
<CAPTION>
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Mar-95 RETURN - TR YEARS - n COMPOUND RETURN -
------------ ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
31-Mar-94 $1,040.10 4.01% 1.00 4.01%
12-Jul-93 $1,028.70 2.87% 1.72 1.66%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS (NO-LOAD FUND) 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>
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Mar-95 YEARS - n COMPOUND RETURN - tb
------------ ----------- --------- --------------------
<S> <C> <C> <C>
12-Jul-93 $1,023.30 1.72 1.35%
</TABLE>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
------------ ----------- ---------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
12-Jul-93 2.87 $10,287 $51,435 $102,870
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 85,892,555
<INVESTMENTS-AT-VALUE> 81,848,435
<RECEIVABLES> 3,734,844
<ASSETS-OTHER> 115,655
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 85,698,934
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 199,482
<TOTAL-LIABILITIES> 199,482
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 97,910,471
<SHARES-COMMON-STOCK> 8,946,383
<SHARES-COMMON-PRIOR> 17,746,706
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,366,899)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,044,120)
<NET-ASSETS> 85,499,452
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,089,417
<OTHER-INCOME> 0
<EXPENSES-NET> 890,614
<NET-INVESTMENT-INCOME> 5,198,803
<REALIZED-GAINS-CURRENT> (8,283,452)
<APPREC-INCREASE-CURRENT> 5,381,579
<NET-CHANGE-FROM-OPS> 2,296,930
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,198,803)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 56,905,855
<NUMBER-OF-SHARES-REDEEMED> (143,161,201)
<SHARES-REINVESTED> 4,067,263
<NET-CHANGE-IN-ASSETS> (85,089,956)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (83,447)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 589,450
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 890,614
<AVERAGE-NET-ASSETS> 117,889,997
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> .42
<PER-SHARE-GAIN-APPREC> (.05)
<PER-SHARE-DIVIDEND> (.42)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 4.01
<PER-SHARE-NAV-END> 9.56
<EXPENSE-RATIO> .76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
