<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996
REGISTRATION NOS.: 33-62158
811-7700
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
[X]
UNDER THE SECURITIES ACT OF 1933
[ ]
PRE-EFFECTIVE AMENDMENT NO.
[X]
POST-EFFECTIVE AMENDMENT NO. 4
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
[X]
ACT OF 1940
[X]
AMENDMENT NO. 5
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 24, 1996 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 YEAR ENDING MARCH 31, 1996 WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MAY 10, 1996.
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> <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> <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;
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>
PROSPECTUS
MAY 24, 1996
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 24, 1996, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
DEAN WITTER
LIMITED TERM MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR
(800) 869-NEWS (TOLL-FREE)
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 ........................................... 15
Dividends, Distributions and Taxes .................................... 16
Performance Information ............................................... 17
Additional Information ................................................ 18
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Dean Witter Distributors Inc.,
Distributor
<PAGE>
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
- --------------- ---------------------------------------------------------------------------
The The Fund is organized as a Massachusetts business trust and is a no-load,
Fund open-end, diversified management investment company investing predominately
in intermediate term municipal bonds.
- --------------- ---------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page 18).
Offered
- --------------- ---------------------------------------------------------------------------
Offering The price of the shares offered by this Prospectus is determined once daily
Price 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, $1,000; ($100 if the account is opened through
Purchase EasyInvestSM); minimum subsequent 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-seven investment companies and other
portfolios with assets of approximately $83.9 billion at April 30, 1996
(see page 5).
- --------------- ---------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.50%
Fee 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 16).
- --------------- ---------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor") sells shares of the Fund
and 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; EasyInvestSM; (see page 12).
- --------------- ---------------------------------------------------------------------------
Risk The prices of interest-bearing securities are inversely affected by changes
Considerations 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, 1996.
<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 ........................................................... 0.37%
Total Fund Operating Expenses ............................................ 0.87%
</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: $9 $28 $48 $106
</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
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, the notes thereto and the
unqualified report of independent accountants which are contained in the
Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's Annual Report to
Shareholders, which may be obtained without charge upon request from the
Fund.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 12, 1993*
ENDED ENDED THROUGH
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1994
- ----------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 9.56 $ 9.61 $ 10.00
-------------- -------------- --------------
Net investment income .................... 0.41 0.42 0.29
Net realized and unrealized gain (loss) . 0.39 (0.05) (0.39)
-------------- -------------- --------------
Total from investment operations ........ 0.80 0.37 (0.10)
Less dividends from net investment income (0.41) (0.42) (0.29)
-------------- -------------- --------------
Net asset value, end of period ........... $ 9.95 $ 9.56 $ 9.61
============== ============== ==============
TOTAL INVESTMENT RETURN .................. 8.42% 4.01% (1.11)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 0.87%(4) 0.76% 0.31%(2)(3)
Net investment income .................... 4.09% 4.41% 3.92%(2)(3)
Supplemental Data:
Net assets, end of period, in thousands . $72,766 $85,499 $170,589
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/reimbursed
or waived by the Investment Manager, the above annualized expense and
net investment income ratios would have been 0.75% and 3.48%,
respectively.
(4) The above expense ratio would have been 0.86%, which reflects 0.01%
effect for custody cash credits.
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-seven investment companies,
thirty of which are listed on the New York Stock Exchange, with combined
total assets, including this Fund, of approximately $81.2 billion as of April
30, 1996. The Investment Manager also manages portfolios of pensions plans,
other institutions and individuals which aggregated approximately $2.7
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, 1996, the Fund accrued
total compensation to the Investment Manager amounting to 0.50% of the Fund's
average daily net assets and the Fund's total expenses amounted to 0.87% 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.
Zero Coupon Securities. A portion of the fixed- income securities
purchased by the Fund may be zero coupon securities. Such securities are
purchased at a discount from their face amount, giving the purchaser the
right to receive their full value at maturity. The interest earned on such
securities is, implicitly, automatically compounded and paid out at maturity.
While such compounding at a constant rate eliminates the risk of receiving
lower yields upon reinvestment of interest if prevailing interest rates
decline, the owner of a zero coupon security will be unable to participate in
higher yields upon reinvestment of interest received on interest-paying
securities if prevailing interest rates rise.
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A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Fund receives no interest payments in cash
on the security during the year.
In addition to the risks that apply to all options transactions (see the
Statement of Additional Information for a description of the characteristics
of, and the risks of investing in, options on debt securities), there are
several special risks relating to options on futures. In particular, the
ability to establish and close out positions on such options will be subject
to the development and maintenance of a liquid secondary market. It is not
certain that this market will develop or be maintained.
For additional risk disclosure, please refer to the "Investment Objective
and Policies" section 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 Tax-Exempt Group, which manages 40 tax-exempt municipal bond
funds, with approximately $10.7 billion in assets as of April 30, 1996. Ms.
Katherine H. Stromberg is the Fund's portfolio manager. Ms. Stromberg has
been a municipal bond portfolio manager for more than 15 years. Prior to
joining InterCapital in October 1991, Ms. Stromberg was Vice President of
Kidder Peabody Asset Management Inc. In determining which securities to
purchase for the Fund or hold in the Fund's portfolio, the Investment Manager
will rely on information from various sources, including research, analysis
and appraisals of brokers and dealers, including Dean Witter Reynolds Inc.
("DWR"), a broker-dealer affiliate of the Investment Manager; the views of
the Trustees of the Fund and others regarding economic developments and
interest rate trends; and the Investment Manager's own analysis of factors it
deems relevant.
Brokerage commissions are not normally charged on the purchase or sale of
municipal obligations, but such transactions may involve costs in the form of
spreads between bid and asked prices. Pursuant to an order of the Securities
and Exchange Commission, the Fund may effect principal transactions in
certain taxable money market instruments with DWR. In addition, the Fund may
incur brokerage commissions on futures' and options' transactions conducted
through DWR. It is not anticipated that the portfolio trading engaged in by
the Fund will result in its portfolio turnover rate exceeding 100%.
INVESTMENT RESTRICTIONS
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The investment restrictions listed below are among the restrictions, a
complete listing of which is contained in the Statement of Additional
Information, which have been adopted by the Fund as fundamental policies.
Under the Investment Company Act of 1940, as amended (the "Act"), a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act.
For purposes of the following restrictions: (a) an "issuer" of a security
is the entity whose assets and revenues are committed to the payment of
interest and principal on that particular security, provided that the
guarantee of a security will be considered a separate security and provided
further that a guarantee of a security shall not be deemed to be a security
issued by the guarantor if the value of all securities issued or guaranteed
by the guarantor
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and owned by the Fund does not exceed 10% of the value of the total assets of
the Fund; (b) a "taxable security" is any security the interest on which is
subject to federal income tax; and (c) all percentage limitations apply
immediately after a purchase or initial investment, and any subsequent change
in any applicable percentage resulting from market fluctuations does not
require elimination of any security from the portfolio.
The Fund may not:
1. With respect to 75% of its total assets, purchase securities of any
issuer if, immediately thereafter, more than 5% of the value of its total
assets are in the securities of any one issuer (other than obligations
issued, or guaranteed by, the United States Government, its agencies or
instrumentalities).
2. With respect to 75% of its total assets, purchase more than 10% of
all outstanding taxable debt securities of any one issuer (other than debt
securities issued, or guaranteed as to principal and interest by, the
United States Government, its agencies or instrumentalities).
3. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry (industrial development and pollution
control bonds are grouped into industries based upon the business in which
the issuers of such obligations are engaged). This restriction does not
apply to obligations issued or guaranteed by the United States Government,
its agencies or instrumentalities or to domestic bank obligations.
PURCHASE OF FUND SHARES
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The Fund offers it shares for sale to the public on a continuous basis at
the offering price without the imposition of a sales charge. The offering
price will be the net asset value per share next determined following receipt
of an order (see "Determination of Net Asset Value"). Pursuant to a
Distribution Agreement between the Fund and Dean Witter Distributors Inc.
(the "Distributor"), an affiliate of the Investment Manager, shares of the
Fund are distributed by the Distributor and are offered by DWR and other
broker-dealers which have entered into selected broker-dealer agreements with
the Distributor ("Selected Broker-Dealers"). The principal executive office
of the Distributor is located at Two World Trade Center, New York, New York
10048.
The minimum initial purchase is $1,000 and subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter Limited Term
Municipal Trust, directly to Dean Witter Trust Company (the "Transfer Agent")
at P.O. Box 1040, Jersey City, NJ 07303 or by contacting an account executive
of DWR or of another Selected Broker-Dealer. The minimum initial purchase in
the case of investments through EasyInvestSM, an automatic purchase plan (see
"Shareholder Services"), is $100, provided that the schedule of automatic
investments will result in investments totalling at least $1,000 within the
first twelve months. In the case of 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 three business day settlement basis; that is,
payment is due on the third business day (settlement date) after the order is
placed with the Distributor 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
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<PAGE>
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 as special sales incentives,
including trips, educational and/or business seminars and merchandise. The
Fund and the Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1
under the Act with the Distributor whereby the Distributor is authorized to
utilize its own resources or those of its affiliates, including InterCapital,
to finance certain services and activities in connection with the
distribution of the Fund's shares. The principal activities and services
which may be provided by the Distributor, DWR, its affiliates and other
Selected Broker- Dealers under the Plan include: (1) compensation to, and
expenses of, account executives and other employees of DWR and other Selected
Broker- Dealers, including overhead and telephone expenses; (2) sales
incentives and bonuses to sales representatives and to marketing personnel in
connection with promoting sales of the Fund's shares; (3) expenses incurred
in connection with promoting sales of the Fund's shares; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio,
newspaper, magazine and other media advertisements.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting 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
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<PAGE>
for shareholders who own or purchase shares of the Fund having a minimum
value of $10,000 based upon the then current net asset value. The Withdrawal
Plan provides for monthly or quarterly (March, June, September and December)
checks in any dollar amount, not less than $25, or in any whole percentage of
the account balance, on an annualized basis. Withdrawal Plan payments should
not be considered as dividends, yields or income. If periodic withdrawal plan
payments continuously exceed net investment income and net capital gains, the
shareholder's original investment could be correspondingly reduced and
ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income, and generally, for state and
local tax purposes.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
Exchange Privilege. An "Exchange Privilege", that is, the privilege of
exchanging shares of certain Dean Witter Funds for shares of the Fund, exists
whereby shares of various Dean Witter Funds which are open-end investment
companies sold with either a front-end (at time of purchase) sales charge
("FESC funds") or a contingent deferred sales charge ("CDSC funds") may be
redeemed at their next calculated net asset value and the proceeds of the
redemption may be used to purchase shares of the Fund, shares of Dean Witter
Tax-Free Daily Income Trust, Dean Witter U.S. Government Money Market Trust,
Dean Witter Liquid Asset Fund Inc., Dean Witter California Tax-Free Daily
Income Trust and Dean Witter New York Municipal Money Market Trust (which
five funds are hereinafter called "money market funds") and shares of Dean
Witter Short- Term U.S. Treasury Trust, Dean Witter Short-Term Bond Fund,
Dean Witter Intermediate Term U.S. Treasury Trust, 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 Intermediate Term U.S. Treasury Trust, 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
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<PAGE>
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
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) 869-NEWS (toll-free). The Fund will employ
reasonable procedures to confirm that exchange instructions communicated over
the telephone are genuine. Such procedures may include requiring various
forms of personal identification such as name, mailing address, social
security or other tax identification number and DWR or other Selected 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
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<PAGE>
the New York Stock Exchange is open. Any shareholder wishing to make an
exchange who has previously filed an Exchange Privilege Authorization Form
and who is unable to reach the Fund by telephone should contact his or her
DWR or other Selected Broker-Dealer account executive, if appropriate, or
make a written exchange request. Shareholders are advised that during periods
of drastic economic or market changes, it is possible that the telephone
exchange procedures may be difficult to implement, although this has not been
the experience of the other Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. Shares of the Fund can be redeemed for cash at any time at its
respective current net asset value per share (without any redemption or other
charge). If shares are held in a shareholder's account without a share
certificate, a written request for redemption is required. If certificates
are held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption along with any additional
documentation required by the Transfer Agent, to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303.
Repurchase. DWR and other Selected Broker- Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker- Dealers
upon the telephonic request of the shareholder. The repurchase price is the
net asset value next determined (see "Purchase of Fund Shares-- Determination
of Net Asset Value") after such repurchase order is received by DWR and other
Selected Broker-Dealers.
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the 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 or, in the case of an account opened
through EasyInvestSM, if after twelve months the shareholder has invested
less than $1,000 in the account. However, before the Fund redeems such shares
and sends the proceeds to the shareholder, it will notify the shareholder
that the value of the shares is less than the applicable amount and allow him
or her sixty days to make an additional investment in an amount which will
increase the value of his or her account to at least the applicable amount
before the redemption is processed.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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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 calendar year prior to February 1 will be deemed received by the
shareholder in the prior calendar year. Shareholders may instruct the
Transfer Agent (in writing) to have their dividends paid out monthly in cash.
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 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
16
<PAGE>
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 may quote its "yield" and/or its "total return"
in advertisements and sales literature. Both the yield and the total return
of the Fund are based on historical earnings and are not intended to indicate
future performance. The yield of the Fund is computed by dividing the Fund's
net investment income over a 30-day period by an average value (using the
average number of shares entitled to receive dividends and the maximum
offering price per share at the end of the period), all in accordance with
applicable regulatory requirements. Such amount is compounded for six months
and then annualized for a twelve-month period to derive the Fund's yield. The
Fund may also quote 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 of $1,000 over periods 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 Fund's assets and all
expenses incurred by the Fund for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. The Fund from time to time may also advertise its performance relative
to certain performance rankings (such as Lipper Analytical Services Inc.) and
indices compiled by independent organizations (such as the Lehman Brothers
Municipal Bond Index and Sub-indices).
17
<PAGE>
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 Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within 60 days of a sale or a sale
within 60 days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within 30 days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute
Advisory Group on Personal Investing.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or addresses 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
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
Dean Witter Japan Fund
Dean Witter Income Builder 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
Dean Witter Intermediate Term U.S. Treasury Trust
ASSET ALLOCATION FUNDS
Dean Witter Strategist Fund
Dean Witter Global Asset Allocation Fund
ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
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
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 24, 1996
<PAGE>
DEAN WITTER
LIMITED TERM
MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
MAY 24, 1996
- -----------------------------------------------------------------------------
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 24, 1996, 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) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management .......... 3
Trustees and Officers ................ 6
Investment Practices and Policies ... 11
Investment Restrictions .............. 19
Portfolio Transactions and Brokerage 20
Purchase of Fund Shares .............. 21
Shareholder Services ................. 24
Redemptions and Repurchases .......... 28
Dividends, Distributions and Taxes .. 29
Performance Information .............. 31
Shares of the Fund ................... 32
Custodian and Transfer Agent ......... 33
Independent Accountants .............. 33
Reports to Shareholders .............. 33
Legal Counsel ........................ 33
Experts .............................. 33
Registration Statement ............... 33
Financial Statements -- March 31,
1996 ................................ 34
Report of Independent Accountants ... 45
Appendix ............................. 46
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts
Business Trust" and was organized under the laws of the Commonwealth of
Massachusetts on 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 periodic review 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 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, 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, Dean Witter Capital
Appreciation Fund, Dean Witter Information Fund, Dean Witter Intermediate
Term U.S. Treasury Trust, Dean Witter Japan Fund, Dean Witter Income Builder
Fund, 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
3
<PAGE>
Municipal Premium Income Trust. The foregoing investment companies, together
with the Fund, are collectively referred to as the Dean Witter Funds. In
addition, Dean Witter Services Company Inc. ("DWSC"), 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 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 Total Return
Trust, TCW/DW Mid-Cap Equity 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.
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; 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
4
<PAGE>
(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
12, 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 waived 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
years ended March 31, 1995 and 1996 the Fund accrued to the Investment
Manager monthly compensation under the Agreement of $226,830, $589,450 and
$401,513, 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 ended March 31, 1996.
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 then 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 by the vote of a majority of the Trustees of
the Fund who are not parties to the Agreement or "interested persons" (as
defined in the Act) of any such party (the "Independent Trustees"), which
vote must be cast in person at a meeting called for the purpose of voting on
such approval. At their meeting held on April 17, 1996, the Fund's Board of
Trustees, including all of the Independent Trustees, approved continuation of
the Agreement until April 30, 1997.
5
<PAGE>
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 81 Dean Witter Funds and the 12 TCW/DW Funds are
shown below:
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- ---------------------------------------------------------------
<S> <C>
Michael Bozic (55) Chairman and Chief Executive Officer of Levitz Furniture (since
Trustee November, 1995); Director or Trustee of the Dean Witter Funds; formerly
c/o Levitz Furniture Corporation President and Chief Executive Officer of Hills Department Stores
6111 Broken Sound Parkway, N.W. (May, 1991-July, 1995); formerly variously Chairman, Chief Executive
Boca Raton, Florida Officer, President and Chief Operating Officer (1987-1991) of the
Sears Merchandise Group of Sears, Roebuck and Co.; Director of Eaglemark
Financial Services, Inc., the United Negro College Fund and Weirton
Steel Corporation.
Charles A. Fiumefreddo* (63) Chairman, Chief Executive Officer and Director of InterCapital,
Chairman, President Distributors and DWSC; Director and Executive Vice President of DWR;
Chief Executive Officer and Trustee Chairman, Director or Trustee, President and Chief Executive Officer
Two World Trade Center of the Dean Witter Funds; Chairman, Chief Executive Officer and Trustee
New York, New York of the TCW/DW Funds; Chairman and Director of Dean Witter Trust Company
("DWTC"); Director and/or officer of various DWDC subsidiaries and
affiliates; formerly Executive Vice President and Director of DWDC
(until February, 1993).
Edwin J. Garn (63) Director or Trustee of the Dean Witter Funds; formerly United States
Trustee Senator (R-Utah) (1974-1992) and Chairman, Senate Banking Committee
c/o Huntsman Chemical Corporation 500 (1980-1986); formerly Mayor of Salt Lake City, Utah (1971-1974);
Huntsman Way formerly Astronaut, Space Shuttle Discovery (April 12-19, 1985);
Salt Lake City, Utah Vice Chairman, Huntsman Chemical Corporation (since January, 1993);
Director of Franklin Quest (time management systems) and John Alden
Financial Corp; Member of the board of various civic and charitable
organizations.
John R. Haire (71) Chairman of the Audit Committee and Chairman of the Committee of
Trustee the Independent Directors or Trustees and Director or Trustee of
Two World Trade Center the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly President,
New York, New York Council for Aid to Education (1978-1989) and Chairman and Chief
Executive Officer of Anchor Corporation, an Investment Adviser
(1964-1978); Director of Washington National Corporation (insurance).
6
<PAGE>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- ---------------------------------------------------------------
Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc., a consulting firm;
Trustee Koch Professor of International Economics and Director of the Center
c/o Johnson Smick International, Inc. for Global Market Studies at George Mason University; Co-Chairman
1133 Connecticut Avenue, N.W. and a founder of the Group of Seven Council (G7C), an international
Washington, D.C. economic commission; Director or Trustee of the Dean Witter Funds;
Trustee of the TCW/DW Funds; Director of NASDAQ (since June, 1995);
Director of Greenwich Capital Markets Inc. (broker-dealer); formerly
Vice Chairman of the Board of Governors of the Federal Reserve System
(1986-1990) and Assistant Secretary of the U.S. Treasury (1982-1988).
Paul Kolton (72) Director or Trustee of the Dean Witter Funds; Chairman of the Audit
Trustee Committee and Chairman of the Committee of the Independent Trustees
c/o Gordon Altman Butowsky and Trustee of the TCW/DW Funds; formerly Chairman of the Financial
Weitzen Shalov & Wein Accounting Standards Advisory Council and Chairman and Chief Executive
Counsel to the Independent Trustees Officer of the American Stock Exchange; Director of UCC Investors
114 West 47th Street Holding Inc. (Uniroyal Chemical Company, Inc.); director or trustee
New York, New York of various not-for-profit organizations.
Michael E. Nugent (60) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; 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
237 Park Avenue and BT Capital Corporation (1984-1988); Director of various business
New York, New York organizations.
Philip J. Purcell* (52) Chairman of the Board of Directors and Chief Executive Officer of
Trustee DWDC, DWR and Novus Credit Services Inc.; Director of InterCapital,
Two World Trade Center DWSC and Distributors; Director or Trustee of the Dean Witter Funds;
New York, New York Director and/or officer of various DWDC subsidiaries.
John L. Schroeder (65) Retired; Director or Trustee of the Dean Witter Funds; Trustee of
Trustee the TCW/DW Funds; Director of Citizens Utilities Company; formerly
c/o Gordon Altman Butowsky Executive Vice President and Chief Investment Officer of the Home
Weitzen Shalov & Wein Insurance Company (August, 1991-September, 1995); formerly Chairman
Counsel to the Independent Trustees and Chief Investment Officer of Axe-Houghton Management and the
114 West 47th Street Axe-Houghton Funds (April, 1983-June, 1991) and President of USF&G
New York, New York Financial Services, Inc. (June 1990-June, 1991).
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel of InterCapital
Vice President, Secretary and DWSC; Senior Vice President, Assistant Secretary and Assistant
and General Counsel General Counsel of Distributors; Senior Vice President and Secretary
Two World Trade Center of DWTC; Assistant Secretary of DWR; and Vice President, Secretary
New York, New York and General Counsel of the Dean Witter Funds and the TCW/DW Funds.
Katherine H. Stromberg (47) Vice President of InterCapital; Vice President of various Dean Witter
Vice President Funds, formerly, Vice President of Kidder Peabody Asset Management
Two World Trade Center (September, 1985-October, 1991).
New York, New York
7
<PAGE>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- ---------------------------------------------------------------
Thomas F. Caloia (50) First Vice President (since May, 1991) and Assistant Treasurer (since
Treasurer January, 1993) of InterCapital; First Vice President and Assistant
Two World Trade Center Treasurer of DWSC; Treasurer of the Dean Witter Funds and the TCW/DW
New York, New York Funds; previously Vice President of InterCapital.
</TABLE>
- ---------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Robert M. Scanlan, President 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, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of InterCapital, Robert S. Giambrone, Senior Vice
President of InterCapital, DWSC, Distributors and DWTC and Director of DWTC
and Peter M. Avelar, Jonathan R. Page and James F. Willison, Senior Vice
Presidents of InterCapital, and Joseph Arcieri and Gerard J. Lian, Vice
Presidents of InterCapital, are Vice Presidents of the Fund. Marilyn K.
Cranney and Barry Fink, First Vice Presidents and Assistant General Counsels
of InterCapital and DWSC, and Lou Anne D. McInnis and Ruth Rossi, Vice
Presidents and Assistant General Counsels of InterCapital and DWSC, and
Carsten Otto, a staff attorney with InterCapital, are Assistant Secretaries
of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of
this Statement of Additional Information, there are a total of 81 Dean Witter
Funds, comprised of 121 portfolios. As of April 31, 1996, the Dean Witter
Funds had total net assets of approximately $75.7 billion and more than five
million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, DWDC.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Five
of the seven independent Trustees are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1995, the three Committees held a combined total of fifteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and
8
<PAGE>
nominate individuals to fill any Independent Trustee vacancy on the Board of
any Fund that has a Rule 12b-1 plan of distribution. Most of the Dean Witter
Funds have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He
screens and/or prepares written materials and identifies critical issues for
the Independent Trustees to consider, develops agendas for Committee
meetings, determines the type and amount of information that the Committees
will need to form a judgment on various issues, and arranges to have that
information furnished to Committee members. He also arranges for the services
of independent experts and consults with them in advance of meetings to help
refine reports and to focus on critical issues. Members of the Committees
believe that the person who serves as Chairman of all three Committees and
guides their efforts is pivotal to the effective functioning of the
Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination
of chief executive and support staff of the Independent Trustees.
The Chairman of the Committees is not employed by any other organization
and devotes his time primarily to the services he performs as Committee
Chairman and Independent Trustee of the Dean Witter Funds and as an
Independent Trustee of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 ($1,200
prior to September 30, 1995) plus a per meeting fee of $50 for meetings of
the Board of Trustees or committees of the Board
9
<PAGE>
of Trustees attended by the Trustee (the Fund pays the Chairman of the Audit
Committee an annual fee of $750 and pays the Chairman of the Committee of the
Independent Trustees an additional annual fee of $2,400, in each case
inclusive of the Committee meeting fees). The Fund also reimburses such
Trustees for travel and other out-of-pocket expenses incurred by them in
connection with attending such meetings. Trustees and officers of the Fund
who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended March 31, 1996.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME OF INDEPENDENT COMPENSATION
TRUSTEE FROM THE FUND
- -------------------------- ---------------
<S> <C>
Michael Bozic ............. $1,600
Edwin J. Garn ............. 1,600
John R. Haire ............. 4,525(1)
Dr. Manuel H. Johnson .... 1,600
Paul Kolton ............... 1,600
Michael E. Nugent ......... 1,600
John L. Schroeder ......... 1,600
</TABLE>
(1) Of Mr. Haire's compensation from the Fund, $3,150 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($750).
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for
services to the 79 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Kolton, Nugent and Schroeder, the 11 TCW/DW Funds that were in
operation at December 31, 1995. With respect to Messrs. Haire, Johnson,
Kolton, Nugent and Schroeder, the TCW/DW Funds are included solely because of
a limited exchange privilege between those Funds and five Dean Witter Money
Market Funds. Mr. Schroeder was elected as a Trustee of the TCW/DW Funds on
April 20, 1995.
COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF TOTAL
FOR SERVICE AS COMMITTEES OF COMPENSATION
DIRECTOR OR FOR SERVICE AS INDEPENDENT PAID FOR
TRUSTEE AND TRUSTEE AND DIRECTORS/ SERVICES TO 79
COMMITTEE MEMBER COMMITTEE MEMBER TRUSTEES AND DEAN WITTER
NAME OF INDEPENDENT OF 79 DEAN WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
TRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- -------------------------- ----------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Michael Bozic ............. $126,050 -- -- $126,050
Edwin J. Garn ............. 136,450 -- -- 136,450
John R. Haire ............. 98,450 $82,038 $217,350(2) 397,838
Dr. Manuel H. Johnson .... 136,450 82,038 -- 218,488
Paul Kolton ............... 136,450 54,788 36,900(3) 228,138
Michael E. Nugent ......... 124,200 75,038 -- 199,238
John L. Schroeder ......... 136,450 46,964 -- 183,414
</TABLE>
(2) For the 79 Dean Witter Funds in operation at December 31, 1995.
(3) For the 11 TCW/DW Funds in operation at December 31, 1995.
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under
which an Independent Trustee who retires after serving for at least five
years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled
10
<PAGE>
to retirement payments upon reaching the eligible retirement age (normally,
after attaining age 72). Annual payments are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive from
the Adopting Fund, commencing as of his or her retirement date and continuing
for the remainder of his or her life, an annual retirement benefit (the
"Regular Benefit") equal to 25.0% of his or her Eligible Compensation plus
0.4166666% of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(4) "Eligible Compensation" is
one-fifth of the total compensation earned by such Eligible Trustee for
service to the Adopting Fund in the five year period prior to the date of the
Eligible Trustee's retirement. Benefits under the retirement program are not
secured or funded by the Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended March 31,
1996 and by the 57 Dean Witter Funds (including the Fund) as of December 31,
1995, and the estimated annual retirement benefits for the Fund's Independent
Trustees from the Fund as of March 31, 1996 and from the 57 Dean Witter Funds
as of December 31, 1995.
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
--------------------------------
ESTIMATED ANNUAL
RETIREMENT BENEFITS BENEFITS UPON
ACCRUED AS EXPENSES RETIREMENT(5)
-------------------- -------------------
ESTIMATED
CREDITED YEARS ESTIMATED
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
NAME OF INDEPENDENT RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- -------------------------- --------------- --------------- -------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic ............. 10 50.0% $ 436 $ 26,359 $ 950 $ 51,550
Edwin J. Garn ............. 10 50.0 747 41,901 950 51,550
John R. Haire ............. 10 50.0 2,904 261,763 1,225 130,404
Dr. Manuel H. Johnson .... 10 50.0 294 16,748 950 51,550
Paul Kolton ............... 10 49.6 1,137 113,186 357 58,325
Michael E. Nugent ......... 10 50.0 558 30,370 950 51,550
John L. Schroeder ......... 8 41.7 854 51,812 792 42,958
</TABLE>
(4) 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.
(5) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (4)
above.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
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.
11
<PAGE>
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
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.
12
<PAGE>
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.
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
13
<PAGE>
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 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 year ended March 31,
1996, the Fund did not loan any of its portfolio securities and it has no
current intention of doing so 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,
14
<PAGE>
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 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 year ended
March 31, 1996, 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
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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.
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
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(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 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
17
<PAGE>
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 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,
1996 was 2.82%. It is anticipated that the Fund's portfolio turnover rate
will not exceed 50% during the fiscal year ending March 31, 1997. 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.
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<PAGE>
LOCAL GOVERNMENTAL UNIT AND RELATED AUTHORITY OBLIGATIONS
Various state statutes authorize local units of government (counties,
cities, school districts and the like) to issue general obligations and
revenue obligations, subject to compliance with the requirements of such
statutes. In addition, various statutes permit local government units to
organize authorities having the power to issue obligations which are not
subject to debt limits that may be applicable to the organizing governmental
unit and which are payable from assets of or revenues derived from projects
financed by such authorities. Such authorities include parking authorities,
industrial development authorities, redevelopment authorities, transportation
authorities, water and sewer authorities, and authorities to undertake
projects for institutions of higher education and health care. Such
obligations may generally be affected by adverse changes in the economy of
the area in which such local government units or projects financed by them or
by authorities created by them are located, by changes in applicable federal,
state or local law or regulation, or by changes in levels of federal, state
or local appropriations, grants or subsidies to the extent such
appropriations, grants or subsidies directly or indirectly affect revenues of
such issuers.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
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.
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<PAGE>
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.
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 period July 12, 1993
(commencement of operations) through March 31, 1994 and the fiscal years
ended March 31, 1995 and 1996, the Fund did not pay any brokerage
commissions.
The Investment Manager currently serves as investment manager or advisor
to a number of clients, including other investment companies, and may in the
future act as investment manager or adviser to others. It is the practice of
the Investment Manager to cause purchase and sale transactions to be
allocated among the Fund and others whose assets it manages in such manner as
it deems equitable. In making such allocations among the Fund and other
client accounts, various factors may be
20
<PAGE>
considered, including the respective investment objectives, the relative size
of portfolio holdings of the same or comparable securities, the availability
of cash for investment, the size of investment commitments generally held and
the opinion of the persons responsible for managing the porfolios of the Fund
and other client accounts. In the case of certain initial and secondary
public offerings, the Investment Manager may utilize a pro-rata allocation
process based on the size of the Dean Witter Funds involved and the number of
shares available from the public offering.
The policy of the Fund, regarding purchases and sales of securities 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.
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 period July 12, 1993 (commencement of operations) through March
31, 1994 and the fiscal years ended March 31, 1995 and 1996, 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,
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<PAGE>
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 17, 1996, the Trustees, including all of
the Independent Trustees, voted to approve the continuance of the
Distribution Agreement until April 30, 1997.
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 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 then 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
22
<PAGE>
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 17, 1996, 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, 1997, 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.
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
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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 be determined once daily at 4:00 p.m.
New York time (or, on days when the New York Stock Exchange closes prior to
4:00 p.m., at such earlier time) on each day that the New York Stock Exchange
is open. The New York Stock Exchange currently observes the following
holidays: New Year's Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.
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. 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.
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
24
<PAGE>
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.
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 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.
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<PAGE>
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, Dean Witter Intermediate Term U. S.
Treasury Trust 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, Dean Witter Intermediate Term U. S. Treasury Trust and the five
money market funds hereinafter referred to as "Exchange Funds"). There is no
waiting period for exchanges of shares 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
26
<PAGE>
(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 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.
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.
27
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Treasury Trust is $10,000, although that fund, in its discretion, may accept
initial investments of as low as $5,000. The minimum initial investment for
all other Dean Witter Funds for which the Exchange Privilege is available is
$1,000.) Upon exchange into an Exchange Fund, the shares of that fund will be
held in a special Exchange Privilege Account separately from accounts of
those shareholders who have acquired their shares directly from that fund. As
a result, certain services normally available to shareholders of 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 Intermediate Term U.S. Treasury Trust, 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
28
<PAGE>
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
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 calendar year which
are paid in the following calendar year prior to February 1 will be deemed
received by the shareholder in the prior calendar year.
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
29
<PAGE>
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 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.
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<PAGE>
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 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, 1996 was 4.15%.
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, 1996 was 6.87%.
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, 1996 and for the
period July 12, 1993 (commencement of operations) through March 31, 1996 was
8.42% and 4.10%, respectively.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. In addition, the Fund may also compute
its aggregate total return for specified periods by determining the aggregate
31
<PAGE>
percentage rate which will result in the ending value of a hypothetical
$1,000 investment made at the beginning of the period. For the purpose of
this calculation, it is assumed that all dividends and distributions are
reinvested. The formula for computing aggregate total return involves a
percentage obtained by dividing the ending value by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the Fund's aggregate total return for the fiscal year ended
March 31, 1996 and for the period July 12, 1993 (commencement of operations)
through March 31, 1996 was 8.42% and 11.53%, 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 grown to $11,153, $55,765 and $111,530,
respectively at March 31, 1996.
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 then 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.
32
<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.
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 by reference in the Prospectus have
been so included and incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
33
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------------------------------------------------------------- -------- ---------- -------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (97.4%)
General Obligation (15.1%)
$ 2,000 Wilmington, Delaware, Refg Ser 1993 B (FGIC) ................... 4.60 % 07/01/04 $ 1,961,120
1,000 District of Columbia, Refg Ser 1994 A (MBIA) ................... 4.95 06/01/05 969,680
1,000 Honolulu, Hawaii, Refg Ser 1993 B .............................. 5.00 10/01/03 1,013,110
2,000 Rosemont, Illinois, Ser 1993 B ................................. 5.30 12/01/04 2,023,400
2,000 Massachusetts, Refg Ser 1993 C ................................. 4.80 08/01/03 1,992,300
2,000 New York City, New York, Ser 1992 A ............................ 6.10 08/01/02 2,065,480
1,000 Massillon City School District, Ohio, Refg Ser 1994 (AMBAC) .... 4.70 12/01/05 975,350
- ----------- -------------
11,000 11,000,440
- ----------- -------------
Educational Facilities Revenue (9.6%)
1,500 University of Delaware, Ser 1993 ............................... 4.90 11/01/02 1,512,540
1,500 Massachusetts Health & Educational Facilities Authority, Boston
College
Ser K ........................................................ 4.80 06/01/04 1,487,715
2,000 University of Minnesota, Ser 1993 A ............................ 4.80 08/15/03 2,004,820
2,000 New York State Dormitory Authority, State University Ser 1993 B 5.25 05/15/05 1,977,060
- ----------- -------------
7,000 6,982,135
- ----------- -------------
Electric Revenue (8.1%)
1,000 Salt River Project Agricultural Improvement & Power District,
Arizona, Refg Ser 1993 B ..................................... 4.75 01/01/03 999,360
3,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 ............... 4.70 02/01/05 2,919,030
2,000 Snohomish County Public Utility District #1, Washington,
Generation Ser 1993 B (AMT) .................................. 5.35 01/01/05 1,992,920
- ----------- -------------
6,000 5,911,310
- ----------- -------------
Hospital Revenue (8.1%)
2,000 California Statewide Communities Development Authority,
Cedars-Sinai Medical Center Ser 1993 ......................... 4.70 11/01/03 1,955,000
1,000 Michigan Hospital Finance Authority, McLaren Obligated Group Ser
1993 A ........................................................ 5.00 10/15/04 968,230
1,000 Murray, Utah, IHC Hospitals Inc Refg Ser 1993 (AMBAC) .......... 5.00 05/15/04 1,005,910
1,000 Fairfax County Industrial Development Authority, Virginia, Inova
Health System Foundation Refg Ser 1993 A ..................... 4.70 08/15/04 976,540
1,000 Wisconsin Health & Educational Facilities Authority, Hospital
Sisters Services Ser 1993 (MBIA) ............................. 5.00 06/01/03 1,001,720
- ----------- -------------
6,000 5,907,400
- ----------- -------------
Industrial Development/Pollution Control Revenue (4.1%)
1,000 Massachusetts Industrial Finance Agency, Eastern Edison Co Refg
Ser 1993 ...................................................... 5.875 08/01/08 976,700
2,000 Greenwood, Wisconsin, Land O'Lakes Inc (AMT) ................... 5.50 09/01/03 2,012,260
- ----------- -------------
3,000 2,988,960
- ----------- -------------
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------------------------------------------------------------- -------- ---------- -------------
Mortgage Revenue - Multi-Family (2.9%)
$2,130 Wisconsin Housing & Economic Development Authority, Ser 1993 B
(AMT) ......................................................... 5.10% 11/01/03 $2,077,346
- ----------- -------------
Mortgage Revenue - Single Family (2.7%)
2,000 Connecticut Housing Finance Authority, 1993 Subser F-1 ......... 4.90 05/15/04 1,982,720
- ----------- -------------
Public Facilities Revenue (9.3%)
1,400 St Paul Housing & Redevelopment Authority, Minnesota, Civic
Center Ser 1993 .............................................. 4.80 11/01/03 1,383,312
2,000 Regional Convention & Sports Complex Authority, Missouri, Refg
Ser A 1993 ................................................... 4.75 08/15/04 1,928,860
2,000 Ohio Building Authority, Correctional Refg 1994 Ser A .......... 4.65 10/01/04 1,949,540
1,500 Pittsburgh Stadium Authority, Pennsylvania, Refg Ser 1993 (MBIA) 4.85 10/01/04 1,495,455
- ----------- -------------
6,900 6,757,167
- ----------- -------------
Resource Recovery Revenue (2.8%)
2,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) ............................................. 5.50 07/01/01 2,045,560
- ----------- -------------
Student Loan Revenue (5.5%)
2,000 Montana Higher Education Student Assistance Corporation, Senior
Ser 1993 B (AMT) ............................................. 5.10 12/01/01 2,009,640
2,000 South Carolina Education Assistance Authority, Ser 1993 A-1
(AMT) ......................................................... 5.00 09/01/03 1,979,180
- ----------- -------------
4,000 3,988,820
- ----------- -------------
Tax Allocation (5.4%)
1,945 Pleasanton Joint Powers Financing Authority, California,
Reassessment Ser 1993 A ...................................... 5.60 09/02/00 1,969,488
2,000 Sacramento Financing Authority, California, Refg Ser 1993 A
(AMBAC) ....................................................... 4.85 11/01/04 1,974,920
- ----------- -------------
3,945 3,944,408
- ----------- -------------
Transportation Facilities Revenue (9.4%)
1,000 Delaware River & Bay Authority, Delaware & New Jersey, Ser 1993+ 4.50 01/01/04 968,110
2,000 Washington Metropolitan Area Transit Authority, District of
Columbia, Maryland and Virginia Refg Ser 1993 (FGIC)++ ....... 4.90 01/01/05 1,971,600
2,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport Refg Ser 1993 A 4.80 01/01/05 1,919,960
2,000 Harris County, Texas, Toll Road Refg Ser 1994 (AMBAC) .......... 4.85 08/15/05 1,969,720
- ----------- -------------
7,000 6,829,390
- ----------- -------------
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------------------------------------------------------------- -------- ---------- -------------
Water & Sewer Revenue (11.6%)
$ 1,000 Atlanta, Georgia, Water & Sewer Ser 1993 ....................... 4.50 % 01/01/04 $ 971,870
2,000 Massachusetts Water Resources Authority, Ser 1993 C ............ 5.25 12/01/06 1,991,780
2,000 New York City Municipal Water Finance Authority, New York, Ser
1994 B ........................................................ 5.125 06/15/04 2,009,820
1,500 Pittsburgh Water & Sewer Authority, Pennsylvania, Refg Ser 1993
A (FGIC) ...................................................... 4.60 09/01/03 1,481,760
2,000 Southeastern Public Service Authority, Virginia, Regional Solid
Waste Refg Ser 1993 A (MBIA) ................................. 4.70 07/01/04 1,967,100
- ----------- -------------
8,500 8,422,330
- ----------- -------------
Other Revenue (2.8%)
2,000 Pennsylvania Intergovernmental Cooperation Authority, Special Tax
Ser 1993 (FGIC) .............................................. 5.05 06/15/04 2,009,440
- ----------- -------------
71,475 TOTAL MUNICIPAL BONDS
- ----------- (Identified Cost $71,189,880) ...................................................... 70,847,426
-------------
SHORT-TERM MUNICIPAL OBLIGATION (0.7%)
500 Kemmerer, Wyoming, Exxon Corp Ser 1984 (Demand 04/01/96)
(Identified Cost $500,000) ................................... 3.80* 11/01/14 500,000
- ----------- -------------
$71,975 TOTAL INVESTMENTS
===========
(Identified Cost $71,689,880) (a) ....................................... 98.1 % 71,347,426
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .......................... 1.9 1,418,509
-------------
NET ASSETS .............................................................. 100.0 % $72,765,935
=============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
+ Joint exemption in Delaware and New Jersey.
++ Exemption in District of Columbia, Maryland and Virginia.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation was
$236,716 and the aggregate gross unrealized depreciation was
$579,170, resulting in net unrealized depreciation of $342,454.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1996, continued
Geographic Summary of Investments
Based on Market Value as a Percent of Net Assets
March 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Arizona .............. 1.4%
California ........... 8.1
Connecticut .......... 2.7
Delaware ............. 6.1
District of Columbia 1.3
Georgia .............. 1.3
Hawaii ............... 1.4
Illinois ............. 5.4
Maryland ............. 5.6
Massachusetts ........ 8.9%
Michigan ............. 1.3
Minnesota ............ 4.7
Missouri ............. 2.7
Montana .............. 2.8
New Jersey ........... 1.4
New York ............. 8.3
Ohio ................. 4.0
Pennsylvania ......... 6.9
South Carolina ....... 2.7%
Texas ................ 6.7
Utah ................. 1.4
Virginia ............. 6.7
Washington ........... 2.7
Wisconsin ............ 7.0
Wyoming .............. 0.7
Joint Exemption ...... (4.1)
-------
Total ................ 98.1%
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $71,689,880) ................. $71,347,426
Cash ........................................... 144,367
Receivable for:
Interest ..................................... 969,387
Shares of beneficial interest sold ........... 384,824
Deferred organizational expenses ............... 72,147
Prepaid expenses and other assets .............. 15,836
-------------
TOTAL ASSETS ................................. 72,933,987
-------------
LIABILITIES:
Payable for:
Investment management fee .................... 31,415
Shares of beneficial interest repurchased ... 29,007
Dividends to shareholders .................... 16,477
Accrued expenses and other payables ............ 91,153
-------------
TOTAL LIABILITIES ............................ 168,052
-------------
NET ASSETS:
Paid-in-capital ................................ 81,663,013
Net unrealized depreciation .................... (342,454)
Accumulated undistributed net investment income 16,444
Accumulated net realized loss .................. (8,571,068)
-------------
NET ASSETS ................................... $72,765,935
=============
NET ASSET VALUE PER SHARE,
7,310,483 shares outstanding (unlimited
shares authorized of $.01 par value) .......... $9.95
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $3,978,412
------------
EXPENSES
Investment management fee .............. 401,513
Shareholder reports and notices ....... 57,194
Professional fees ...................... 57,035
Registration fees ...................... 54,342
Transfer agent fees and expenses ...... 47,787
Trustees' fees and expenses ............ 33,233
Organizational expenses ................ 28,775
Custodian fees ......................... 5,911
Other .................................. 10,273
------------
TOTAL EXPENSES BEFORE EXPENSE OFFSET 696,063
LESS: EXPENSE OFFSET ................. (5,873)
------------
TOTAL EXPENSES AFTER EXPENSE OFFSET . 690,190
------------
NET INVESTMENT INCOME ................ 3,288,222
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ...................... (204,169)
Net change in unrealized depreciation . 3,701,666
------------
NET GAIN ............................. 3,497,497
------------
NET INCREASE ........................... $6,785,719
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MARCH 31, 1996 MARCH 31, 1995
- ------------------------------------------------------ -------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 3,288,222 $ 5,198,803
Net realized loss ..................................... (204,169) (8,283,452)
Net change in unrealized depreciation ................. 3,701,666 5,381,579
-------------- --------------
NET INCREASE ........................................ 6,785,719 2,296,930
Dividends from net investment income .................. (3,271,778) (5,198,803)
Net decrease from transactions in shares of beneficial
interest ............................................. (16,247,458) (82,188,083)
-------------- --------------
TOTAL DECREASE ...................................... (12,733,517) (85,089,956)
NET ASSETS:
Beginning of period ................................... 85,499,452 170,589,408
-------------- --------------
END OF PERIOD
(Including undistributed net investment income of
$16,444 and $0, respectively) ....................... $ 72,765,935 $ 85,499,452
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1996
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's investment objective is to provide
a high level of current income which is exempt from federal income tax,
consistent with the preservation of capital and prescribed standards of
quality and maturity. The Fund seeks to achieve this objective by investing
primarily in intermediate term, investment grade municipal securities. The
Fund was organized as a Massachusetts business trust on February 25, 1993 and
commenced operations on July 12, 1993.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued 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 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 by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Discounts are accreted and premiums are amortized over the life of
the respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
41
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1996, continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Fund in the amount of
$141,529 which were reimbursed exclusive of $12,651 which was absorbed 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 Fund pays 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 proceeds from sales of portfolio securities, excluding short-term
investments, for the year ended March 31, 1996 aggregated $11,818,196.
42
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1996, continued
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At March 31, 1996, the Fund had transfer agent fees
and expenses payable of approximately $9,700.
The Fund has an unfunded noncontributory defined benefit pension plan
covering all independent Trustees of the Fund who will have served as
independent Trustees for at least five years at the time of retirement.
Benefits under this plan are based on years of service and compensation
during the last five years of service. Aggregate pension costs for the year
ended March 31, 1996 included in Trustees' fees and expenses in the Statement
of Operations amounted to $12,000. At March 31, 1996, the Fund had an accrued
pension liability of $26,470 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 FOR THE YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold 4,179,668 $ 41,325,172 5,996,771 $ 56,905,855
Reinvestment of dividends 252,716 2,510,255 431,682 4,067,263
------------- --------------- -------------- ---------------
4,432,384 43,835,427 6,428,453 60,973,118
Repurchased (6,068,284) (60,082,885) (15,228,776) (143,161,201)
------------- --------------- -------------- ---------------
Net decrease (1,635,900) $(16,247,458) (8,800,323) $ (82,188,083)
============= =============== ============== ===============
</TABLE>
5. FEDERAL INCOME TAX STATUS
At March 31, 1996, the Fund had a net capital loss carryover of approximately
$8,571,000 of which $4,630,000 will be available through March 31, 2003 and
$3,941,000 will be available through March 31, 2004 to offset future capital
gains to the extent provided by regulations. To the extent that this
carryover loss is used to offset future capital gains, it is probable that
the gains so offset will not be distributed to shareholders.
43
<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 FOR THE YEAR JULY 12, 1993*
ENDED MARCH ENDED MARCH THROUGH MARCH
31, 1996 31, 1995 31, 1994
- ----------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 9.56 $ 9.61 $ 10.00
-------------- -------------- --------------
Net investment income .................... 0.41 0.42 0.29
Net realized and unrealized gain (loss) . 0.39 (0.05) (0.39)
-------------- -------------- --------------
Total from investment operations ........ 0.80 0.37 (0.10)
Less dividends from net investment income (0.41) (0.42) (0.29)
-------------- -------------- --------------
Net asset value, end of period ........... $ 9.95 $ 9.56 $ 9.61
============== ============== ==============
TOTAL INVESTMENT RETURN .................. 8.42% 4.01% (1.11)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 0.87%(4) 0.76% 0.31%(2)(3)
Net investment income .................... 4.09% 4.41% 3.92%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands . $72,766 $85,499 $170,589
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/reimbursed
or waived by the Investment Manager, the above annualized expense and
net investment income ratios would have been 0.75% and 3.48%,
respectively.
(4) The above expense ratio would have been 0.86%, which reflects 0.01%
effect for custody cash credits.
SEE NOTES TO FINANCIAL STATEMENTS
44
<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, 1996, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights
for each of the two years in the period 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 at March
31, 1996 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, 1996
1996 FEDERAL TAX NOTICE (unaudited)
During the year ended March 31, 1996, the Fund paid to shareholders
$0.41 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.
<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.
46
<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.
47
<PAGE>
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>
48
<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.
49
<PAGE>
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 years
ended March 31, 1995 and 1996............................ 4
(2) Financial statements included in the Statement of Additional
Information (Part B):
Page in
SAI
-------
Portfolio of Investments at March 31, 1996.......... 34
Statement of assets and liabilities at
March 31, 1996....................................... 38
Statement of operations for the year ended
March 31, 1996...................................... 39
Statement of changes in net assets for the fiscal
years ended March 31, 1995 and 1996................. 40
Notes to Financial Statements....................... 41
Financial highlights for the period July 12, 1993
through March 31, 1994 and for the fiscal years
ended March 31, 1995 and 1996....................... 44
(3) Financial statements included in Part C:
None
(b) Exhibits:
1. (a) -- Form of Declaration of Trust of Registrant*
(b) -- Form of Amendment to the Declaration of Trust*
5. -- Form of Investment Management Agreement between Registrant and
Dean Witter InterCapital Inc.*
<PAGE>
6. -- Form of Distribution Agreement between Registrant and
Dean Witter Distributors Inc.*
8. (a) -- Form of Custodian Agreement between Registrant and The
Bank of New York*
(b) -- Form of Amendment to the Custodian Agreement
11. -- Consent of Independent Accountants
15. -- Form of Plan of Distribution between Registrant and Dean
Witter Distributors Inc.*
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
- -----------------
* Previouly filed; re-filed via EDGAR with this Amendment to the Registration
Statement.
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 April 31, 1996
-------------- --------------------
Shares of Beneficial Interest 2,774
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
2
<PAGE>
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the
case of bad faith, willful misfeasance, gross negligence or reckless disregard
of duties to the Registrant.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such
trustee, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940,
so long as the interpretation of Sections 17(h) and 17(i) of such Act remains
in effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was
a Trustee, officer, employee, or agent of Registrant, or who is or was serving
at the request of Registrant as a trustee, director, officer, employee or
agent of another trust or corporation, against any liability asserted against
him and incurred by him or arising out of his position. However, in no event
will Registrant maintain insurance to indemnify any such person for any act
for which Registrant itself is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment adviser. The following information is given
regarding officers of Dean Witter InterCapital Inc. InterCapital is a
wholly-owned subsidiary of Dean Witter, Discover & Co. The principal
3
<PAGE>
address of the Dean Witter Funds is Two World Trade Center, New York, New
York 10048.
The term "Dean Witter Funds" used below refers to the following
registered investment companies:
Closed-End Investment Companies
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
Open-end Investment Companies:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
4
<PAGE>
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
(33) Dean Witter Diversified Income Trust
(34) Dean Witter U.S. Government Money Market Trust
(35) Dean Witter Global Dividend Growth Securities
(36) Active Assets California Tax-Free Trust
(37) Dean Witter Natural Resource Development Securities Inc.
(38) Active Assets Government Securities Trust
(39) Active Assets Money Trust
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
(57) Dean Witter Income Builder Fund
The term "TCW/DW Funds" refers to the following registered investment
companies:
Open-End Investment Companies
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
5
<PAGE>
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
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
<S> <C>
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc.
("DWSC"); Chairman and Director of
Dean Witter Trust Company
("DWTC"); Chairman, Director or
Trustee, President and Chief
Executive Officer of the Dean
Witter Funds and Chairman, Chief
Executive Officer and Trustee of
the TCW/DW Funds; Formerly
Executive Vice President and
Director of Dean Witter, Discover
& Co. ("DWDC"); Director and/or
officer of various DWDC
subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee
of the Dean Witter Funds; Director
and/or officer of various DWDC
subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since
January, 1993) and Chairman (since January, 1995)
of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
<S> <C>
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.
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Joseph J. McAlinden
Executive Vice President
and Chief Investment
Officer Vice President of the Dean Witter Funds.
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC,
Distributors and DWTC and Director of DWTC; Vice
President of the Dean Witter Funds and the TCW/DW
Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
<S> <C>
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 N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
<S> <C>
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.
Kirk Balzer
Vice President Vice President of Dean Witter Mid-Cap Growth Fund
Douglas Brown
Vice President
Philip Casparius
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
<S> <C>
Peter W. Gurman
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of various Dean Witter Funds
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
James Kastberg
Vice President
Stanley Kapica
Vice President
Michael Knox
Vice President Vice President of various Dean Witter Funds
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
<S> <C>
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell
Vice President Vice President of Dean Witter Global Short-
Term Income Fund Inc.
Hugh Rose
Vice President
Robert Rossetti
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
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Marianne Zalys
Vice President
</TABLE>
11
<PAGE>
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
12
<PAGE>
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(56) Dean Witter Income Builder Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of the
following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
- ---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained
by the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 23rd day of May, 1996.
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. 4 has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 05/23/96
-----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 05/23/96
-----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 05/23/96
-----------------------------
Sheldon Curtis
Attorney-in-Fact
Michael Bozic Paul Kolton
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Manuel H. Johnson
By /s/ David M. Butowsky 05/23/96
-----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
EXHIBIT INDEX
1.(a) -- Form of Declaration of Trust of Registrant*
(b) -- Form of Amendment to the Declaration of Trust
5. -- Form of Investment Management Agreement between Registrant
and Dean Witter InterCapital Inc.*
6. -- Form of Distribution Agreement between Registrant and
Dean Witter Distributors Inc.*
8.(a) -- Form of Custodian Agreement between Registrant and The
Bank of New York*
(b) -- Form of Amendment to the Custodian Agreement
11. -- Consent of Independent Accountants
15. -- Form of Plan of Distribution between Registrant and Dean
Witter Distributors Inc.*
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
_________________
* Previouly filed; re-filed via EDGAR with this Amendment to the
Registration Statement.
DEAN WITTER
INTERMEDIATE TERM MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NY 10048
DECLARATION OF TRUST
Dated: February 25, 1993
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - Name and Definitions ............................... 2
Section 1.1 Name ............................................... 2
Section 1.2 Definitions ........................................ 2
ARTICLE II - Trustees ........................................... 3
Section 2.1 Number of Trustees ................................. 3
Section 2.2 Election and Term .................................. 3
Section 2.3 Resignation and Removal ............................ 3
Section 2.4 Vacancies .......................................... 3
Section 2.5 Delegation of Power to Other Trustees .............. 4
ARTICLE III - Powers of Trustees ................................. 4
Section 3.1 General ............................................ 4
Section 3.2 Investments ........................................ 4
Section 3.3 Legal Title ........................................ 5
Section 3.4 Issuance and Repurchase of Securities .............. 5
Section 3.5 Borrowing Money; Lending Trust Assets .............. 5
Section 3.6 Delegation; Committees ............................. 5
Section 3.7 Collection and Payment ............................. 5
Section 3.8 Expenses ........................................... 5
Section 3.9 Manner of Acting; By-Laws .......................... 5
Section 3.10 Miscellaneous Powers ............................... 6
Section 3.11 Principal Transactions ............................. 6
Section 3.12 Litigation ......................................... 6
ARTICLE IV - Investment Adviser, Distributor, Custodian and
Transfer Agent ..................................... 6
Section 4.1 Investment Adviser ................................. 6
Section 4.2 Administrative Services ............................ 7
Section 4.3 Distributor ........................................ 7
Section 4.4 Transfer Agent ..................................... 7
Section 4.5 Custodian .......................................... 7
Section 4.6 Parties to Contract ................................ 7
ARTICLE V - Limitations of Liability of Shareholders,
Trustees and Others ................................ 8
Section 5.1 No Personal Liability of Shareholders,
Trustees, etc ...................................... 8
Section 5.2 Non-Liability of Trustees, etc ..................... 8
Section 5.3 Indemnification .................................... 8
Section 5.4 No Bond Required of Trustees ....................... 8
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc ................................... 8
Section 5.6 Reliance on Experts, etc ........................... 9
i
<PAGE>
PAGE
ARTICLE VI - Shares of Beneficial Interest ...................... 9
Section 6.1 Beneficial Interest ................................ 9
Section 6.2 Rights of Shareholders ............................. 9
Section 6.3 Trust Only ......................................... 9
Section 6.4 Issuance of Shares ................................. 9
Section 6.5 Register of Shares ................................. 10
Section 6.6 Transfer of Shares ................................. 10
Section 6.7 Notices ............................................ 10
Section 6.8 Voting Powers ...................................... 10
Section 6.9 Series or Classes of Shares ........................ 11
ARTICLE VII - Redemptions ........................................ 13
Section 7.1 Redemptions ........................................ 13
Section 7.2 Redemption at the Option of the Trust .............. 13
Section 7.3 Effect of Suspension of Determination
of Net Asset Value ................................. 13
Section 7.4 Suspension of Right of Redemption .................. 13
ARTICLE VIII - Determination of Net Asset Value, Net
Income and Distributions ........................... 14
Section 8.1 Net Asset Value .................................... 14
Section 8.2 Distributions to Shareholders ...................... 14
Section 8.3 Determination of Net Income ........................ 14
Section 8.4 Power to Modify Foregoing Procedures ............... 15
ARTICLE IX - Duration; Termination of Trust, Amendment;
Mergers, etc ....................................... 15
Section 9.1 Duration ........................................... 15
Section 9.2 Termination of Trust or a Series ................... 15
Section 9.3 Amendment Procedure ................................ 15
Section 9.4 Merger, Consolidation and Sale of
Assets ............................................. 16
Section 9.5 Incorporation ...................................... 16
ARTICLE X - Reports to Shareholders ............................ 17
ARTICLE XI - Miscellaneous ...................................... 17
Section 11.1 Filing ............................................. 17
Section 11.2 Resident Agent ..................................... 17
Section 11.3 Governing Law ...................................... 17
Section 11.4 Counterparts ....................................... 17
Section 11.5 Reliance by Third Parties .......................... 17
Section 11.6 Provisions in Conflict with Law or
Regulations ........................................ 17
Section 11.7 Use of the Name "Dean Witter" ...................... 18
Section 11.8 Principal Place of Business ........................ 18
SIGNATURE PAGE ...................................................... 19
ii
<PAGE>
DECLARATION OF TRUST
OF
DEAN WITTER INTERMEDIATE TERM MUNICIPAL TRUST
Dated: February 25, 1993
THE DECLARATION OF TRUST of Dean Witter Intermediate Term Municipal
Trust is made the th day of February, 1993 by the parties signatory hereto, as
trustees (such persons, so long as they shall continue in office in accordance
with the terms of this Declaration of Trust, and all other persons who at the
time in question have been duly elected or appointed as trustees in accordance
with the provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
WITNESSETH:
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is provided that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest as
hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust, all money and property contributed to the trust fund to manage and
dispose of the same for the benefit of the holders from time to time of the
shares of beneficial interest issued hereunder and subject to the provisions
hereof, to wit:
1
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is the "Dean
Witter Intermediate Term Municipal Trust," and so far as may be practicable
the Trustees shall conduct the Trust's activities, execute all documents and
sue or be sued under that name, which name (and the word "Trust" wherever
herein used) shall refer to the Trustees as Trustees, and not as individuals,
or personally, and shall not refer to the officers, agents, employees or
Shareholders of the Trust. Should the Trustees determine that the use of such
name Is not advisable, they may use such other name for the Trust as they deem
proper and the Trust may hold Its property and conduct its activities under
such other name.
Section 1.2. Definitions. Wherever they are used herein, the
following terms have the following respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.9
hereof, as from time to time amended.
(b) the terms "Commission," "Affiliated Person" and
"Interested Person, " have the meanings given them in the 1940 Act.
(c) "Declaration" means this Declaration of Trust as amended
from time to time. Reference in this Declaration of Trust to
"Declaration, " "hereof, " "herein" and "hereunder" shall be deemed
to refer to this Declaration rather than the article or section in
which such words appear.
(d) "Distributor" means the party, other than the Trust, to a
contract described in Section 4.3 hereof.
(e) "Fundamental Policies" shall mean the investment policies
and restrictions set forth in the Prospectus and Statement of
Additional Information and designated as fundamental policies
therein.
(f) "Investment Adviser" means any party, other than the
Trust, to a contract described in Section 4.1 hereof.
(g) "Majority Shareholder Vote" means the vote of the holders
of a majority of Shares, which shall consist of: (i) a majority of
Shares represented in person or by proxy and entitled to vote at a
meeting of Shareholders at which a quorum, as determined in
accordance with the By-Laws, is present; (ii) a majority of Shares
issued and outstanding and entitled to vote when action is taken by
written consent of Shareholders; and (iii) a "majority of the
outstanding voting securities," as the phrase is defined in the 1940
Act, when any action is required by the 1940 Act by such majority as
so defined.
(h) "1940 Act" means the Investment Company Act of 1940 and
the rules and regulations thereunder as amended from time to time.
(i) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and
political subdivisions thereof.
(j) "Prospectus" means the Prospectus and Statement of
Additional Information constituting parts of the Registration
Statement of the Trust under the Securities Act of 1933 as such
Prospectus and Statement of Additional Information may be amended or
supplemented and filed with the Commission from time to time.
(k) "Series" means one of the separately managed components
of the Trust (or, if the Trust shall have only one such component,
then that one) as set forth in Section 6.1 hereof or as may be
established and designated from time to time by the Trustees pursuant
to that section.
(l) "Shareholder" means a record owner of outstanding
Shares.
2
<PAGE>
(m) "Shares" means the units of interest into which the
beneficial interest in the Trust shall be divided from time to time,
including the shares of any and all series or classes which may be
established by the Trustees, and includes fractions of Shares as well
as whole Shares.
(n) "Transfer Agent" means the party, other than the Trust,
to the contract described in Section 4.4 hereof.
(o) "Trust" means the Dean Witter Intermediate Term
Municipal Trust.
(p) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for
the account of the Trust or the Trustees,
(q) "Trustees" means the persons who have signed the
Declaration, so long as they shall continue in office in accordance
with the terms hereof, and all other persons who may from time to
time be duly elected or appointed, qualified and serving as Trustees
in accordance with the provisions hereof, and reference herein to a
Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (1 5).
Section 2.2. Election and Term. The Trustees shall be elected by a
Majority Shareholder Vote at the first meeting of Shareholders following the
public offering of Shares of the Trust. The Trustees shall have the power to
set and alter the terms of office of the Trustees, and they may at any time
lengthen or lessen their own terms or make their terms of unlimited duration,
subject to the resignation and removal provisions of Section 2.3 hereof.
Subject to Section 16(a) of the 1940 Act, the Trustees may elect their own
successors and may, pursuant to Section 2.4 hereof, appoint Trustees to fill
vacancies. The Trustees shall adopt By-Laws not inconsistent with this
Declaration or any provision of law to provide for election of Trustees by
Shareholders at such time or times as the Trustees shall determine to be
necessary or advisable.
Section 2.3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an Instrument in writing
signed by him and delivered to the other Trustees and such resignation shall
be effective upon such delivery, or at a later date according to the terms of
the instrument. Any of the Trustees may be removed (provided the aggregrate
number of Trustees after such removal shall not be less than the number
required by Section 2.1 hereof) by the action of two-thirds of the remaining
Trustees or by the action of the Shareholders of record of not less than
two-thirds of the Shares outstanding (for purposes of determining the
circumstances and procedures under which such removal by the Shareholders may
take place, the provisions of Section 16(c) of the 1940 Act shall be
applicable to the same extent as if the Trust were subject to the provisions
of that Section). Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust Property held in the name of the
resigning or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
Section 2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform
the duties of the office of a Trustee. No such vacancy shall operate to annul
the Declaration or to revoke any existing agency created pursuant to the terms
of the Declaration. In the case of an existing vacancy existing by reason of
an increase in the number of Trustees, subject to the provisions of Section
16(a) of the 1940 Act, the remaining Trustees or, prior to the public offering
of Shares of the
3
<PAGE>
Trust, if only one Trustee shall then remain in office, the remaining Trustee,
shall fill such vacancy by the appointment of such other person as they or he,
in their or his discretion, shall see fit, made by a written instrument signed
by a majority of the remaining Trustees or by the remaining Trustee, as the
case may be. Any such appointment shall not become effective, however, until
the person named in the written instrument of appointment shall have accepted
in writing such appointment and agreed in writing to be bound by the terms of
the Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the
number of Trustees. Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in this Section 2.4, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by the
Declaration. A written instrument certifying the existence of such vacancy
signed by a majority of the Trustees shall be conclusive evidence of the
existence of such vacancy.
Section 2.5. Delegation of Power to Other Trustees. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees personally exercise the powers granted
to the Trustees under the Declaration except as herein otherwise expressly
provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. General The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of Its
branches and maintain offices both within and without the Commonwealth of
Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities wheresoever
in the world they may be located as they deem necessary, proper or desirable
in order to promote the interests of the Trust although such things are not
herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of the Declaration, the presumption shall be in
favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Investments. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase
or otherwise acquire, hold, pledge, sell, assign, transfer,
exchange, distribute, lend or otherwise deal in or dispose
of negotiable or nonnegotiable instruments, obligations,
evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements,
reverse repurchase agreements, options, commodities,
commodity futures contracts and related options, currencies,
currency futures and forward contracts, and other
securities, investment contracts and other instruments of
any kind, including, without limitation, those issued,
guaranteed or sponsored by any and all Persons including,
without limitation, states, territories and possessions of
the United States, the District of Columbia and any of the
political subdivisions, agencies or instrumentalities
thereof, and by the United States Government or its agencies
or instrumentalities, foreign or international
instrumentalities, or by any bank or savings institution, or
by any corporation or organization organized under the laws
of the United States or of any state, territory or
possession thereof, and of corporations or organizations
organized under foreign laws, or In "when issued" contracts
for any such securities, or retain Trust assets in cash and
from time to time change the investments of the assets of
the Trust; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and
all
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such investments of every kind and description, including,
without limitation, the right to consent and otherwise act
with respect thereto, with power to designate one or more
persons, firms, associations or corporations to exercise any
of said rights, powers and privileges in respect of any of
said instruments; and the Trustees shall be deemed to have
the foregoing powers with respect to any additional
securities in which the Trust may invest should the
Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by
any law limiting the investments which may be made by fiduciaries.
Section 3.3. Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust, or in the name of
any other Person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is appropriately protected.
The right, title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to
have any right, title or interest in any of the Trust Property, and the right,
title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed
and delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section
6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 3.5. Borrowing Money, Lending Trust Assets. Subject to the
Fundamental Policies, the Trustee shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust assets.
Section 3.6. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of
the Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient.
Section 3.7. Collection and Payment. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay all
claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and
other instruments.
Section 3.8. Expenses. Subject to Section 6.9 hereof, the Trustees
shall have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise
provided herein or in the By-Laws or by any provision of law, any action to be
taken by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
or by written consents of all the Trustees. The
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Trustees may adopt By-Laws not inconsistent with this Declaration to provide
for the conduct of the business of the Trust and may amend or repeal such
By-Laws to the extent such power is not reserved to the Shareholders.
Section 3.10. Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust or any Series
thereof; (b) enter into joint ventures, partnerships and any other
combinations or associations; (c) remove Trustees or fill vacancies in or add
to their number, elect and remove such officers and appoint and terminate such
agents or employees as they consider appropriate, and appoint from their own
number, and terminate, any one or more committees which may exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
(d) purchase, and pay for out of Trust Property or the property of the
appropriate Series of the Trust, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action
taken or omitted to be taken by any such Person in such capacity, whether or
not constituting negligence, or whether or not the Trust would have the power
to indemnify such Person against such liability; (e) establish pension,
profit-sharing, Share purchase, and other retirement, incentive and benefit
plans for any Trustees, officers, employees and agents of the Trust; (f) to the
extent permitted by law, indemnify any person with whom the Trust or any
Series thereof has dealings, including any Investment Adviser, Distributor,
Transfer Agent and selected dealers, to such extent as the Trustees shall
determine; (g) guarantee indebtedness or contractual obligations of others;
(h) determine and change the fiscal year of the Trust or any Series thereof
and the method by which its accounts shall be kept; and (i) adopt a seal for
the Trust but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
Section 3.11. Principal Transactions. Except in transactions permitted
by the 1940 Act or any rule or regulation thereunder, or any order of
exemption issued by the Commission, or effected to implement the provisions of
any agreement to which the Trust is a party, the Trustees shall not, on behalf
of the Trust, buy any securities (other than Shares) from or sell any
securities (other than Shares) to, or lend any assets of the Trust or any
Series thereof to, any Trustee or officer of the Trust or any firm of which
any such Trustee or officer is a member acting as principal, or have any such
dealings with any Investment Adviser, Distributor or Transfer Agent or with
any Affiliated Person of such Person; but the Trust or any Series thereof may
employ any such Person, or firm or company in which such Person is an
Interested Person, as broker, legal counsel, registrar, transfer agent,
dividend disbursing agent or custodian upon customary terms.
Section 3.12. Litigation. The Trustees shall have the power to engage
in and to prosecute, defend, compromise, abandon, or adjust, by arbitration,
or otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series
thereof to pay or to satisfy any debts, claims or expenses incurred in
connection therewith, including those of litigation, and such power shall
include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business
judgment, to dismiss any action, suit, proceeding, dispute, claim, or demand,
derivative or otherwise, brought by any person, including a Shareholder in its
own name or the name of the Trust, whether or not the Trust or any of the
Trustees may be named Individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Section 4.1. Investment Adviser. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time enter
into one or more investment advisory or management contracts or, if the
Trustees establish multiple Series, separate investment advisory or management
contracts with respect to one or more Series whereby the other party or
parties to any such contracts shall undertake to furnish the Trust or such
Series such management, investment advisory, administration,
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accounting, legal, statistical and research facilities and services,
promotional or marketing activities, and such other facilities and services, if
any, as the Trustees shall from time to time consider desirable and all upon
such terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of the Declaration, the Trustees may authorize
the Investment Advisers, or any of them, under any such contracts (subject to
such general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales, loans or exchanges of portfolio securities
and other investments of the Trust on behalf of the Trustees or may authorize
any officer, employee or Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of such Investment Advisers, or any of
them (and all without further action by the Trustees). Any such purchases,
sales, loans and exchanges shall be deemed to have been authorized by all of
the Trustees. The Trustees may, in their sole discretion, call a meeting of
Shareholders in order to submit to a vote of Shareholders at such meeting the
approval or continuance of any such investment advisory or management contract.
If the Shareholders of any one or more of the Series of the Trust should fail
to approve any such investment advisory or management contract, the Investment
Adviser may nonetheless serve as Investment Adviser with respect to any Series
whose Shareholders approve such contract.
Section 4.2. Administrative Services. The Trustees may in their
discretion from time to time contract for administrative personnel and services
whereby the other party shall agree to provide the Trustees or the Trust
administrative personnel and services to operate the Trust on a daily or other
basis, on such terms and conditions as the Trustees may in their discretion
determine. Such services may be provided by one or more persons or entities.
Section 4.3. Distributor. The Trustees may in their discretion from
time to time enter into one or more contracts, providing for the sale of Shares
to net the Trust or the applicable Series of the Trust not less than the net
asset value per Share (as described in Article VIII hereof) and pursuant to
which the Trust may either agree to sell the Shares to the other parties to the
contracts, or any of them, or appoint any such other party its sales agent for
such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the provisions of this Article IV, including, without limitation, the
provision for the repurchase or sale of shares of the Trust by such other party
as principal or as agent of the Trust.
Section 4.4. Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
Section 4.5. Custodian. The Trustees may appoint or otherwise engage
one or more banks or trust companies, each having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least five
million dollars ($5,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any,
as may be contained in the By-Laws of the Trust.
Section 4.6. Parties to Contract Any contract of the character
described in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any
other contract may be entered into with any Person, although one or more of the
Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence
of any such relationship; nor shall any Person holding such relationship be
liable merely by reason of such relationship for any loss or expense to the
Trust under or by reason of said contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was not inconsistent with the provisions of this Article IV. The
same Person may be the other party to any contracts entered into pursuant to
Sections 4.1, 4.2, 4.3, 4.4 or 4.5 above or otherwise, and any individual may
be financially interested or otherwise affiliated with Persons who are parties
to any or all of the contracts mentioned in this Section 4.6.
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ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with the Trust Property or the affairs of the
Trust, save only that arising from bad faith, willful misfeasance, gross
negligence or reckless disregard for his duty to such Person; and all such
Persons shall look solely to the Trust Property, or to the Property of one or
more specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee, officer, employee or agent, as such, of
the Trust is made a party to any suit or proceeding to enforce any such
liability, he shall not, on account thereof, be held to any personal liability.
The Trust shall Indemnify out of the property of the Trust and hold each
Shareholder harmless from and against all claims and liabilities, to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability; provided that, in the event the Trust shall consist of more than one
Series, Shareholders of a particular Series who are faced with claims or
liabilities solely by reason of their status as Shareholders of that Series
shall be limited to the assets of that Series for recovery of such loss and
related expenses. The rights accruing to a Shareholder under this Section 5.1
shall not exclude any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right of the Trust
to indemnify or reimburse a Shareholder in any appropriate situation even
though not specifically provided herein.
Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
this own bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties.
Section 5.3. Indemnification. (a) The Trustees shall provide
for indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, of any person
who is, or has been, a Trustee, officer, employee or agent of the Trust against
all liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a
Trustee, officer, employee or agent and against amounts paid or incurred by him
in the settlement thereof, in such manner as the Trustees may provide from time
to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
Section 5.4. No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or a Series thereof or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their
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capacity as officers, employees or agents of the Trust or a Series thereof.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees shall
recite that the same is executed or made by them not individually, but as
Trustees under the Declaration, and that the obligations of the Trust or a
Series thereof under any such instrument are not binding upon any of the
Trustees or Shareholders, individually, but bind only the Trust Estate (or, in
the event the Trust shall consist of more than one Series, in the case of any
such obligation which relates to a specific Series, only the Series which is a
party thereto), and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not affect the validity of
such obligation, contract instrument, certificate, Share, security or
undertaking and shall not operate to bind the Trustees or Shareholders
individually. The Trustees shall at all times maintain insurance for the
protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to
cover possible tort liability, and such other insurance as the Trustees in
their sole judgment shall deem advisable.
Section 5.6. Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser,
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may
also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.01 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the authority to establish and
designate one or more Series or classes of shares. Each share of any Series
shall represent an equal proportionate share in the assets of that Series with
each other Share in that Series. The Trustees may divide or combine the shares
of any Series into a greater or lesser number of shares in that Series without
thereby changing the proportionate interests in the assets of that Series.
Subject to the provisions of Section 6.9 hereof, the Trustees may also
authorize the creation of additional series of shares (the proceeds of which
may be invested in separate, independently managed portfolios) and additional
classes of shares within any series. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend in Shares or a
split in Shares, shall be fully paid and nonassessable.
Section 6.2. Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition of division of any property, profits, rights or interests of the
Trust nor can they be called upon to assume any losses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares. The Shares
shall be personal property giving only the rights in the Declaration
specifically set forth. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights, except as the Trustees
may determine with respect to any series of Shares.
Section 6.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4. Issuance of Shares. The Trustees, in their discretion
may, from time to time without vote of the Shareholders, issue Shares of any
Series, in addition to the then issued and outstanding
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Shares and Shares held in the treasury, to such party or parties and for such
amount and type of consideration, including cash or property, at such time or
times and on such terms as the Trustees may deem best, and may in such manner
acquire other assets (including the acquisition of assets subject to, and in
connection with the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares. The
Trustees may from time to time divide or combine the Shares of any Series into
a greater or lesser number without thereby changing the proportionate
beneficial interests in that Series. Contributions to the Trust may be accepted
for, and Shares shall be redeemed as, whole Shares and/or fractions of a Share
as described in the Prospectus.
Section 6.5. Register of Shares. A register shall be kept in respect of
each Series at the principal office of the Trust or at an office of the
Transfer Agent which shall contain the names and addresses of the Shareholders
and the number of Shares of each Series held by them respectively and a record
of all transfers thereof. Such register may be in written form or any other
form capable of being converted into written form within a reasonable time for
visual inspection. Such register shall be conclusive as to who are the holders
of the Shares and who shall be entitled to receive dividends or distributions
or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder
shall be entitled to receive payment of any dividend or distribution, nor to
have notice given to him as herein or in the By-Laws provided, until he has
given his address to the Transfer Agent or such other officer or agent of the
Trustees as shall keep the said register for entry thereon. It is not
contemplated that certificates will be issued for the Shares; however, the
Trustees, In their discretion, may authorize the issuance of Share certificates
and promulgate appropriate rules and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder or by his agent thereunto duly
authorized in writing, upon delivery to the Trustees or the Transfer Agent of a
duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded
on the register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any notice of the
proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees or
the Transfer Agent, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law, except as may otherwise be provided by
the laws of the Commonwealth of Massachusetts.
Section 6.7. Notices. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust. Annual reports and
proxy statements need not be sent to a shareholder if: (i) an annual report and
proxy statement for two consecutive annual meetings, or (ii) all, and at least
two, checks (if sent by first class mail) in payment of dividends or interest
and shares during a twelve month period have been mailed to such shareholder's
address and have been returned undelivered. However, delivery of such annual
reports and proxy statements shall resume once a Shareholder's current address
is determined.
Section 6.8. Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.2 hereof, (ii)
for the removal of Trustees as provided in Section 2.3 hereof, (iii) with
respect to any investment advisory or management contract as provided in
Section 4.1, (iv) with respect to termination of the Trust as provided in
Section 9.2, (v) with respect to any amendment of the Declaration to the extent
and as provided in Section 9.3, (vi) with respect to any merger, consolidation
or sale of assets as provided in Section 9.4, (vii) with respect to
incorporation of the Trust to the
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extent and as provided in Section 9.5, (viii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders
(provided that Shareholders of a Series are not entitled to vote in connection
with the bringing of a derivative or class action with respect to any matter
which only affects another Series or its Shareholders), (ix) with respect to
any plan adopted pursuant to Rule 12b-1 (or any successor rule) under the 1940
Act and (x) with respect to such additional matters relating to the Trust as
may be required by law, the Declaration, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as and
when the Trustees may consider necessary or desirable. Each whole Share shall
be entitled to one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote,
except that Shares held in the treasury of the Trust as of the record date, as
determined in accordance with the By-Laws, shall not be voted. On any matter
submitted to a vote of Shareholders, all Shares shall be voted by individual
Series except (1) when required by the 1940 Act, Shares shall be voted in the
aggregate and not by individual Series; and (2) when the Trustees have
determined that the matter affects only the interests of one or more Series,
then only the Shareholders of such Series shall be entitled to vote thereon.
The Trustees may, in conjunction with the establishment of any further Series
or any classes of Shares, establish conditions under which the several series
or classes of Shares shall have separate voting rights or no voting rights.
There shall be no cumulative voting in the election of Trustees. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, the Declaration or the By-Laws to be taken by
Shareholders. The By-Laws may include further provisions for Shareholders'
votes and meetings and related matters.
Section 6.9. Series or Classes of Shares. The following provisions are
applicable regarding the Series of Shares of the Trust established in Section
6.1 hereof and shall be applicable if the Trustees shall establish additional
Series or shall divide the shares of any Series into two or more classes, also
as provided in Section 6.1 hereof, and all provisions relating to the Trust
shall apply equally to each Series thereof except as the context requires:
(a) The number of authorized shares and the number of shares
of each Series or of each class that may be issued shall be unlimited.
The Trustees may classify or reclassify any unissued shares or any
shares previously issued and reacquired of any Series or class into
one or more Series or one or more classes that may be established and
designated from time to time. The Trustees may hold as treasury shares
(of the same or some other Series or class), reissue for such
consideration and on such terms as they may determine, or cancel any
shares of any Series or any class reacquired by the Trust at their
discretion from time to time.
(b) The power of the Trustees to invest and reinvest the
Trust Property shall be governed by Section 3.2 of this Declaration
with respect to any one or more Series which represents the interests
in the assets of the Trust immediately prior to the establishment of
any additional Series and the power of the Trustees to invest and
reinvest assets applicable to any other Series shall be as set forth
in the instrument of the Trustees establishing such series which is
hereinafter described.
(c) All consideration received by the Trust for the issue or
sale of shares of a particular Series or class together with all
assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably
belong to that Series or class for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of
account of the Trust. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, ot payments which are
not readily identifiable as belonging to any particular Series or
class, the Trustees shall allocate them among any one or more of the
Series or classes established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair
and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all Series or classes
for all purposes. No holder of Shares of any Series shall have any
claim on or right to any assets allocated or belonging to any other
Series.
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(d) The assets belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that Series
and all expenses, costs, charges and reserves attributable to that
Series. All expenses and liabilities incurred or arising in connection
with a particular Series, or in connection with the management
thereof, shall be payable solely out of the assets of that Series and
creditors of a particular Series shall be entitled to look solely to
the property of such Series for satisfaction of their claims. Any
general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to and among any
one or more of the series established and designated from time to time
in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all Series for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
shareholders.
(e) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 8.2 of this Declaration
with respect to any one or more Series or classes which represents the
interests in the assets of the Trust immediately prior to the
establishment of any additional Series or classes. With respect to any
other Series or class, dividends and distributions on shares of a
particular Series or class may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise, pursuant to a
standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, to the holders of shares of
that Series or class, from such of the income and capital gains,
accrued or realized, from the assets belonging to that Series or
class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Series or class. All dividends
and distributions on shares of a particular Series or class shall be
distributed pro rata to the holders of that Series or class in
proportion to the number of shares of that Series or class held by
such holders at the date and time of record established for the
payment of such dividends or distributions.
(f) The Trustees shall have the power to determine the
designations, preferences, privileges, limitations and rights,
including voting and dividend rights, of each class and Series of
Shares.
(g) Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that the
holders of Shares of any Series or class shall have the right to
convert or exchange said Shares into Shares of one or more Series of
Shares in accordance with such requirements and procedures as may be
established by the Trustees.
(h) The establishment and designation of any Series or class
of shares in addition to those established in Section 6.1 hereof shall
be effective upon the execution by a majority of the then Trustees of
an instrument setting forth such establishment and designation and the
relative rights, preferences, voting powers, restrictions, limitations
as to dividends, qualifications, and terms and conditions of
redemption of such Series or class, or as otherwise provided in such
instrument. At any time that there are no shares outstanding of any
particular Series or class previously established and designated, the
Trustees may by an instrument executed by a majority of their number
abolish that Series or class and the establishment and designation
thereof. Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration.
(i) Shareholders of a Series shall not be entitled to
participate in a derivative or class action with respect to any matter
which only affects another Series or its Shareholders.
(j) Each Share of a Series of the Trust shall represent a
beneficial interest in the net assets of such Series. Each holder of
Shares of a Series shall be entitled to receive his pro rata share of
distributions of income and capital gains made with respect to such
Series. In the event of the liquidation of a particular Series, the
Shareholders of that Series which has been established and designated
and which is being liquidated shall be entitled to receive, when and
as declared by the Trustees, the excess of the assets belonging to
that Series over the liabilities belonging to that Series. The holders
of Shares of any Series shall not be entitled hereby to any
distribution upon
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liquidation of any other Series. The assets so distributable to the
Shareholders of any Series shall be distributed among such
Shareholders in proportion to the number of Shares of that Series held
by them and recorded on the books of the Trust. The liquidation of any
particular Series in which there are Shares then outstanding may be
authorized by an instrument in writing, without a meeting, signed by a
majority of the Trustees then in office, subject to the approval of a
majority of the outstanding voting securities of that Series, as that
phrase is defined in the 1940 Act.
ARTICLE VII
REDEMPTIONS
Section 7.1. Redemptions. Each Shareholder of a particular Series
shall have the right at such times as may be permitted by the Trust to require
the Trust to redeem all or any part of his Shares of that Series, upon and
subject to the terms and conditions provided in this Article VII. The Trust
shall, upon application of any Shareholder or pursuant to authorization from
any Shareholder, redeem or repurchase from such Shareholder outstanding shares
for an amount per share determined by the Trustees in accordance with any
applicable laws and regulations; provided that (a) such amount per share shall
not exceed the cash equivalent of the proportionate interest of each share or
of any class or Series of shares in the assets of the Trust at the time of the
redemption or repurchase and (b) if so authorized by the Trustees, the Trust
may, at any time and from time to time charge fees for effecting such
redemption or repurchase, at such rates as the Trustees may establish, as and
to the extent permitted under the 1940 Act and the rules and regulations
promulgated thereunder, and may, at any time and from time to time, pursuant to
such Act and such rules and regulations, suspend such right of redemption. The
procedures for effecting and suspending redemption shall be as set forth in the
Prospectus from time to time. Payment will be made in such manner as described
in the Prospectus.
Section 7.2. Redemption at the Option of the Trust. Each Share of the
Trust or any Series of the Trust shall be subject to redemption at the option
of the Trust at the redemption price which would be applicable if such Share
were then being redeemed by the Shareholder pursuant to Section 7.1: (i) at any
time, if the Trustees determine in their sole discretion that failure to so
redeem may have materially adverse consequences to the holders of the Shares of
the Trust or of any Series, or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount as may from time to
time be determined by the Trustees and set forth in the then current Prospectus
of the Trust. Upon such redemption the holders of the Shares so redeemed shall
have no further right with respect thereto other than to receive payment of
such redemption price.
Section 7.3. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 7.4 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or of
any Series thereof, the rights of Shareholders (including those who shall have
applied for redemption pursuant to Section 7.1 hereof but who shall not yet
have received payment) to have Shares redeemed and paid for by the Trust or a
Series thereof shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on
deposit. The redemption price of Shares for which redemption applications have
not been revoked shall be the net asset value of such Shares next determined as
set forth in Section 8.1 after the termination of such suspension, and payment
shall be made within seven (7) days after the date upon which the application
was made plus the period after such application during which the determination
of net asset value was suspended.
Section 7.4. Suspension of Right of Redemption. The Trust may declare
a suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which
disposal by the Trust or a Series thereof of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust or a
Series thereof fairly to
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determine the value of its net assets, or (iv) during any other period when the
Commission may for the protection of security holders of the Trust by order
permit suspension of the rights of redemption or postponement of the date of
payment or redemption; provided that applicable rules and regulations of the
Commission shall govern as to whether the conditions prescribed in (ii), (iii)
or (iv) exist. Such suspension shall take effect at such time as the Trust
shall specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no right
of redemption or payment on redemption until the Trust shall declare the
suspension at an end, except that the suspension shall terminate in any event
on the first day on which said stock exchange shall have reopened or the period
specified in (ii) or (iii) shall have expired (as to which in the absence of an
official ruling by the Commission, the determination of the Trust shall be
conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the net asset value existing after the termination of the suspension.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1. Net Asset Value. The net asset value of each outstanding
Share of each Series of the Trust shall be determined on such days and at such
time or times as the Trustees may determine. The method of determination of net
asset value shall be determined by the Trustees and shall be as set forth in
the Prospectus. The power and duty to make the daily calculations may be
delegated by the Trustees to any Investment Adviser, the Custodian, the
Transfer Agent or such other person as the Trustees by resolution may
determine. The Trustees may suspend the daily determination of net asset value
to the extent permitted by the 1940 Act.
Section 8.2. Distributions to Shareholders. The Trustees shall from
time to time distribute ratably among the Shareholders of the Trust or of any
Series such proportion of the net income, earnings, profits, gains, surplus
(including paid-in surplus), capital, or assets of the Trust or of such Series
held by the Trustees as they may deem proper. Such distribution may be made in
cash or property (including without limitation any type of obligations of the
Trust or of such Series or any assets thereof, and the Trustees may distribute
ratably among the Shareholders of the Trust or of that Series additional Shares
issuable hereunder in such manner, at such times, and on such terms as the
Trustees may deem proper. Such distributions may be among the Shareholders of
record (determined in accordance with the Prospectus) of the Trust or of such
Series at the time of declaring a distribution or among the Shareholders of
record of the Trust or of such Series at such later date as the Trustees shall
determine. The Trustees may always retain from the net income, earnings,
profits or gains of the Trust or of such Series such amount as they may deem
necessary to pay the debts or expenses of the Trust or of such Series or to
meet obligations of the Trust or of such Series, or as they may deem desirable
to use in the conduct of its affairs or to retain for future requirements or
extensions of the business. The Trustees may adopt and offer to Shareholders of
the Trust or of any Series such dividend reinvestment plans, cash dividend
payout plans or related plans as the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
Section 8.3. Determination of Net Income. The Trustees shall have the
power to determine the net income of any Series of the Trust and from time to
time to distribute such net income ratably among the Shareholders as dividends
in cash or additional Shares of such Series issuable hereunder. The
determination of net income and the resultant declaration of dividends shall be
as set forth in the Prospectus. The Trustees shall have full discretion to
determine whether any cash or property received by any Series of the Trust
shall be treated as income or as principal and whether any item of expense
shall be charged to the income or the principal account, and their
determination made in good faith shall
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be conclusive upon the Shareholders. In the case of stock dividends received,
the Trustees shall have full discretion to determine, in the light of the
particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal.
Section 8.4. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe,
in their absolute discretion, such other bases and times for determining the
per Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to enable the Trust to comply with any provision of the 1940 Act, or any rule
or regulation thereunder, including any rule or regulation adopted pursuant to
Section 22 of the 1940 Act by the Commission or any securities association
registered under the Securities Exchange Act of 1934, or any order of exemption
issued by said Commission, all as in effect now or hereafter amended or
modified. Without limiting the generality of the foregoing, the Trustees may
establish classes or additional Series of Shares in accordance with Section
6.9.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust shall continue without
limitation of time but subject to the provisions of this Article IX.
Section 9.2. Termination of Trust. (a) The Trust or any Series may be
terminated (i) by a Majority Shareholder Vote at any meeting of Shareholders of
the Trust or the appropriate Series thereof, (ii) by an instrument in writing,
without a meeting, signed by a majority of the Trustees and consented to by a
Majority Shareholder Vote of the Trust or the appropriate Series thereof, or by
such other vote as may be established by the Trustees with respect to any class
or Series of Shares, or (iii) with respect to a Series as provided In Section
6.9(h). Upon the termination of the Trust or the Series:
(i) The Trust or the Series shall carry on no business except
for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust or the Series and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust shall have
been wound up, including the power to fulfill or discharge the
contracts of the Trust or the Series, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or any
part of the remaining Trust Property or Trust Property allocated or
belonging to such Series to one or more persons at public or private
sale for consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property or Trust Property allocated or belonging to such Series shall
require Shareholder approval in accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property or Trust Property
allocated or belonging to such Series, in cash or in kind or partly
each, among the Shareholders of the Trust according to their
respective rights.
Section 9.3. Amendment Procedure. (a) This Declaration may be amended
by a Majority Shareholder Vote, at a meeting of Shareholders, or by written
consent without a meeting. The Trustees may also amend this Declaration without
the vote or consent of Shareholders (i) to change the name of the Trust or any
Series or classes of Shares, (ii) to supply any omission, or cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, (iii) if
they deem it necessary to conform this Declaration to the requirements of
applicable federal or state laws or regulations or the requirements of the
Internal Revenue Code, or to eliminate or reduce any federal, state or local
taxes which are or may by the Trust or the Shareholders, but the Trustees shall
not be liable for failing to do so, or (iv)
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for any other purpose which does not adversely affect the rights of any
Shareholder with respect to which the amendment is or purports to be
applicable.
(b) No amendment may be made under this Section 9.3 which would change
any rights with respect to any Shares of the Trust or of any Series of the
Trust by reducing the amount payable thereon upon liquidation of the Trust or
of such Series of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders of
two-thirds of the Shares of the Trust or of such Series outstanding and
entitled to vote, or by such other vote as may be established by the Trustees
with respect to any Series or class of Shares. Nothing contained in this
Declaration shall permit the amendment of this Declaration to impair the
exemption from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the
Secretary or any Assistant Secretary of the Trust, setting forth an amendment
and reciting that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and executed by a majority
of the Trustees or certified by the Secretary or any Assistant Secretary of the
Trust, shall be conclusive evidence of such amendment when lodged among the
records of the Trust. Unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective when lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust or
any Series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property or Trust Property allocated or
belonging to such Series, including its good will, upon such terms and
conditions and for such consideration when and as authorized, at any meeting of
Shareholders called for the purpose, by the affirmative vote of the holders of
not less than two-thirds of the Shares of the Trust or such Series outstanding
and entitled to vote, or by an instrument or instruments in writing without a
meeting, consented to by the holders of not less than two-thirds of such
Shares, or by such other vote as may be established by the Trustees with
respect to any series or class of Shares; provided, however, that, if such
merger, consolidation, sale, lease or exchange is recommended by the Trustees,
a Majority Shareholder Vote shall be sufficient authorization; and any such
merger, consolidation, sale, lease or exchange shall be deemed for all purposes
to have been accomplished under and pursuant to the laws of the Commonwealth of
Massachusetts.
Section 9.5. Incorporation. With approval of a Majority Shareholder
Vote, or by such other vote as may be established by the Trustees with respect
to any Series or class of Shares, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other organization
to take over all of the Trust Property or the Trust Property allocated or
belonging to such Series or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property or the Trust Property allocated or belonging to such Series to
any such corporation, trust, partnership, association or organization in
exchange for the shares or securities thereof or otherwise, and to lend money
to, subscribe for the shares or securities of, and enter into any contracts
with any such corporation, trust, partnership, association or organization in
which the Trust or such Series holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
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ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit or cause the officers
of the Trust to submit to the Shareholders a written financial report of each
Series of the Trust, including financial statements which shall at least
annually be certified by independent public accountants.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Filing. This Declaration and any amendment hereto shall
be filed in the office of the Secretary of the Commonwealth of Massachusetts
and in such other places as may be required under the laws of Massachusetts and
may also be filed or recorded in such other places as the Trustees deem
appropriate. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by a Trustee or by the Secretary or any Assistant
Secretary of the Trust stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the Trustees and
shall, upon filing with the Secretary of the Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
Section 11.2. Resident Agent. The Prentice-Hall Corporation
System, Inc., 84 State Street, Boston, Massachusetts 02109 is the
resident agent of the Trust in the Commonwealth of Massachusetts.
Section 11.3. Governing Law. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the laws thereof and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said State.
Section 11.4. Counterparts. The Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.5. Reliance by Third Patties. Any certificate
executed by an individual who, according to the records of the Trust, appears
to be a Trustee hereunder, or Secretary or Assistant Secretary of the Trust,
certifying to: (a) the number or identity of Trustees or Shareholders, (b) the
due authorization of the execution of any instrument or writing, (c) the form
of any vote passed at a meeting of Trustees or Shareholders, (d) the fact that
the number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their
successors.
Section 11.6. Provisions in Conflict with Law or Regulations. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation to
the extent necessary to eliminate such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
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Section 11.7.
Use of the name "Dean Witter." Dean Witter Reynolds Inc.
("DWR") has consented to the use by the Trust of the identifying name "Dean
Witter," which is a property right of DWR. The Trust will only use the name
"Dean Witter" as a component of its name and for no other purpose, and will not
purport to grant to any third party the right to use the name "Dean Witter" for
any purpose. DWR, or any corporate affiliate of the parent of DWR, may use or
grant to others the right to use the name "Dean Witter", or any combination or
abbreviation thereof, as all or a portion of a corporate or business name or
for any commercial purpose, including a grant of such right to any other
investment company. At the request of DWR or its parent, the Trust will take
such action as may be required to provide its consent to the use by DWR or its
parent, or any corporate affiliate of DWR's parent, or by any person to whom
DWR or its parent or an affiliate of DWR's parent shall have granted the right
to the use, of the name "Dean Witter," or any combination or abbreviation
thereof. Upon the termination of any investment advisory or investment
management agreement into which DWR, or any corporate affiliate of DWR or its
parent and the Trust may enter, the Trust shall, upon request by DWR, or any
corporate affiliate of DWR or its parent, cease to use the name "Dean Witter"
as a component of its name, and shall not use the name, or any combination or
abbreviation thereof, as a part of its name or for any other commercial
purpose, and shall cause its officers, trustees and shareholders to take any
and all actions which DWR or its parent may request to effect the foregoing and
to reconvey to DWR or its parent any and all rights to such name.
Section 11.8. Principal Place of Business. The principal place of
business of the Trust shall be Two World Trade Center, New York, New York
10048, or such other location as the Trustees may designate from time to time.
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IN WITNESS WHEREOF, the undersigned have executed this Declaration of Trust
this 12th day of February, 1993.
/s/ Charles A. Fiumefreddo /s/ David A. Hughey
------------------------------- --------------------------
Charles A. Fiumefreddo, as David A. Hughey, as
Trustee and not individually Trustee and not individually
Two World Trade Center Five World Trade Center
New York, New York 10048 New York, New York 10048
/s/ Sheldon Curtis
-------------------------------------
Sheldon Curtis, as Trustee
and not Individually
Two World Trade Center
New York, New York 10048
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this 12th day of February, 1993, CHARLES A. FIUMEFREDDO and SHELDON
CURTIS, known to me and known to be the individuals described in and who
executed the foregoing instrument, personally appeared before me and they
severally acknowledged the foregoing instrument to be their free act and deed.
/s/ /Ruth Rossi
-----------------------
Notary Public
My commission expires: February 25, 1993
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IN WITNESS WHEREOF, the undersigned has executed this instrument this
day of February, 1993.
---------------------------------------
Joseph F. Mazzella, as Trustee
and not individually
101 Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. Boston, MA
February , 1993
Then personally appeared the above-named ______________________ who
acknowledged the foregoing instrument to be his free act and deed.
before me.
---------------------
Notary Public
My commission expires:
-----------------------------
20
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AMENDMENT
DATED: JUNE 29,1993
TO BE EFFECTIVE: JUNE 29, 1993
TO
DEAN WITTER INTERMEDIATE TERM MUNICIPAL TRUST
DECLARATION OF TRUST
FEBRUARY 25, 1993
<PAGE>
Amendment dated June 29, 1993 to the
Declaration of Trust (the "Declaration")
of Dean Witter Intermediate Term
Municipal Trust (the "Trust") dated
February 25, 1993
WHEREAS, the Trust was established by the Declaration on the date hereinabove
set forth under the laws of the Commonwealth of Massachusetts; and
WHEREAS, the Trustees of the Trust have deemed it advisable to change the
name of the Trust to "Dean Witter Limited Term Municipal Trust," to be
effective on June 22, 1993;
1. Section 1.1 of Article I of the declaration is hereby amended so that
that Section shall read in its entirety as follows:
"Section 1.1 Name. The name of the Trust created hereby is the "Dean
Witter Limited Term Municipal Trust", and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue
or be sued under that name, which name (and the word "Trust" whenever herein
used) shall refer to the Trustees as Trustees, and not as individuals, or
personally, and shall not refer to the officers, agents, employees or
Shareholders of the Trust. Should the Trustees determines that the use of
such name is not advisable, they may use such other name for the Trust as
they deem proper and the Trust may hold its property and conduct its
activities under such other name."
2. Subsection (o) of Section 1.2 of Article I of the Declaration is
hereby amended so that that Section shall read in its entirety as follows:
"Section 1.2 Definitions.....
" (o) "Trust" means the "Dean Witter Limited Term Municipal Trust."
3. The Trustees of the Trust hereby reaffirm the Declaration, as amended,
in all respects.
4. This Amendment may be executed in more than one counterpart, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
<PAGE>
IN WITNESS WHEREOF, the undersigned, a majority of the Trustees of the Trust,
have executed this instrument this 29th day of June, 1993.
/s/ Jack F. Bennett /s/ Paul Kolton
- --------------------------------- -------------------------------------
Jack F. Bennett, as Trustee Paul Kolton, as Trustee and not
and not individually individually
141 Taconic Road 9 Huntington Ridge Road
Greenwich, CT 06831 Stamford, CT 06903
/s/ Charles A. Fiumefreddo
-------------------------------------
Charles A. Fiumefreddo as Trustee and
not individually
Two World Trade
Center New York, NY 10048
/s/ John R. Haire /s/ Michael E. Nugent
- --------------------------------- -------------------------------------
John R. Haire, as Trustee Michael E. Nugent, as Trustee and
and not individually not individually
439 East 51st Street 237 Park Avenue
New York, NY 10022 New York, NY 10017
/s/ Albert T. Sommers
- --------------------------------- -------------------------------------
John E. Jeuck, as Trustee Albert T Sommers, as Trustee and not
and not individually individually
70 East Cedar Street 16 Bonnie Heights Road
Chicago, IL 60611 Manhasset, NY 11030
/s/ Manuel H. Johnson /s/ Edward R. Telling
- --------------------------------- -------------------------------------
Manuel H. Johnson, as Trustee Edward R. Telling, as Trustee and not
and not individually individually
7521 Old Dominion Dr. Sear, Roebuck and Co.
MacLean, VA 22102 Sears Tower, 68th Floor
Chicago, IL 60684
/s/ Edwin J. Garn
- ---------------------------------
Edwin J. Garn, as Trustee
and not individually
2000 Eagle Gate Tower
Salt Lake City, Utah 84111
<PAGE>
STATE OF NEW YORK)
:ss.:
COUNTY OF NEW YORK)
On this 29th day of June, 1993, CHARLES A. FIUMEFREDDO, JACK F. BENNETT,
PAUL KOLTON, JOHN R. HAIRE, ALBERT T. SOMMERS, EDWIN J. GARN, MANUEL H.
JOHNSON, MICHAEL E. NUGENT and EDWARD R. TELLING, known to me to be the
individuals described in and who executed the foregoing instrument,
personally appeared before me and they severally acknowledged the foregoing
instrument to be their free art and deed.
/s/ Marilyn K. Cranney
--------------------------------------------
Notary Public
My commission expires:
Marilyn K. Cranney
Notary Public, State of New York
No. 24-4795538
Qualified in Kings County
Commission Expires:
May 31, 1995
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 7th day of July, 1993 by and between Dean
Witter Limited Term Municipal Trust, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (hereinafter called the
"Fund"), and Dean Witter InterCapital Inc., a Delaware corporation (hereinafter
called the "Investment Manager"):
WHEREAS, The Fund intends to engage in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, and engages in the business of
acting as investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform
services on said terms and conditions:
Now, Therefore, this Agreement
WITNESSETH:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Trustees, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously
manage the assets of the Fund in a manner consistent with the investment
objectives and policies of the Fund; shall determine the securities and
commodities to be purchased, sold or otherwise disposed of by the Fund and the
timing of such purchases, sales and dispositions; and shall take such further
action, including the placing of purchase and sale orders on behalf of the
Fund, as the Investment Manager shall deem necessary or appropriate. The
Investment Manager shall also furnish to or place at the disposal of the Fund
such of the information, evaluations, analyses and opinions formulated or
obtained by the Investment Manager in the discharge of its duties as the Fund
may, from time to time, reasonably request.
2. The Investment Manager shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other persons
as it shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Investment Manager
shall be deemed to include persons employed or otherwise retained by the
Investment Manager to furnish statistical and other factual data, advice
regarding economic factors and trends, information with respect to technical
and scientific developments, and such other information, advice and assistance
as the Investment Manager may desire. The Investment Manager shall, as agent
for the Fund, maintain the Fund's records and books of account (other than
those maintained by the Fund's transfer agent, registrar, custodian and other
agencies). All such books and records so maintained shall be the property of
the Fund and, upon request therefor, the Investment Manager shall surrender to
the Fund such of the books and records so requested.
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3. The Fund will, from time to time, furnish or otherwise make
available to the Investment Manager such financial reports, proxy statements
and other information relating to the business and affairs of the Fund as the
Investment Manager may reasonably require in order to discharge its duties and
obligations hereunder.
4. The Investment Manager shall bear the cost of rendering the
investment management and supervisory services to be performed by it under this
Agreement, and shall, at its own expense, pay the compensation of the officers
and employees, if any, of the Fund, and provide such office space, facilities
and equipment and such clerical help and bookkeeping services as the Fund shall
reasonably require in the conduct of its business. The Investment Manager shall
also bear the cost of telephone service, heat, light, power and other utilities
provided to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including without limitation: the charges and expenses of
any registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities or commodities and other
property, and any stock transfer or dividend agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with portfolio
transactions to which the Fund is a party; all taxes, including securities or
commodities issuance and transfer taxes, and fees payable by the Fund to
federal, state or other governmental agencies; the cost and expense of
engraving or printing certificates representing shares of the Fund; all costs
and expenses in connection with the registration and maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees
and legal fees and disbursements of counsel); the cost and expense of
preparing, printing (including typesetting) and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders' and Trustees' meetings and
of preparing, printing and mailing proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's shares; charges and expenses of legal counsel, including counsel
to the Trustees of the Fund who are not interested persons (as defined in the
Act) of the Fund or the Investment Manager, and of independent accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Trustees) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation
unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the
Investment Manager monthly compensation determined by applying the annual rate
of 0.50% to the daily net assets of the Fund determined as of the close of each
business day. Except as hereinafter set forth, compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. Such calculations shall be made by applying
1/365ths of the annual rates to the net assets of the Fund each day determined
as of the close of business on that day or the last previous business day. If
this Agreement becomes effective subsequent to the first day of a month or
shall terminate before the last day of a month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fees as set forth above.
Subject to the provisions of paragraph 7 hereof, payment of the
Investment Manager's compensation for the preceding month shall be made as
promptly as possible after completion of the computations contemplated by
paragraph 7 hereof.
2
<PAGE>
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by state securities laws or
regulations thereunder, as such limitations may be raised or lowered from time
to time, the Investment Manager shall reduce its management fee in respect to
the Fund to the extent of such excess and, if required, pursuant to any such
laws or regulations, will reimburse the Fund for annual operating expenses in
excess of any expense limitation that may be applicable; provided, however,
there shall be excluded from such expenses the amount of any interest, taxes,
brokerage commissions, distribution fees and extraordinary expenses (including
but not limited to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Fund. Such reduction,
if any, shall be computed and accrued daily, shall be settled on a monthly
basis, and shall be based upon the expense limitation applicable to the Fund as
at the end of the last business day of the month. Should two or more such
expense limitations be applicable as at the end of the last business day of the
month, that expense limitation which results in the largest reduction in the
Investment Manager's fee shall be applicable.
For purposes of this provision, should any applicable expense
limitation be based upon the gross income of the Fund, such gross income shall
include, but not be limited to, interest on debt securities in the Fund's
portfolio accrued to and including the last day of the Fund's fiscal year, and
dividends declared on equity securities in the Fund's portfolio, the record
dates for which fall on or prior to the last day of such fiscal year, but shall
not include gains from the sale of securities.
8. The Investment Manager will use its best efforts in the supervision
and management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund
or any of its investors for any error of judgment or mistake of law or for any
act or omission by the Investment Manager or for any losses sustained by the
Fund or its investors.
9. Nothing contained in this Agreement shall prevent the Investment
Manager or any affiliated person of the Investment Manager from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way bind or restrict the Investment Manager or any such
affiliated person from buying, selling or trading any securities or commodities
for their own accounts or for the account of others for whom they may be
acting. Nothing in this Agreement shall limit or restrict the right of any
Trustee, officer or employee of the Investment Manager to engage in any other
business or to devote his or her time and attention in part to the management
or other aspects of any other business whether of a similar or dissimilar
nature.
10. This Agreement shall remain in effect until April 30, 1995 and from
year to year thereafter provided such continuance is approved at least annually
by the vote of holders of a majority, as defined in the Investment Company Act
(the "Act"), of the outstanding voting securities of the Fund or by the
Trustees of the Fund; provided that in either event such continuance is also
approved annually by the vote of a majority of the Trustees of the Fund who are
not parties to this Agreement or "interested persons" (as defined in the Act)
of any such party, which vote must be cast in person at a meeting called for
the purpose of voting on such approval; provided, however, that (a) the Fund
may, at any time and without the payment of any penalty, terminate this
Agreement upon thirty days' written notice to the Investment Manager, either by
majority vote of the Trustees of the Fund or, by the vote of a majority of the
outstanding voting securities of the Fund; (b) this Agreement shall immediately
terminate in the event of its assignment (to the extent required by the Act and
the rules thereunder) unless such automatic terminations shall be prevented by
an exemptive order of the Securities and Exchange Commission; and (c) the
Investment Manager may terminate this Agreement
3
<PAGE>
without payment of penalty on thirty days' written notice to the Fund. Any
notice under this Agreement shall be given in writing, addressed and delivered,
or mailed post-paid, to the other party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Agreement to the
requirements of applicable federal laws or regulations, but neither the Fund
nor the Investment Manager shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws
of the State of New York and the applicable provisions of the Act. To the
extent the applicable law of the State of New York, or any of the provisions
herein, conflicts with the applicable provisions of the Act, the latter shall
control.
13. The Investment Manager and the Fund each agree that the name "Dean
Witter," which comprises a component of the Fund's name, is a property right of
the Investment Manager. The Fund agrees and consents that (i) it will only use
the name "Dean Witter" as a component of its name and for no other purpose,
(ii) it will not purport to grant to any third party the right to use the name
"Dean Witter" for any purpose, (iii) the Investment Manager or its parent, Dean
Witter Reynolds Inc., or any corporate affiliate of the Investment Manager's
parent, may use or grant to others the right to use the name "Dean Witter," or
any combination or abbreviation thereof, as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right to
any other investment company, (iv) at the request of the Investment Manager or
its parent, the Fund will take such action as may be required to provide its
consent to the use of the name "Dean Witter", or any combination or
abbreviation thereof, by the Investment Manager or its parent or any corporate
affiliate of the Investment Manager's parent, or by any person to whom the
Investment Manager or its parent or any corporate affiliate of the Investment
Manager's parent shall have granted the right to such use, and (v) upon the
termination of any investment advisory agreement into which the Investment
Manager and the Fund may enter, or upon termination of affiliation of the
Investment Manager with its parent, the Fund shall, upon request by the
Investment Manager or its parent, cease to use the name "Dean Witter" as a
component of its name, and shall not use the name, or any combination or
abbreviation thereof, as a part of its name or for any other commercial
purpose, and shall cause its officers, Trustees and shareholders to take any
and all actions which the Investment Manager or its parent may request to
effect the foregoing and to reconvey to the Investment Manager or its parent
any and all rights to such name.
14. The Declaration of Trust establishing Dean Witter Limited Term
Municipal Trust, dated February 25, 1993, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter 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.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
By ....................................
Attest:
...................................
DEAN WITTER INTERCAPITAL INC.
By ....................................
Attest:
...................................
5
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Distribution Agreement
AGREEMENT made as of this 7th day of July, 1993 between DEAN WITTER
LIMITED TERM MUNICIPAL TRUST, an unincorporated business trust organized under
the laws of the Commonwealth of Massachusetts (the "Fund"), and Dean Witter
Distributors Inc., a Delaware corporation (the "Distributor");
WITNESSETH:
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end investment company and it is
in the interest of the Fund to offer its shares for sale continuously; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Fund's
transferable shares of beneficial interest, of $.01 par value ("Shares"), to
commence on the date listed above, in order to promote the growth of the Fund
and facilitate the distribution of its shares.
Now, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Distributor. (a) The Fund hereby appoints
the Distributor as the principal underwriter of the Fund to sell Shares to the
public on the terms set forth in this Agreement and the Fund's Prospectus
(defined below) and the Distributor hereby accepts such appointment and agrees
to act hereunder. The Fund, during the term of this Agreement, shall sell
Shares to the Distributor upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate
of the Distributor upon the terms described herein and in the Fund's prospectus
(the "Prospectus") and statement of additional information included in the
Fund's registration statement (the "Registration Statement") most recently
filed from time to time with the Securities and Exchange Commission (the "SEC")
and effective under the Securities Act of 1933, as amended (the "1933 Act"),
and 1940 Act or as said Prospectus may be otherwise amended or supplemented and
filed with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive principal underwriter and distributor of the Trust, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by the Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; or
(ii) pursuant to reinvestment of dividends or capital gains distributions; or
(iii) pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. Purchase of Shares from the Trust. (a) The Distributor shall
have the right to buy from the Trust the Shares needed, but not more than the
Shares needed (except for clerical errors in transmission), to fill
unconditional orders for Shares placed with the Distributor by investors. The
price which the Distributor shall pay for the Shares so purchased from the Fund
shall be the net asset value, determined as set forth in the Prospectus, used
in determining the public offering price on which such orders were based.
(b) The Shares are to be resold by the Distributor at the net asset
value per share, as set forth in the Prospectus, to investors or to securities
dealers including DWR, who have entered into selected dealer agreements with
the Distributor pursuant to Section 7 ("Selected Dealers").
(c) The Fund shall have the right to suspend the sale of the Shares
at times when redemption is suspended pursuant to the conditions set forth in
Section 4(d) hereof. The Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been sus-
1
<PAGE>
pended, if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of the Fund, makes it impracticable to sell the Shares.
(d) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept
orders for the purchase of Shares. The Distributor will confirm orders upon
their receipt, and the Fund (or its agent) upon receipt of payment therefor and
instructions will deliver share certificates for such Shares or a statement
confirming the issuance of Shares. Payment shall be made to the Fund in New
York Clearing House funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its agent).
With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Trust's transfer agent to receive instructions
directly from the Selected Dealer on behalf of the Distributor as to
registration of Shares in the names of investors and to confirm issuance of the
Shares to such investors. The Distributor is also authorized to instruct the
transfer agent to receive payment directly from the Selected Dealer on behalf
of the Distributor, for prompt transmittal to the Trust's custodian, of the
purchase price of the Shares. In such event the Distributor shall obtain from
the Selected Dealer and maintain a record of such registration instructions and
payments.
SECTION 4. Repurchase or Redemption of Shares. (a) Any of the
outstanding Shares may be tendered for redemption at any time, and the Fund
agrees to redeem the Shares so tendered in accordance with the applicable
provisions set forth in the Prospectus. The price to be paid to redeem the
Shares shall be equal to the net asset value determined as set forth in the
Prospectus. All payments by the Fund hereunder shall be made in the manner set
forth below.
Upon any redemption of Shares the Fund shall pay the total amount of
the redemption price in accordance with applicable provisions of the Prospectus
in New York Clearing House funds, or in portfolio securities in event of
redemptions in kind, on or before the seventh day subsequent to its having
received the notice of redemption in proper form.
(b) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of
the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Fund, to repurchase
Shares held in a shareholder's account with the Fund for which no share
certificate has been issued, upon the telephonic or telegraphic request of the
shareholder, or at the discretion of the Distributor. The Distributor shall
promptly transmit to the transfer agent of the Fund, for redemption, all such
orders for repurchase of shares. Payment for shares repurchased may be made by
the Fund to the Distributor for the account of the shareholder. The Distributor
shall be responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
With respect to Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of their customers, the Distributor is authorized to
instruct the transfer agent of the Trust to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and
to instruct the Trust to transmit payments for such redemption and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer and
maintain a record of such orders. The Distributor is further authorized to
obtain from the Trust; and shall maintain, a record of payments made directly
to the Selected Dealer on behalf of the Distributor.
(d) Redemption of Shares or payment by the Fund may be suspended at
times when the New York Stock Exchange is closed, when trading on said Exchange
is restricted, when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or during any other period when the Securities and Exchange Commission,
by order, so permits.
2
<PAGE>
SECTION 5. Duties of the Fund. (a) The Fund shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of the Shares, including one certified copy, upon request by the
Distributor, of all financial statements prepared by the Fund and examined by
independent accountants. The Fund shall, at the expense of the Distributor,
make available to the Distributor such number of copies of the Prospectus as
the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be home by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund shall, at the expense of the Distributor, furnish,
in reasonable quantities upon request by the Distributor, copies of annual and
interim reports of the Fund.
SECTION 6. Duties of the Distributor. (a) The Distributor shall sell
Shares of the Trust through DWR and may sell Shares through other securities
dealers and shall devote reasonable time and effort to promote sales of the
Shares, but shall not be obligated to sell any specific number of Shares. The
services of the Distributor hereunder are not exclusive and it is understood
that the Distributor may act as principal underwriter for other registered
investment companies and intends to do so in the future. It is also understood
that Selected Dealers, including DWR, may also sell shares for other registered
investment companies.
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the Fund.
(c) The Distributor agrees that it will comply with the terms and
limitations of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
SECTION 7. Selected Dealers Agreements. (a) The Distributor shall have
the right to enter into selected dealers agreements with Selected Dealers for
the sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public
offering price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell
Shares only to such Selected Dealers that are members in good standing of the
NASD.
(c) The Distributor shall adopt and follow procedures, as approved by
the Fund, for the confirmation of sales of Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. Payment of expenses. (a) The Distributor shall bear all
expenses incurred by it in connection with its duties and activities under this
Agreement including the payment of any sales commissions for sales of the
Fund's shares (except such expenses as are specifically undertaken herein by
the Fund). It is understood and agreed that, so long as the Fund's Plan of
Distribution pursuant to Rule 12b-1 under the 1940 Act continues in effect, any
expenses incurred by the Distributor hereunder may be paid by the Distributor
and any of its affiliates, including Dean Witter, Discover & Co. ("DWDC") from
their own resources, which may include payments received from the Fund pursuant
to an Investment Management Agreement between Dean Witter InterCapital, Inc.
and the Fund, pursuant to such Plan of Distribution.
3
<PAGE>
(b) The Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of legal counsel including counsel to the Trustees of
the Fund who are not interested persons (as defined in the 1940 Act) of the
Fund or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.
(c) The Fund shall bear the cost and expenses of qualification of the
Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Fund as a broker or dealer, in such states of the United States
or other jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5(c) hereof and the cost and expenses payable to each such
state for continuing qualification therein until the Fund decides to
discontinue such qualification pursuant to Section 5(c) hereof.
SECTION 9. Indemnification. (a) The Fund shall indemnify and hold
harmless the Distributor and each person, if any, who controls the Distributor
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage
or expense and reasonable counsel fees incurred in connection therewith)
arising by reason of any person acquiring any Shares, which may be based upon
the 1933 Act, or on any other statute or at common law, on the ground that the
Registration Statement or related Prospectus and Statements of Additional
Information, as from time to time amended and supplemented, or the annual or
interim reports to shareholders of the Fund, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, unless
such statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of the
Fund in favor of the Distributor and any such controlling persons to be deemed
to protect the Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Fund in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Fund will be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the defense, of any
suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling persons or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the
Fund against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information fur-
4
<PAGE>
nished to the Fund in writing by or on behalf of the Distributor for use in
connection with the Registration Statement or related Prospectus and Statement
of Additional Information, as from time to time amended, or the annual or
interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless the Fund and the
Fund's transfer agent, individually and in its capacity as the Fund's transfer
agent, from and against any claims, damages and liabilities which arise as a
result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to subsection 4(c) hereof and pay the proceeds to, or as directed by,
the Distributor for the account of each shareholder whose Shares are so
redeemed and (2) register Shares in the names of investors, confirm the
issuance thereof and receive payment therefor pursuant to subsection 3(e).
(iii) In case any action shall be brought against the Fund or any
person to indemnified by this subsection 9(b) in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall
have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
(c) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to herein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Fund on the one
hand and the Distributor on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Fund on the one hand and the Distributor on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Fund on the one hand and the Distributor on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Fund bear to the total compensation
received by the Distributor, in each case as set forth in the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Fund or the Distributor and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Fund and the Distributor agree that it would not be just and
equitable if contribution were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
SECTION 10. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1994, and thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Board of
Trustees of the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund, cast in person or by proxy, and (ii) a majority of
those Trustees who are not parties to this Agreement or interested persons of
any such party and who have no direct or indirect financial interest in this
Agreement or in the operation of the Fund's Rule 12b-1 Plan or in any agreement
related thereto, cast in person at a meeting called for the purpose of voting
upon such approval.
5
<PAGE>
This Agreement may be terminated at any time without the payment of any
penalty, by the Trustees of the Fund, by a majority of the Trustees of the Fund
who are not interested persons of the Fund and who have no direct or indirect
financial interest in this Agreement, or by vote of a majority of the
outstanding voting securities of the Fund, or by the Distributor, on sixty
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person", when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifically approved by (i) the
Trustees of the Fund, or by the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Trustees of the Fund who
are not parties to this Agreement or interested persons of any such party and
who have no direct or indirect financial interest in this Agreement or in any
Agreement related to the Fund's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act, cast in person at a meeting called for the purpose of
voting on such approval.
SECTION 12. Governing Law. This Agreement shall be construed in
accordance with the law of the State of New York and the applicable provisions
of the 1940 Act. To the extent the applicable law of the State of New York, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
SECTION 13. Personal Liability. The Declaration of the Trust
establishing Dean Witter Limited Term Municipal Trust, dated February 25, 1993,
a copy of which, together with all amendments thereto (the "Declaration"), is
on file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name Dean Witter 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.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
DEAN WITTER LIMITED MUNICIPAL TRUST
By:..........................................
DEAN WITTER DISTRIBUTORS INC.
By:..........................................
6
Exhibit 8(a)
CUSTODY AGREEMENT
Agreement made as of this 7th day of July, 1993,
between DEAN WITTER LIMITED TERM MUNICIPAL TRUST, a
Massachusetts business trust organized and existing under the
laws of the Commonwealth of Massachusetts, having its
principal office and place of business at 2 World Trade
Center, New York, New York 10048 (hereinafter called the
"Fund"), and THE BANK OF NEW YORK, a New York corporation
authorized to do a banking business, having its principal of-
fice and place of business at 48 Wall Street, New York, New
York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, shall have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all
Appendices and Certifications described in the Exhibits
delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether
or not such person is an Officer or employee of the Fund, duly
authorized by the Board of Trustees of the Fund to give Oral
Instructions and Written Instructions on behalf of the Fund
and listed in the Certificate annexed hereto as Appendix A or
such other Certificate as may be received by the Custodian
from time to time, provided that each person who is designated
in any such Certificate as an "Officer of DWTC" shall be an
Authorized Person only for purposes of Articles XII and XIII
hereof.
3. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and its
nominee or nominees.
4. "Call Option" shall mean an exchange traded option
with respect to Securities other than Index, Futures
Contracts, and Futures Contract Options entitling the holder,
upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the
specified underlying instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually
received (irrespective of constructive receipt) by the
Custodian and signed on behalf of the Fund by any two Offic-
ers. The term Certificate shall also include instructions by
the Fund to the Custodian communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or
any broker-dealer reasonably believed by the Custodian to be
such a clearing member.
7. "Collateral Account" shall mean a segregated account
so denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of any Put Option guarantee let-
ter or similar document described in paragraph 8 of Article V
herein.
8. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment
of the exercise price, as specified therein, to purchase from
the writer thereof the specified underlying instruments, cur-
rency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its
nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identi-
fied in a certified copy of a resolution of the Fund's Board
of Trustees specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm
commitment to buy or sell financial instruments on a U.S. com-
modities exchange or board of trade at a specified future time
at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures
Contract and/or Index Futures Contracts.
- 2 -
12. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
13. "Investment Company Act of 1940" shall mean the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
14. "Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
index at the close of the last business day of the contract
and the price at which the futures contract is originally
struck.
15. "Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference
between the exercise price and the value of the index on the
date of exercise.
16. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant, or
a Clearing Member, or in the name of the Fund for the benefit
of a broker, dealer, futures commission merchant, or Clearing
Member, or otherwise, in accordance with an agreement between
the Fund, the Custodian and a broker, dealer, futures commis-
sion merchant or a Clearing Member (a "Margin Account Agree-
ment"), separate and distinct from the custody account, in
which certain Securities and/or money of the Fund shall be
deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System or a
Depository shall be deemed to have been deposited in, or
withdrawn from, a Margin Account upon the Custodian's effect-
ing an appropriate entry in its books and records.
17. "Money Market Security" shall mean all instruments
and obligations commonly known as a money market instruments,
where the purchase and sale of such securities normally
requires settlement in federal funds on the same day as such
purchase or sale, including, without limitation, certain
Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and/or principal by the government
of the United States or agencies or instrumentalities thereof,
any tax, bond or revenue anticipation note issued by any state
or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase
agreements with respect to Securities and bank time deposits.
18. "O.C.C." shall mean the Options Clearing Corpora-
tion, a clearing agency registered under Section 17A of the
- 3 -
Securities Exchange Act of 1934, its successor or successors,
and its nominee or nominees.
19. "Officers" shall mean the President, any Vice
President, the Secretary, the Clerk, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Clerk, any
Assistant Treasurer, and any other person or persons, whether
or not any such other person is an officer or employee of the
Fund, but in each case only if duly authorized by the Board of
Trustees of the Fund to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund and listed in
the Certificate annexed hereto as Appendix B or such other
Certificate as may be received by the Custodian from time to
time; provided that each person who is designated in any such
Certificate as holding the position of "Officer of DWTC" shall
be an Officer only for purposes of Articles XII and XIII
hereof.
20. "Option" shall mean a Call Option, Covered Call Op-
tion, Index Option and/or a Put Option.
21. "Oral Instructions" shall mean verbal instructions
actually received (irrespective of constructive receipt) by
the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized
Person.
22. "Put Option" shall mean an exchange traded option
with respect to instruments, currency, or Securities other
than Index Options, Futures Contracts, and Futures Contract
Options entitling the holder, upon timely exercise and tender
of the specified underlying instruments, currency, or Securi-
ties, to sell such instruments, currency, or Securities to the
writer thereof for the exercise price.
23. "Reverse Repurchase Agreement" shall mean an agree-
ment pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date
and price.
24. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Op-
tions, Index Options, Index Futures Contracts, Index Futures
Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, over
the counter options on Securities, common stocks and other
securities having characteristics similar to common stocks,
preferred stocks, debt obligations issued by state or
municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds,
industrial bonds and industrial development bonds), bonds,
debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe
- 4 -
for the same, or evidencing or representing any other rights
or interest therein, or rights to any property or assets.
25. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the
terms of this Agreement as a segregated account, by recorda-
tion or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from
time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may
from time to time determine.
26. "Series" shall mean the various portfolios, if any,
of the Fund as described from time to time in the current and
effective prospectus for the Fund, except that if the Fund
does not have more than one portfolio, "Series" shall mean the
Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only
one portfolio.
27. "Shares" shall mean the shares of beneficial inter-
est of the Fund and its Series.
28. "Terminal Link" shall mean an electronic data
transmission link between the Fund and the Custodian requiring
in connection with each use of the Terminal Link the use of an
authorization code provided by the Custodian and at least two
access codes established by the Fund, provided, that the Fund
shall have delivered to the Custodian a Certificate
substantially in the form of Appendix C.
29. "Transfer Agent" shall mean Dean Witter Trust
Company, a New Jersey limited purpose trust company, its suc-
cessors and assigns.
30. "Transfer Agent Account" shall mean any account in
the name of the Transfer Agent maintained with The Bank of New
York pursuant to a Cash Management and Related Services Agree-
ment between The Bank of New York and the Transfer Agent.
31. "Written Instructions" shall mean written communica-
tions actually received (irrespective of constructive receipt)
by the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized
Person by telex or any other such system whereby the receiver
of such communications is able to verify by codes or otherwise
with a reasonable degree of certainty the identity of the
sender of such communication.
- 5 -
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of the Securities and moneys at any
time owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to
be delivered to the Custodian all Securities and all moneys
owned by it, at any time during the period of this Agreement,
and shall specify with respect to such Securities and money
the Series to which the same are specifically allocated, and
the Custodian shall not be responsible for any Securities or
money not so delivered. The Custodian shall physically
segregate, keep and maintain the Securities of the Series
separate and apart from each other Series and from other as-
sets held by the Custodian. Except as otherwise expressly
provided in this Agreement, the Custodian will not be
responsible for any Securities and moneys not actually
received by it, unless the Custodian has been negligent or has
engaged in willful misconduct with respect thereto. The
Custodian will be entitled to reverse any credits of money
made on the Fund's behalf where such credits have been previ-
ously made and moneys are not finally collected, unless the
Custodian has been negligent or has engaged in willful
misconduct with respect thereto. The Fund shall deliver to the
Custodian a certified resolution of the Board of Trustees of
the Fund, substantially in the form of Exhibit A hereto, ap-
proving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry
System all Securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated and
to utilize the Book-Entry System to the extent possible in
connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities and deliveries and
returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in any
Depository, the Fund shall deliver to the Custodian a certi-
fied resolution of the Board of Trustees of the Fund,
substantially in the form of Exhibit B hereto, approving,
- 6 -
authorizing and instructing the Custodian on a continuous and
ongoing basis until instructed to the contrary by a
Certificate to deposit in such Depository all Securities
specifically allocated to such Series eligible for deposit
therein, and to utilize such Depository to the extent possible
with respect to such Securities in connection with its
performance hereunder, including, without limitation, in con-
nection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral. Securities and moneys deposited in either the
Book-Entry System or a Depository will be represented in ac-
counts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which
the Custodian acts in a fiduciary or representative capacity
and will be specifically allocated on the Custodian's books to
the separate account for the applicable Series. Prior to the
Custodian's accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and transactions in
Options for a Series as provided in this Agreement, the
Custodian shall have received a certified resolution of the
Fund's Board of Trustees, substantially in the form of Exhibit
C hereto, approving, authorizing and instructing the Custodian
on a continuous and on-going basis, until instructed to the
contrary by a Certificate, to accept, utilize and act in ac-
cordance with such confirmations as provided in this Agreement
with respect to such Series. All securities are to be held or
disposed of by the Custodian for, and subject at all times to
the instructions of, the Fund pursuant to the terms of this
Agreement. The Custodian shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement,
and shall have the sole power to release and deliver Securi-
ties held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all moneys received by it for
the account of the Fund with respect to such Series. Such
moneys will be held in such manner and account as the Fund and
the Custodian shall agree upon in writing from time to time.
Money credited to a separate account for a Series shall be
subject only to drafts, orders, or charges of the Custodian
pursuant to this Agreement and shall be disbursed by the
Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Resolutions of the Fund's Board of
Trustees certified by an Officer and by the Secretary or As-
sistant Secretary of the Fund setting forth the name and ad-
dress of the person to whom the payment is to be made, the
Series account from which payment is to be made, the purpose
for which payment is to be made, and declaring such purpose to
be a proper corporate purpose; provided, however, that amounts
- 7 -
representing dividends, distributions, or redemptions proceeds
with respect to Shares shall be paid only to the Transfer
Agent Account;
(c) In payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to
such Series and authorized by this Agreement; or
(d) Pursuant to Certificates to pay interest,
taxes, management fees or operating expenses (including,
without limitation thereto, Board of Trustees' fees and
expenses, and fees for legal accounting and auditing
services), which Certificates set forth the name and address
of the person to whom payment is to be made, state the purpose
of such payment and designate the Series for whose account the
payment is to be made.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a
summary, on a per Series basis, of all transfers to or from
the account of the Fund for a Series, either hereunder or with
any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are
transferred to the account of the Fund for a Series but held
in a Depository, the Custodian shall upon such transfer also
by book-entry or otherwise identify such Securities as
belonging to such Series in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or
shown on the Custodian's account on the books of the
Book-Entry System or the Depository. At least monthly and
from time to time, the Custodian shall furnish the Fund with a
detailed statement, on a per Series basis, of the Securities
and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the
Custodian hereunder, which are issued or issuable only in
bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that
form; all other Securities held hereunder may be registered in
the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry
System or a Depository or their successor or successors, or
their nominee or nominees. The Fund agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in
the name of its registered nominee or in the name of the
Book-Entry System or a Depository any Securities which it may
hold hereunder and which may from time to time be registered
in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not
held in the Book-Entry System or in a Depository in a separate
account in the name of such Series physically segregated at
all times from those of any other person or persons.
- 8 -
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate,
the Custodian by itself, or through the use of the Book-Entry
System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with
preceding paragraph 4:
(a) Promptly collect all income and dividends due
or payable;
(b) Promptly give notice to the Fund and promptly
present for payment and collect the amount of money or other
consideration payable upon such Securities which are called,
but only if either (i) the Custodian receives a written notice
of such call, or (ii) notice of such call appears in one or
more of the publications listed in Appendix D annexed hereto,
which may be amended at any time by the Custodian without the
prior consent of the Fund, provided the Custodian gives prior
notice of such amendment to the Fund;
(c) Promptly present for payment and collect for
the Fund's account the amount payable upon all Securities
which mature;
(d) Promptly surrender Securities in temporary form
in exchange for definitive Securities;
(e) Promptly execute, as custodian, any necessary
declarations or certificates of ownership under the Federal
Income Tax Laws or the laws or regulations of any other taxing
authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System
or the Depository with respect to Securities therein
deposited, for the account of a Series, all rights and similar
securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, prox-
ies, proxy soliciting materials, consents and other written
information (including, without limitation, notices of tender
offers and exchange offers, pendency of calls, maturities of
Securities and expiration of rights) relating to Securities
held pursuant to this Agreement which are actually received by
the Custodian, such proxies and other similar materials to be
executed by the registered holder (if Securities are
registered otherwise than in the name of the Fund), but
without indicating the manner in which proxies or consents are
to be voted.
- 9 -
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry
System or the Depository, shall:
(a) Promptly execute and deliver to such persons as
may be designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby the author-
ity of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder
for the Series specified in such Certificate in exchange for
other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the
exercise of any right, warrant or conversion privilege and
receive and hold hereunder specifically allocated to such
Series any cash or other Securities received in exchange;
(c) Promptly deliver any Securities held hereunder
for the Series specified in such Certificate to any protective
committee, reorganization committee or other person in connec-
tion with the reorganization, refinancing, merger, consolida-
tion, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such
Series in exchange therefor such certificates of deposit,
interim receipts or other instruments or documents as may be
issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the
amount payable upon Securities which may be called as
specified in the Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain posses-
sion of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until
after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments
or certificates are available. The Fund shall deliver to the
Custodian such a Certificate no later than the business day
preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall
comply with Section 17(f) of the Investment Company Act of
1940 in connection with the purchase, sale, settlement, clos-
ing out or writing of Futures Contracts, Options, or Futures
Contract Options by making payments or deliveries specified in
Certificates in connection with any such purchase, sale,
writing, settlement or closing out upon its receipt from a
broker, dealer, or futures commission merchant of a statement
or confirmation reasonably believed by the Custodian to be in
the form customarily used by brokers, dealers, or future
- 10 -
commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be,
confirming that such Security is held by such broker, dealer
or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the
Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from
the Margin Account and payments with respect to Securities to
which a Margin Account relates, shall be made in accordance
with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision
in this Agreement to the contrary, make payment for any
Futures Contract, Option, or Futures Contract Option for which
such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or
such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such
certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or
certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of
Securities by the Fund, other than a purchase of an Option, a
Futures Contract, or a Futures Contract Option, the Fund shall
deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate, Oral Instructions or Writ-
ten Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the
title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d)
the date of purchase and settlement; (e) the purchase price
per unit; (f) the total amount payable upon such purchase; (g)
the name of the person from whom or the broker through whom
the purchase was made, and the name of the clearing broker, if
any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of such Securities
purchased by or for the Fund, pay to the broker specified in
- 11 -
the Certificate out of the moneys held for the account of such
Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set
forth in such Certificate, Oral Instructions or Written
Instructions.
2. Promptly after each execution of a sale of Securi-
ties by the Fund, other than a sale of any Option, Futures
Contract, Futures Contract Option, or any Reverse Repurchase
Agreement, the Fund shall deliver such to the Custodian (i)
with respect to each sale of Securities which are not Money
Market Securities, a Certificate, and (ii) with respect to
each sale of Money Market Securities, a Certificate, Oral
Instructions or Written Instructions, specifying with respect
to each such sale: (a) the Series to which such Securities
were specifically allocated; (b) the name of the issuer and
the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest, if any; (d) the
date of sale and settlement; (e) the sale price per unit; (f)
the total amount payable to the Fund upon such sale; (g) the
name of the broker through whom or the person to whom the sale
was made, and the name of the clearing broker, if any; and (h)
the name of the broker to whom the Securities are to be
delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series
to the broker in accordance with generally accepted street
practices and as specified in the Certificate upon receipt of
the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set
forth in such Certificate, Oral Instructions or Written
Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any
Option by the Fund other than a closing purchase transaction
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to each Option purchased: (a) the Series to
which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or
Security underlying such Option and the number of Options, or
the name of the in the case of an Index Option, the index to
which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the total amount
payable by the Fund in connection with such purchase; and (h)
the name of the Clearing Member through whom such Option was
purchased. The Custodian shall pay, upon receipt of a Clear-
ing Member's statement confirming the purchase of such Option
held by such Clearing Member for the account of the Custodian
(or any duly appointed and registered nominee of the
- 12 -
Custodian) as custodian for the Fund, out of moneys held for
the account of the Series to which such Option is to be
specifically allocated, the total amount payable upon such
purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount pay-
able as set forth in such Certificate.
2. Promptly after the execution of a sale of any Option
purchased by the Fund, other than a closing sale transaction,
pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to each such
sale: (a) the Series to which such Option was specifically
allocated; (b) the type of Option (put or call); (c) the
instrument, currency, or Security underlying such Option and
the number of Options, or the name of the issuer and the title
and number of shares subject to such Option or, in the case of
a Index Option, the index to which such Option relates and the
number of Index Options sold; (d) the date of sale; (e) the
sale price; (f) the date of settlement; (g) the total amount
payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian
shall consent to the delivery of the Option sold by the Clear-
ing Member which previously supplied the confirmation
described in preceding paragraph 1 of this Article with
respect to such Option against payment to the Custodian of the
total amount payable to the Fund, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Call Option: (a) the Series to which
such Call Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the
Call Option; (c) the expiration date; (d) the date of exercise
and settlement; (e) the exercise price per share; (f) the
total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call
Option was exercised. The Custodian shall, upon receipt of
the Securities underlying the Call Option which was exercised,
pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total
amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the
total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Put Option: (a) the Series to which
such Put Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the
Put Option; (c) the expiration date; (d) the date of exercise
- 13 -
and settlement; (e) the exercise price per share; (f) the
total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Op-
tion was exercised. The Custodian shall, upon receipt of the
amount payable upon the exercise of the Put Option, deliver or
direct a Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the
amount payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Index
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Index Option: (a) the Series to which
such Index Option was specifically allocated; (b) the type of
Index Option (put or call); (c) the number of Options being
exercised; (d) the index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the total amount
to be received by the Fund in connection with such exercise;
and (h) the Clearing Member from whom such payment is to be
received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
Series for which such Covered Call Option was written; (b) the
name of the issuer and the title and number of shares for
which the Covered Call Option was written and which underlie
the same; (c) the expiration date; (d) the exercise price; (e)
the premium to be received by the Fund; (f) the date such
Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received.
The Custodian shall deliver or cause to be delivered, in
exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs
prevailing among Clearing Members dealing in Covered Call Op-
tions and shall impose, or direct a Depository to impose, upon
the underlying Securities specified in the Certificate
specifically allocated to such Series such restrictions as may
be required by such receipts. Notwithstanding the foregoing,
the Custodian has the right, upon prior written notification
to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct
the Depository to deliver, the Securities subject to such
Covered Call Option and specifying: (a) the Series for which
such Covered Call Option was written; (b) the name of the is-
suer and the title and number of shares subject to the Covered
Call Option; (c) the Clearing Member to whom the underlying
- 14 -
Securities are to be delivered; and (d) the total amount pay-
able to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6
of this Article, the Custodian shall deliver, or direct a
Depository to deliver, the underlying Securities as specified
in the Certificate against payment of the amount to be
received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing with respect to such Put Option: (a) the Series for which
such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Put Option is written; (g) the name of
the Clearing Member through whom the premium is to be received
and to whom a Put Option guarantee letter is to be delivered;
(h) the amount of cash, and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; and
(i) the amount of cash and/or the amount and kind of Securi-
ties specifically allocated to such Series to be deposited
into the Collateral Account for such Series. The Custodian
shall, after making the deposits into the Collateral Account
specified in the Certificate, issue a Put Option guarantee
letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member
specified in the Certificate against receipt of the premium
specified in said Certificate. Notwithstanding the foregoing,
the Custodian shall be under no obligation to issue any Put
Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject
to the Put Option; (c) the Clearing Member from whom the
underlying Securities are to be received; (d) the total amount
payable by the Fund upon such delivery; (e) the amount of cash
and/or the amount and kind of Securities specifically al-
located to such Series to be withdrawn from the Collateral
Account for such Series and (f) the amount of cash and/or the
amount and kind of Securities, specifically allocated to such
Series, if any, to be withdrawn from the Senior Security Ac-
count. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian
in connection with such Put Option, the Custodian shall pay
out of the moneys held for the account of the Series to which
such Put Option was specifically allocated the total amount
payable to the Clearing Member specified in the Certificate as
set forth in such Certificate, against delivery of such
- 15 -
Securities, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes an Index Option, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing with respect to such Index Option: (a) the Series for
which such Index Option was written; (b) whether such Index
Option is a put or a call; (c) the number of options written;
(d) the index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through
whom such Option was written; (h) the premium to be received
by the Fund; (i) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series
to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be
deposited in a Margin Account, and the name in which such ac-
count is to be or has been established. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such
receipts, if any, which the Custodian has specifically agreed
to issue, which are in accordance with the customs prevailing
among Clearing Members in Index Options and make the deposits
into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the
Certificate.
11. Whenever an Index Option written by the Fund and
described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Index Option: (a)
the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option
being exercised; (c) the Clearing Member through whom such
Index Option is being exercised; (d) the total amount payable
upon such exercise, and whether such amount is to be paid by
or to the Fund; (e) the amount of cash and/or amount and kind
of Securities, if any, to be withdrawn from the Margin
Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from
the Collateral Account for such Series. Upon the return
and/or cancellation of the receipt, if any, delivered pursuant
to the preceding paragraph of this Article, the Custodian
shall pay out of the moneys held for the account of the Series
to which such Stock Index Option was specifically allocated to
the Clearing Member specified in the Certificate the total
amount payable, if any, as specified therein.
- 16 -
12. Promptly after the execution of a purchase or sale
by the Fund of any Option identical to a previously written
Option described in paragraphs, 6, 8 or 10 of this Article in
a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall
promptly deliver to the Custodian a Certificate specifying
with respect to the Option being purchased: (a) that the
transaction is a Closing Purchase Transaction or a Closing
Sale Transaction; (b) the Series for which the Option was
written; (c) the instrument, currency, or Security subject to
the Option, or, in the case of an Index Option, the index to
which such Option relates and the number of Options held; (d)
the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g)
the type of Option (put or call); (h) the date of such
purchase or sale; (i) the name of the Clearing Member to whom
the premium is to be paid or from whom the amount is to be
received; and (j) the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the
Collateral Account, a specified Margin Account, or the Senior
Security Account for such Series. Upon the Custodian's
payment of the premium or receipt of the amount, as the case
may be, specified in the Certificate and the return and/or
cancellation of any receipt issued pursuant to paragraphs 6, 8
or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction or the
Closing Sale Transaction, the Custodian shall remove, or
direct a Depository to remove, the previously imposed
restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option
purchased or written by the Fund and described in this
Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3
Article III herein, and upon the return and/or cancellation of
any receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, and the Margin Ac-
count and/or the Senior Security Account as may be specified
in a Certificate received in connection with such expiration,
exercise, or consummation.
14. Securities acquired by the Fund through the exercise
of an Option described in this Article shall be subject to
Article IV hereof.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Futures Contract,
- 17 -
(or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is
being entered; (b) the category of Futures Contract (the name
of the underlying index or financial instrument); (c) the
number of identical Futures Contracts entered into; (d) the
delivery or settlement date of the Futures Contract(s); (e)
the date the Futures Contract(s) was (were) entered into and
the maturity date; (f) whether the Fund is buying (going long)
or selling (going short) such Futures Contract(s); (g) the
amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such
Series; (h) the name of the broker, dealer, or futures commis-
sion merchant through whom the Futures Contract was entered
into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian
shall make the deposits, if any, to the Margin Account in ac-
cordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the moneys
specifically allocated to such Series of the fee or commis-
sion, if any, specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash
and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or
futures commission merchant with respect to an outstanding
Futures Contract shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agree-
ment.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission merchant to the
Fund with respect to an outstanding Futures Contract shall be
received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement
is made on such Futures Contract, the Fund shall deliver to
the Custodian prior to the delivery or settlement date a
Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to an Index
Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract,
the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission
merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be
withdrawn from the Senior Security Account for such Series.
The Custodian shall make the payment or delivery specified in
the Certificate, and delete such Futures Contract from the
- 18 -
statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a
Certificate specifying: (a) the items of information required
in a Certificate described in paragraph 1 of this Article, and
(b) the Futures Contract being offset. The Custodian shall
make payment out of the money specifically allocated to such
Series of the fee or commission, if any, specified in the
Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3
of Article III herein, and make such withdrawals from the
Senior Security Account for such Series as may be specified in
such Certificate. The withdrawals, if any, to be made from
the Margin Account shall be made by the Custodian in ac-
cordance with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any
Futures Contract Option by the Fund, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series to which such Option
is specifically allocated; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the amount of
premium to be paid by the Fund upon such purchase; (h) the
name of the broker or futures commission merchant through whom
such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made.
The Custodian shall pay out of the moneys specifically al-
located to such Series the total amount to be paid upon such
purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the execution of a sale of any
Futures Contract Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically
allocated; (b) the type of Future Contract Option (put or
call); (c) the type of Futures Contract and such other
- 19 -
information as may be necessary to identify the Futures
Contract underlying the Futures Contract Option; (d) the date
of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h)
the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the
cancellation of the Futures Contract Option being closed
against payment to the Custodian of the total amount payable
to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the
Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Op-
tion was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d)
the date of exercise; (e) the name of the broker or futures
commission merchant through whom the Futures Contract Option
is exercised; (f) the net total amount, if any, payable by the
Fund; (g) the amount, if any, to be received by the Fund; and
(h) the amount of cash and/or the amount and kind of Securi-
ties to be deposited in the Senior Security Account for such
Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments
of money, if any, and the deposits of Securities, if any, into
the Senior Security Account as specified in the Certificate.
The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a)
the Series for which such Futures Contract Option was written;
(b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the expiration date; (e) the
exercise price; (f) the premium to be received by the Fund;
(g) the name of the broker or futures commission merchant
through whom the premium is to be received; and (h) the amount
of cash and/or the amount and kind of Securities, if any, to
be deposited in the Senior Security Account for such Series.
The Custodian shall, upon receipt of the premium specified in
the Certificate, make out of the moneys and Securities
specifically allocated to such Series the deposits into the
Senior Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
- 20 -
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the name of the broker or futures
commission merchant through whom such Futures Contract Option
was exercised; (e) the net total amount, if any, payable to
the Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited
in the Senior Security Account for such Series. The Custodian
shall, upon its receipt of the net total amount payable to the
Fund, if any, specified in such Certificate make the payments,
if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits, if any,
to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying:
(a) the Series to which such Option was specifically al-
located; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or futures commis-
sion merchant through whom such Futures Contract Option is
exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount and
kind of Securities and/or cash to be withdrawn from or
deposited in, the Senior Security Account for such Series, if
any. The Custodian shall, upon its receipt of the net total
amount payable to the Fund, if any, specified in the
Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any,
and the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
7. Promptly after the execution by the Fund of a
purchase of any Futures Contract Option identical to a previ-
ously written Futures Contract Option described in this
Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the
Custodian a Certificate specifying with respect to the Futures
Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is
a closing transaction; (c) the type of Future Contract and
such other information as may be necessary to identify the
- 21 -
Futures Contract underlying the Futures Option Contract; (d)
the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h)
the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for
such Series. The Custodian shall effect the withdrawals from
the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Op-
tion written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdraw-
als from and/or in the case of an exercise such deposits into
the Senior Security Account as may be specified in a
Certificate. The deposits to and/or withdrawals from the
Margin Account, if any, shall be made by the Custodian in ac-
cordance with the terms and conditions of the Margin Account
Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this
Article shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of
Securities by any Series of the Fund, the Fund shall deliver
to the Custodian a Certificate specifying: (a) the Series for
which such short sale was made; (b) the name of the issuer and
the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest or dividends, if
any; (d) the dates of the sale and settlement; (e) the sale
price per unit; (f) the total amount credited to the Fund upon
such sale, if any, (g) the amount of cash and/or the amount
and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has
been or is to be established; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in
a Senior Security Account, and (i) the name of the broker
through whom such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon
such sale, if any, as specified in the Certificate is held by
- 22 -
such broker for the account of the Custodian (or any nominee
of the Custodian) as custodian of the Fund, issue a receipt or
make the deposits into the Margin Account and the Senior
Security Account specified in the Certificate.
2. Promptly after the execution of a purchase to
close-out any short sale of Securities, the Fund shall
promptly deliver to the Custodian a Certificate specifying
with respect to each such closing out: (a) the Series for
which such transaction is being made; (b) the name of the is-
suer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if
any, required to effect such closing-out to be delivered to
the broker; (d) the dates of closing-out and settlement; (e)
the purchase price per unit; (f) the net total amount payable
to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of
cash and the amount and kind of Securities to be withdrawn, if
any, from the Margin Account; (i) the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account; and (j) the name of the
broker through whom the Fund is effecting such closing-out.
The Custodian shall, upon receipt of the net total amount pay-
able to the Fund upon such closing-out, and the return and/ or
cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of
the moneys held for the account of the Fund to the broker the
net total amount payable to the broker, and make the withdraw-
als from the Margin Account and the Senior Security Account,
as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement
is a Money Market Security, a Certificate, Oral Instructions,
or Written Instructions specifying: (a) the Series for which
the Reverse Repurchase Agreement is entered; (b) the total
amount payable to the Fund in connection with such Reverse
Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with
whom the Reverse Repurchase Agreement is entered; (d) the
amount and kind of Securities to be delivered by the Fund to
such broker, dealer, or financial institution; (e) the date of
such Reverse Repurchase Agreement; and (f) the amount of cash
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of
- 23 -
the total amount payable to the Fund specified in the
Certificate, Oral Instructions, or Written Instructions make
the delivery to the broker, dealer, or financial institution
and the deposits, if any, to the Senior Security Account,
specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agree-
ment described in preceding paragraph 1 of this Article, the
Fund shall promptly deliver a Certificate or, in the event
such Reverse Repurchase Agreement is a Money Market Security,
a Certificate, Oral Instructions, or Written Instructions to
the Custodian specifying: (a) the Reverse Repurchase Agreement
being terminated and the Series for which same was entered;
(b) the total amount payable by the Fund in connection with
such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series
in connection with such termination; (d) the date of termina-
tion; (e) the name of the broker, dealer, or financial
institution with whom the Reverse Repurchase Agreement is to
be terminated; and (f) the amount of cash and/or the amount
and kind of Securities to be withdrawn from the Senior Securi-
ties Account for such Series. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by
the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make the payment to the broker, dealer,
or financial institution and the withdrawals, if any, from the
Senior Security Account, specified in such Certificate, Oral
Instructions, or Written Instructions.
3. The Certificates, Oral Instructions, or Written
Instructions described in paragraphs 1 and 2 of this Article
may with respect to any particular Reverse Repurchase Agree-
ment be combined and delivered to the Custodian at the time of
entering into such Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian
hereunder, the Fund shall deliver or cause to be delivered to
the Custodian a Certificate specifying with respect to each
such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities, (c) the number of shares or the
principal amount loaned, (d) the date of loan and delivery,
(e) the total amount to be delivered to the Custodian against
the loan of the Securities, including the amount of cash col-
lateral and the premium, if any, separately identified, and
(f) the name of the broker, dealer, or financial institution
- 24 -
to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the
total amount designated in the Certificate as to be delivered
against the loan of Securities. The Custodian may accept pay-
ment in connection with a delivery otherwise than through the
Book-Entry System or a Depository only in the form of a certi-
fied or bank cashier's check payable to the order of the Fund
or the Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with
respect to each such loan termination and return of Securi-
ties: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities to be returned, (c) the number of
shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the
Custodian (including the cash collateral for such Securities
minus any offsetting credits as described in said
Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned
from the broker, dealer, or financial institution to which
such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the
total amount payable upon such return of Securities as set
forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Ac-
count and from time to time make such deposits thereto, or
withdrawals therefrom, as specified in a Certificate. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior
Security Account for such Series. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and the number of shares or the principal
amount of any particular Securities to be deposited by the
Custodian into, or withdrawn from, a Senior Securities Ac-
count, the Custodian shall be under no obligation to make any
such deposit or withdrawal and shall promptly notify the Fund
that no such deposit has been made.
- 25 -
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose
benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any
Margin Account shall be dealt with in accordance with the
terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by
the Custodian in any Collateral Account described herein. In
accordance with applicable law the Custodian may enforce its
lien and realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put Option
guarantee letter or similar document or any receipt issued
hereunder by the Custodian. In the event the Custodian should
realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such deficiency
shall be a debt owed the Custodian by the Fund within the
scope of Article XIV herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close
of business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker,
dealer, or futures commission merchant specified in the name
of a Margin Account a copy of the statement furnished the Fund
with respect to such Margin Account.
6. The Custodian shall establish a Collateral Account
and from time to time shall make such deposits thereto as may
be specified in a Certificate. Promptly after the close of
business on each business day in which cash and/or Securities
are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect
to such Collateral Account specifying the amount of cash
and/or the amount and kind of Securities held therein. No
later than the close of business next succeeding the delivery
to the Fund of such statement, the Fund shall furnish to the
Custodian a Certificate or Written Instructions specifying the
then market value of the Securities described in such state-
ment. In the event such then market value is indicated to be
less than the Custodian's obligation with respect to any
outstanding Put Option guarantee letter or similar document,
- 26 -
the Fund shall promptly specify in a Certificate the ad-
ditional cash and/or Securities to be deposited in such Col-
lateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of
the resolution of the Board of Trustees of the Fund, certified
by the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, either (i) setting forth with respect to the
Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall
be determined, the amount payable per Share of such Series to
the shareholders of record as of that date and the total
amount payable to the Dividend Agent and any sub-dividend
agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein
and the declaration of dividends and distributions thereon
the Custodian to rely on Oral Instructions, Written Instruc-
tions, or a Certificate setting forth the date of the declara-
tion of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of
such Series to the shareholders of record as of that date and
the total amount payable to the Dividend Agent on the payment
date.
2. Upon the payment date specified in such resolution,
Oral Instructions, Written Instructions, or Certificate, as
the case may be, the Custodian shall pay to the Transfer Agent
Account out of the moneys held for the account of the Series
specified therein the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the
Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver or cause to be delivered, to the Custodian a
Certificate duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
- 27 -
(b) The amount of money to be received by the
Custodian for the sale of such Shares and specifically al-
located to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate account
in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series the
Custodian shall pay, out of the money held for the account of
such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish, or cause to be furnished, to the
Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in
good form for redemption, the Custodian shall make payment to
the Transfer Agent Account out of the moneys held in the
separate account in the name of the Series the total amount
specified in the Certificate issued pursuant to the foregoing
paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion
advance funds on behalf of any Series which results in an
overdraft because the moneys held by the Custodian in the
separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a
Certificate, Oral Instructions, or Written Instructions or
which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other
reason indebted to the Custodian with respect to a Series,
(except a borrowing for investment or for temporary or
emergency purposes using Securities as collateral pursuant to
a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness
shall be deemed to be a loan made by the Custodian to the Fund
- 28 -
for such Series payable on demand and shall bear interest from
the date incurred at a rate per annum (based on a 360-day year
for the actual number of days involved) equal to the Federal
Funds Rate plus 1/2%, such rate to be adjusted on the effec-
tive date of any change in such Federal Funds Rate but in no
event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien
and security interest in the aggregate amount of such
overdrafts and indebtedness as may from time to time exist in
and to any property specifically allocated to such Series at
any time held by it for the benefit of such Series or in which
the Fund may have an interest which is then in the Custodian's
possession or control or in possession or control of any third
party acting in the Custodian's behalf. The Fund authorizes
the Custodian, in its sole discretion, at any time to charge
any such overdraft or indebtedness together with interest due
thereon against any money balance of account standing to such
Series' credit on the Custodian's books. In addition, the
Fund hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/
or otherwise borrow from a third party, or which next succeeds
a Business Day on which at the close of business the Fund had
outstanding a Reverse Repurchase Agreement or such a borrow-
ing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify
the Series to which the same relates, and shall not incur any
indebtedness, including pursuant to any Reverse Repurchase
Agreement, not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a
separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for
such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such
borrowing: (a) the Series to which such borrowing relates; (b)
the name of the bank, (c) the amount and terms of the borrow-
ing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other
loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan
becomes due and payable, (f) the total amount payable to the
Fund on the borrowing date, (g) the market value of Securities
to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a
statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such
loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the
- 29 -
borrowing date specified in a Certificate the specified col-
lateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may,
at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory
note or loan agreement. The Custodian shall deliver such
Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described
in this paragraph. The Fund shall cause all Securities
released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the
event that the Fund fails to specify in a Certificate the
Series, the name of the issuer, the title and number of shares
or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, to any such bank,
the Custodian shall not be under any obligation to deliver any
Securities.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the
performance of its duties hereunder, and, except as
hereinafter provided, neither the Custodian nor its nominee
shall be liable for any loss or damage, including counsel
fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agree-
ment, except for any such loss or damage arising out of its
own negligence, bad faith, or willful misconduct or that of
its officers, employees, or agents. The Custodian may, with
respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and
opinion of counsel to the Fund, at the expense of the Fund,
or of its own counsel, at its own expense, and shall be fully
protected with respect to anything done or omitted by it in
good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence or willful
misconduct on the part of the Custodian or any of its
employees or agents.
2. Notwithstanding the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be li-
able for:
- 30 -
(a) The validity (but not the authenticity) of the
issue of any Securities purchased, sold, or written by or for
the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received
therefor, as specified in a Certificate, Oral Instructions, or
Written Instructions;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor, as specified in a Certificate;
(c) The legality of the declaration or payment of
any dividend by the Fund, as specified in a resolution,
Certificate, Oral Instructions, or Written Instructions;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securi-
ties, nor shall the Custodian be under any duty or obligation
to see to it that the cash collateral delivered to it by a
broker, dealer, or financial institution or held by it at any
time as a result of such loan of portfolio Securities of the
Fund is adequate collateral for the Fund against any loss it
might sustain as a result of such loan, except that this sub-
paragraph shall not excuse any liability the Custodian may
have for failing to act in accordance with Article X hereof or
any Certificate, Oral Instructions, or Written Instructions
given in accordance with this Agreement. The Custodian
specifically, but not by way of limitation, shall not be under
any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obliga-
tion to see that any broker, dealer or financial institution
to which portfolio Securities of the Fund are lent pursuant to
Article X of this Agreement makes payment to it of any
dividends or interest which are payable to or for the account
of the Fund during the period of such loan or at the termina-
tion of such loan, provided, however, that the Custodian shall
promptly notify the Fund in the event that such dividends or
interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of
money and/or Securities held in any Margin Account, Senior
Security Account or Collateral Account in connection with
transactions by the Fund, except that this sub-paragraph shall
not excuse any liability the Custodian may have for failing to
establish, maintain, make deposits to or withdrawals from such
accounts in accordance with this Agreement. In addition, the
Custodian shall be under no duty or obligation to see that any
broker, dealer, futures commission merchant or Clearing Member
makes payment to the Fund of any variation margin payment or
- 31 -
similar payment which the Fund may be entitled to receive from
such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from
any broker, dealer, futures commission merchant or Clearing
Member is the amount the Fund is entitled to receive, or to
notify the Fund of the Custodian's receipt or non-receipt of
any such payment.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented
by any check, draft, or other instrument for the payment of
money, received by it on behalf of the Fund until the
Custodian actually receives such money directly or by the
final crediting of the account representing the Fund's inter-
est at the Book-Entry System or the Depository.
4. With respect to Securities held in a Depository,
except as otherwise provided in paragraph 5(b) of Article III
hereof, the Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls,
conversions, exchange offers, tenders, interest rate changes
or similar matters relating to such Securities, unless the
Custodian shall have actually received timely notice from the
Depository in which such Securities are held. In no event
shall the Custodian have any responsibility or liability for
the failure of a Depository to collect, or for the late col-
lection or late crediting by a Depository of any amount pay-
able upon Securities deposited in a Depository which may
mature or be redeemed, retired, called or otherwise become
payable. However, upon receipt of a Certificate from the Fund
of an overdue amount on Securities held in a Depository the
Custodian shall make a claim against the Depository on behalf
of the Fund, except that the Custodian shall not be under any
obligation to appear in, prosecute or defend any action suit
or proceeding in respect to any Securities held by a
Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all
expense and liability be furnished as often as may be
required, or alternatively, the Fund shall be subrogated to
the rights of the Custodian with respect to such claim against
the Depository should it so request in a Certificate. This
paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral
Instructions, or Written Instructions given in accordance with
this Agreement.
5. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount due to
the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
- 32 -
6. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount if the
Securities upon which such amount is payable are in default,
or if payment is refused after the Custodian has timely and
properly, in accordance with this Agreement, made due demand
or presentation, unless and until (i) it shall be directed to
take such action by a Certificate and (ii) it shall be assured
to its satisfaction of reimbursement of its costs and expenses
in connection with any such action, but the Custodian shall
have such a duty if the Securities were not in default on the
payable date and the Custodian failed to timely and properly
make such demand for payment and such failure is the reason
for the non-receipt of payment.
7. The Custodian may appoint one or more banking
institutions as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to,
banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such
terms and conditions as may be approved in a Certificate or
contained in an agreement executed by the Custodian, the Fund
and the appointed institution.
8. The Custodian agrees to indemnify the Fund against
and save the Fund harmless from all liability, claims, losses
and demands whatsoever, including attorney's fees, howsoever
arising or incurred because of the negligence, bad faith or
willful misconduct of any Sub-Custodian of the Securities and
moneys owned by the Fund, provided such Sub-Custodian is a
banking institution located in a foreign country and appointed
by the Custodian pursuant to paragraph 7 of this Article.
9. The Custodian shall not be under any duty or obliga-
tion (a) to ascertain whether any Securities at any time
delivered to, or held by it, for the account of the Fund and
specifically allocated to a Series are such as properly may be
held by the Fund or such Series under the provisions of its
then current prospectus, or (b) to ascertain whether any
transactions by the Fund, whether or not involving the
Custodian, are such transactions as may properly be engaged in
by the Fund.
10. The Custodian shall be entitled to receive and the
Fund agrees to pay to the Custodian all reasonable
out-of-pocket expenses and such compensation as may be agreed
upon from time to time between the Custodian and the Fund.
The Custodian may charge such compensation, and any such
expenses with respect to a Series incurred by the Custodian in
the performance of its duties under this Agreement against any
money specifically allocated to such Series. The Custodian
shall also be entitled to charge against any money held by it
for the account of a Series the amount of any loss, damage,
liability or expense, including counsel fees, for which it
- 33 -
shall be entitled to reimbursement under the provisions of
this Agreement attributable to, or arising out of, its serving
as Custodian for such Series. The expenses for which the
Custodian shall be entitled to reimbursement hereunder shall
include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred
in settling outside of New York City transactions involving
the purchase and sale of Securities of the Fund.
Notwithstanding the foregoing or anything else contained in
this Agreement to the contrary, the Custodian shall, prior to
effecting any charge for compensation, expenses, or any
overdraft or indebtedness or interest thereon, submit an
invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing, Oral
Instructions, or Written Instructions received by the
Custodian and reasonably believed by the Custodian to be
genuine. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming Oral Instructions
or Written Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian,
whether by hand delivery, telecopier or other similar device,
or otherwise, by the close of business of the same day that
such Oral Instructions or Written Instructions are given to
the Custodian. The Fund agrees that the fact that such
confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions thereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no li-
ability to the Fund in acting upon Oral Instructions or Writ-
ten Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably appear
to have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian
and reasonably believed by the Custodian to be given in ac-
cordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing,
the Custodian shall be under no duty to inquire into, and
shall not be liable for, the accuracy of any statements or
representations contained in any such instrument or other
notice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission
merchant or Clearing Member. This paragraph shall not excuse
any failure by the Custodian to have acted in accordance with
any Margin Agreement it has executed or any Certificate, Oral
Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as
described in Appendix E hereto, which are in the possession of
the Custodian shall be the property of the Fund. Such books
- 34 -
and records shall be prepared and maintained by the Custodian
as required by the Investment Company Act of 1940, as amended,
and other applicable securities laws and rules and regula-
tions. The Fund, or the Fund's authorized representatives,
shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the
Custodian its expenses of providing such copies. Upon reason-
able request of the Fund, the Custodian shall provide in hard
copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by
the Custodian on a computer disc, or are similarly maintained,
and the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
14. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, each Depository or O.C.C.,
and with such reports on its own systems of internal account-
ing control as the Fund may reasonably request from time to
time.
15. The Custodian shall furnish upon request annually to
the Fund a letter prepared by the Custodian's accountants with
respect to the Custodian's internal systems and controls in
the form generally provided by the Custodian to other invest-
ment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims,
losses and demands whatsoever, including attorney's fees,
howsoever arising out of, or related to, the Custodian's
performance of its obligations under this Agreement, except
for any such liability, claim, loss and demand arising out of
the Custodian's own negligence, bad faith, or willful
misconduct or that of its officers, employees, or agents.
17. Subject to the foregoing provisions of this Agree-
ment, the Custodian shall deliver and receive Securities, and
receipts with respect to such Securities, and shall make and
receive payments only in accordance with the customs prevail-
ing from time to time among brokers or dealers in such Securi-
ties and, except as may otherwise be provided by this
Agreement or as may be in accordance with such customs, shall
make payment for Securities only against delivery thereof and
deliveries of Securities only against payment therefor.
18. The Custodian shall have no duties or
responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agree-
ment, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
- 35 -
ARTICLE XVI
TERMINATION
1. Except as provided in paragraph 3 of this Article,
this Agreement shall continue until terminated by either the
Custodian giving to the Fund, or the Fund giving to the
Custodian, a notice in writing specifying the date of such
termination, which date shall be not less than 60 days after
the date of the giving of such notice. In the event such
notice or a notice pursuant to paragraph 3 of this Article is
given by the Fund, it shall be accompanied by a copy of a
resolution of the Board of Trustees of the Fund, certified by
an Officer and the Secretary or an Assistant Secretary of the
Fund, electing to terminate this Agreement and designating a
successor custodian or custodians, each of which shall be
eligible to serve as a custodian for the securities of a
management investment company under the Investment Company Act
of 1940. In the event such notice is given by the Custodian,
the Fund shall, on or before the termination date, deliver to
the Custodian a copy of a resolution of the Board of Trustees
of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, designating a
successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company
having not less than $2,000,000 aggregate capital, surplus and
undivided profits. Upon the date set forth in such notice
this Agreement shall terminate, and the Custodian shall upon
receipt of a notice of acceptance by the successor custodian
on that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as
Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall
then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding
paragraph, the Fund shall upon the date specified in the
notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held
in the Book-Entry System which cannot be delivered to the
Fund) and moneys then owned by the Fund be deemed to be its
own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement,
other than the duty with respect to Securities held in the
Book Entry System which cannot be delivered to the Fund to
hold such Securities hereunder in accordance with this Agree-
ment.
3. Notwithstanding the foregoing, the Fund may
terminate this Agreement upon the date specified in a written
- 36 -
notice in the event of the "Bankruptcy" of The Bank of New
York. As used in this sub-paragraph, the term "Bankruptcy"
shall mean The Bank of New York's making a general assignment,
arrangement or composition with or for the benefit of its
creditors, or instituting or having instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or
the entry of a order for relief under any applicable
bankruptcy law or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors'
rights, or if a petition is presented for the winding up or
liquidation of the party or a resolution is passed for its
winding up or liquidation, or it seeks, or becomes subject to,
the appointment of an administrator, receiver, trustee,
custodian or other similar official for it or for all or
substantially all of its assets or its taking any action in
furtherance or, or indicating its consent to approval of, or
acquiescence in, any of the foregoing.
ARTICLE XVII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund
be obligated to have or utilize the Terminal Link, and the
provisions of this Article shall apply if, but only if, the
Fund in its sole and absolute discretion elects to utilize the
Terminal Link to transmit Certificates to and to receive
notices from the Custodian.
2. The parties hereto shall utilize the Terminal Link
only for the purpose of the Fund providing Certificates to the
Custodian and the Custodian providing notices to the Fund and
only after the Fund and the Custodian shall have established
access codes and internal safekeeping procedures to safeguard
and protect the confidentiality and availability of such
access codes. Each use of the Terminal Link by the Fund shall
constitute a representation and warranty that at least two
such access codes have been utilized and that such procedures
have been established.
3. Each party shall obtain and maintain at its own cost
and expense all equipment and services, including, but not
limited to communications services, necessary for it to
utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such
equipment or services, except that the Custodian shall not pay
any communications costs of any line leased by the Fund, even
if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made
available as part of, or through the Terminal and any
proprietary data, software, processes, information and
documentation (other than any such which are or become part of
- 37 -
the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the
exclusive and confidential property of the Custodian. The
Fund shall, and shall cause others to which it discloses the
Information, to keep the Information confidential by using the
same care and discretion it uses with respect to its own
confidential property and trade secrets, and shall neither
make nor permit any disclosure without the express prior writ-
ten consent of the Custodian.
5. Upon termination of this Agreement for any reason,
each Fund shall return to the Custodian any and all copies of
the Information which are in the Fund's possession or under
its control, or which the Fund distributed to third parties.
The provisions of this Article shall not affect the copyright
status of any of the Information which may be copyrighted and
shall apply to all Information whether or not copyrighted.
6. The Custodian reserves the right to modify the
Terminal Link from time to time without notice to the Fund,
except that the Custodian shall give the Fund notice not less
than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund
agrees not to modify or attempt to modify the Terminal Link
without the Bank's prior written consent. The Fund
acknowledges that the Terminal Link is the property of the
Custodian and, accordingly, the Fund agrees that any
modifications to the Terminal Link, whether by the Fund or the
Custodian and whether with or without the Custodian's consent,
shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and sup-
pliers it utilizes or the Fund utilizes in connection with the
Terminal Link makes any warranties or representations, express
or implied, in fact or in law, including but not limited to
warranties of merchantability and fitness for a particular
purpose.
8. Each party will, and will cause its officers and
employees to, treat the user and authorization codes,
passwords and authentication keys applicable to Terminal Link
with extreme care. Each party hereby irrevocably authorizes
the other to act in accordance with and rely on Certificates
and notices received by it through the Terminal Link. Each
party acknowledges that it is its responsibility to assure
that only its authorized persons use the Terminal Link on its
behalf, and that a party shall not be responsible nor liable
for use of the Terminal Link on its behalf of the other party
by unauthorized persons except that the other party shall be
liable for such use thereof by unauthorized persons who have
obtained access thereto as a result of the bad faith or
willful misconduct of such party or any of its officers or
employees.
- 38 -
9. Notwithstanding anything else in this Agreement to
the contrary, neither party shall have any liability to the
other for any losses, damages, injuries, claims, costs or
expenses arising as a result of a delay, omission or error in
the transmission of a Certificate or notice by use of the
Terminal Link except for money damages for those suffered as
the result of the negligence, bad faith or willfull misconduct
of such party or its officers, employees or agents in an
amount not exceeding for any incident $100,000, provided,
however, that a party shall have no liability under this
Section 9 if the other party fails to comply with the
provisions of Section 11.
10. Without limiting the generality of the foregoing, it
is hereby agreed that in no event shall either party or any
manufacturer or supplier of its computer equipment, software
or services relating to the Terminal Link be responsible for
any special, indirect, incidental or consequential damages
which the other party may incur or experience by reason of its
use of the Terminal Link even if such party, manufacturer or
supplier has been advised of the possibility of such damages,
nor with respect to the use of the Terminal Link shall either
party or any such manufacturer or supplier be liable for acts
of God, or with respect to the following to the extent beyond
such person's reasonable control: machine or computer
breakdown or malfunction, interruption or malfunction of
communication facilities, labor difficulties or any other
similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of,
the Terminal Link as promptly as practicable, and in any event
within 24 hours after the earliest of (i) discovery thereof,
(ii) the business day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case
of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that
discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the
Custodian learns of any errors, omissions or interruption in,
or delay or unavailability of, the Terminal Link.
12. Each party shall, as soon as practicable after its
receipt of a Certificate or of any notice transmitted by the
Terminal Link, verify to the other party by use of the
Terminal Link its receipt of such Certificate or notice, and
in the absence of such verification a party to whom a
Certificate or notice is sent shall not be liable for any
failure to act in accordance with such Certificate or notice,
and the sending party may not claim that such Certificate or
notice was received by the other.
- 39 -
ARTICLE XVIII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present
Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that
any such present Authorized Person ceases to be an Authorized
Person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new Certificate
shall be received, the Custodian shall be entitled to rely and
to act upon Oral Instructions, Written Instructions, or
signatures of the present Authorized Persons as set forth in
the last delivered Certificate to the extent provided by this
Agreement.
2. Annexed hereto as Appendix B is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present Of-
ficers of the Fund. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event any
such present Officer ceases to be an Officer of the Fund, or
in the event that other or additional Officers are elected or
appointed. Until such new Certificate shall be received, the
Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered
Certificate to the extent provided by this Agreement.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Custodian, other than any Certificate or Written Instructions,
shall be sufficiently given if addressed to the Custodian and
mailed or delivered to it at its offices at 90 Washington
Street, New York, New York 10286, or at such other place as
the Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Fund shall be sufficiently given if addressed to the Fund and
mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund
may from time to time designate in writing.
5. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement and approved by a
resolution of the Board of Trustees of the Fund, except that
Appendices A and B may be amended unilaterally by the Fund
without such an approving resolution.
- 40 -
6. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian or The Bank of New York without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Trustees. For purposes of
this paragraph, no merger, consolidation, or amalgamation of
the Custodian, The Bank of New York, or the Fund shall be
deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with
the laws of the State of New York without giving effect to
conflict of laws principles thereof. Each party hereby
consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any
dispute arising hereunder and hereby waives its right to trial
by jury.
8. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
9. A copy of the Declaration of Trust of the Fund is on
file with the Secretary of The Commonwealth of Massachusetts,
and notice is hereby given that this instrument is executed on
behalf of the Board of Trustees of the Fund as Trustees and
not individually and that the obligations of this instrument
are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property
of the Fund; provided, however, that the Declaration of Trust
of the Fund provides that the assets of a particular Series of
the Fund shall under no circumstances be charged with li-
abilities attributable to any other Series of the Fund and
that all persons extending credit to, or contracting with or
having any claim against a particular Series of the Fund shall
look only to the assets of that particular Series for payment
of such credit, contract or claim.
- 41 -
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers,
thereunto duly authorized and their respective seals to be
hereunto affixed, as of the day and year first above written.
DEAN WITTER LIMITED
TERM MUNICIPAL TRUST
[SEAL] By: /s/
_______________________
Attest:
/s/
----------------------------
THE BANK OF NEW YORK
[SEAL] By: /s/
_______________________
Attest:
/s/
-----------------------------
- 42 -
APPENDIX A
I, , President and I,
, of Dean Witter
Limited Term Municipal Trust, a Massachusetts business trust
(the "Fund"), do hereby certify that:
The following individuals have been duly authorized by
the Board of Trustees of the Fund in conformity with the
Fund's Declaration of Trust and By-Laws to give Oral Instruc-
tions and Written Instructions on behalf of the Fund, except
that those persons designated as being an "Officer of DWTC"
shall be an Authorized Person only for purposes of Articles
XII and XIII. The signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
_________________ ________________ _________________
APPENDIX B
I, , President and I,
, of Dean Witter Limited Term Municipal
Trust, a Massachusetts business trust (the "Fund"), do hereby
certify that:
The following individuals for whom a position other than
"Officer of DWTC" is specified serve in the following posi-
tions with the Fund and each has been duly elected or ap-
pointed by the Board of Trustees of the Fund to each such
position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws. With respect to the
following individuals for whom a position of "Officer of DWTC"
is specified, each such individual has been designated by a
resolution of the Board of Trustees of the Fund to be an
Officer for purposes of the Fund's Custody Agreement with The
Bank of New York, but only for purposes of Articles XII and
XIII thereof and a certified copy of such resolution is
attached hereto. The signatures of each individual below set
forth opposite their respective names are their true and
correct signatures:
Name Position Signature
____________________ ___________________ _________________
<PAGE>
APPENDIX C
The undersigned, Sheldon Curtis , hereby
certifies that he or she is the duly elected and acting
Vice President of Dean Witter Limited Term Municipal Trust,
a Massachusetts business Trust (the "Fund"), and further
certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on
June 3, 1993, at which a quorum was at all times present
and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the
Fund dated as of July 7, 1993 (the "Custody Agree-
ment") is authorized and instructed on a continuous and ongo-
ing basis to act in accordance with, and to rely on instruc-
tions by the Fund to the Custodian communicated by a Terminal
Link as defined in the Custody Agreement.
RESOLVED, that the Fund shall establish access codes and
grant use of such access codes only to officers of the Fund as
defined in the Custody Agreement, and shall establish internal
safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes.
RESOLVED, that Officers of the Fund as defined in the
Custody Agreement shall, following the establishment of such
access codes and such internal safekeeping procedures, advise
the Custodian that the same have been established by deliver-
ing a Certificate, as defined in the Custody Agreement, and
the Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of Dean Witter Limited Term Municipal Trust, as of the
7th day of July, 1993.
/s/
_________________
[SEAL]
APPENDIX D
I, Richard P. Lando, an Assistant Vice President with
THE BANK OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
APPENDIX E
The following books and records pertaining to Fund shall
be prepared and maintained by the Custodian and shall be the
property of the Fund:
EXHIBIT A
CERTIFICATION
The undersigned, Sheldon Curtis , hereby
certifies that he or she is the duly elected and acting
Vice President of Dean Witter Limited Term Municipal Trust,
a Massachusetts business Trust (the "Fund"), and further
certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on
June 3, 1993, at which a quorum was at all times present
and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of July 7 , 1993, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to deposit in the Book-Entry
System, as defined in the Custody Agreement, all securi-
ties eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and
to utilize the Book-Entry System to the extent possible
in connection with its performance thereunder, including,
without limitation, in connection with settlements of
purchases and sales of securities, loans of securities,
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of Dean Witter Limited Term Municipal Trust, as of the 7th day
of July 7, 1993.
/s/
________________________________
[SEAL]
EXHIBIT B
CERTIFICATION
The undersigned, Sheldon Curtis , hereby
certifies that he or she is the duly elected and acting
Vice President of Dean Witter Limited Term Municipal Trust,
a Massachusetts business Trust (the "Fund"), and further
certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on
June 3, 1993, at which a quorum was at all times present
and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of July 7, 1993, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in The Depository Trust
Company ("DTC"), as a "Depository" as defined in the
Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are
specifically allocated, and to utilize DTC to the extent
possible in connection with its performance thereunder,
including, without limitation, in connection with
settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of Dean Witter Limited Term Municipal Trust, as of the
7th day of July, 1993.
/s/
________________________________
[SEAL]
EXHIBIT B-1
CERTIFICATION
The undersigned, Sheldon Curtis , hereby
certifies that he or she is the duly elected and acting
Vice President of Dean Witter Limited Term Municipal Trust a
Massachusetts business Trust (the "Fund"), and further
certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on
June 3, 1993, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and
is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of July 7, 1993 (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in the Participants
Trust Company as a Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are
specifically allocated, and to utilize the Participants
Trust Company to the extent possible in connection with
its performance thereunder, including, without limita-
tion, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of Dean Witter Limited Term Municipal Trust, as of the
7th day of July, 1993.
/s/
___________________________________
[SEAL]
EXHIBIT C
CERTIFICATION
The undersigned, Sheldon Curtis , hereby
certifies that he or she is the duly elected and acting
Vice President of Dean Witter Limited Term Municipal Trust,
a Massachusetts business Trust (the "Fund"), and further
certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on
June 3, 1993, at which a quorum was at all times present
and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of July 7, 1993, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agree-
ment, to the contrary, to accept, utilize and act with
respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which
the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the
Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of Dean Witter Limited Term Municipal Trust, as of the
7th day of July, 1993.
/s/
___________________________
[SEAL]
AMENDMENT TO CUSTODY AGREEMENT
Amendment made as of this 17th day of April, 1996 by and between Dean
Witter Limited Term Municipal Trust (the "Fund") and The Bank of New York (the
"Custodian") to the Custody Agreement between the Fund and the Custodian dated
July 7, 1993 (the "Custody Agreement"). The Custody Agreement is hereby amended
as follows:
Article XV Section 8 of the Custody Agreement shall be deleted and be
replaced by Sections 8.(a), 8.(b) and 8.(c) as set forth below:
"8. (a) The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Securities and moneys
owned by the Fund. The Custodian shall indemnify the Fund against and save the
Fund harmless from all liability, claims, losses and demands whatsoever,
including attorneys' fees, howsoever arising or incurred as the result of the
failure of a subcustodian which is a banking institution located in a foreign
country and identified on Schedule A attached hereto and as amended from time
to time upon mutual agreement of the parties (each, a "Subcustodian") to
exercise reasonable care with respect to the safekeeping of such Securities
and moneys to the same extent that the Custodian would be liable to the Fund
if the Custodian were holding such securities and moneys in New York. In the
event of any loss to the Fund by reason of the failure of the Custodian or a
Subcustodian to utilize reasonable care, the Custodian shall be liable to the
Fund only to the extent of the Fund's direct damages, to be determined based
on the market value of the Securities and moneys which are the subject of the
loss at the date of discovery of such loss and without reference to any
special conditions or circumstances.
8. (b) The Custodian shall not be liable for any loss which results
from (i) the general risk of investing, or (ii) investing or holding
Securities and moneys in a particular country including, but not limited to,
losses resulting from nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; or market conditions which prevent
the orderly execution of securities transactions or affect the value of
Securities or moneys.
8. (c) Neither party shall be liable to the other for any loss due
to forces beyond its control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER LIMITED TERM
MUNICIPAL TRUST
[SEAL] By:
------------------------
Attest:
- ------------------
THE BANK OF NEW YORK
[SEAL] By:
-------------------------
Attest:
- -------------------
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Argentina The Bank of Boston
Australia ANZ Banking Group Limited
Austria Girocredit Bank AG
Bangladesh* Standard Charted Bank
Belgium Banque Bruxelles Lambert
Botswana* Stanbic Bank Botswana Ltd.
Brazil The Bank of Boston
Canada Royal Trust/Royal Bank of Canada
Chile The Bank of Boston/Banco de Chile
China Standard Charted Bank
Columbia Citibank, N.A.
Denmark Den Danske Bank
Euromarket CEDEL
Euroclear
First Chicago Clearing Centre
Finland Union Bank of Finland
France Banque Paribas/Credit Commercial de France
Germany Dresdner Bank A.G.
Ghana* Merchant Bank Ghana Ltd.
Greece Alpha Credit Bank
Hong Kong Hong Kong and Shanghai Banking Corp.
Indonesia Hong Kong and Shanghai Banking Corp.
Ireland Allied Irish Bank
Israel Israel Discount Bank
Italy Banca Commerciale Italiana
Japan Yasuda Trust & Banking Co., Lt.
Korea Bank of Seoul
Luxembourg Kredietbank S.A.
Malaysia Hong Kong Bank Malaysia Berhad
Mexico Banco Nacional de Mexico (Banamex)
Netherlands Mees Pierson
New Zealand ANZ Banking Group Limited
Norway Den Norske Bank
Pakistan Standard Chartered Bank
Peru Citibank N.A.
Philippines Hong Kong and Shanghai Banking Corp.
Poland Bank Handlowy w Warsawie
Portugal Banco Comercial Portugues
Singapore United Overseas Bank
South Africa Standard Bank of South Africa Limited
Spain Banco Bilbao Vizcaya
Sri Lanka Standard Chartered Bank
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Sweden Skandinaviska Enskilda Banken
Switzerland Union Bank of Switzerland
Taiwan Hong Kong and Shanghai Banking Corp.
Thailand Siam Commercial Bank
Turkey Citibank N.A.
United Kingdom The Bank of New York
United States The Bank of New York
Uruguay The Bank of Boston
Venezuela Citibank N.A.
Zimbabwe* Stanbic Bank Zimbabwe Ltd.
* Not yet 17(f) 5 compliant
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 4 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated May
10, 1996, 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 headings "Independent Accountants" and
"Experts" in such Statement of Additional Information and to the reference to us
under the heading "Financial Highlights" in such prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
May 10, 1996
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER LIMITED TERM MUNICIPAL TRUST
WHEREAS, Dean Witter Limited Term Municipal Trust (the "Fund") is
engaged in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, on July 7, 1993, the Fund and Dean Witter Distributors Inc.
(the "Distributor") have entered into a separate Distribution Agreement,
pursuant to which the Fund has employed the Distributor as distributor of the
Fund's shares; and
WHEREAS, the Fund desires to adopt a Plan of Distribution pursuant to
Rule 12b-1 under the Act, and the Trustees have determined that there was a
reasonable likelihood that the Plan of Distribution would benefit the Fund and
its shareholders.
Now, THEREFORE, the Fund hereby adopts and the Distributor hereby
agrees to the terms of this Plan of Distribution (the "Plan"), in accordance
with Rule 12b-1 under the Act on the following terms and conditions:
1. Subject to the supervision of the Board of Trustees and the terms of
the Distribution Agreement, the Distributor and any of its affiliates,
including Dean Witter, Discover & Co. ("DWDC"), Dean Witter InterCapital Inc.
("InterCapital") or Dean Witter Reynolds Inc. ("DWR"), are authorized to
utilize their own resources to finance services and expenses incurred by any of
them in connection with the distribution of the Fund's shares or services to
shareholders, including: (1) compensation to, and expenses of, account
executives and other employees, including overhead and telephone expenses; (2)
sales incentives and bonuses to sales representatives of the Distributor, DWR,
its affiliates and other broker-dealers, and to marketing personnel in
connection with promoting sales of shares of the Fund; (3) expenses incurred in
connection with promoting sales of shares of the Fund; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio,
newspaper, magazine and other media advertisements.
2. The Distributor hereby undertakes to bear directly, or indirectly
through DWDC, InterCapital or DWR, all costs of rendering the services to be
performed by it under this Plan and under the Distribution Agreement.
3. The Fund will not make separate payments to the Distributor or any
other party pursuant to this Plan, it being recognized that the Fund pays
management fees to InterCapital, pursuant to the Investment Management
Agreement in effect between the Fund and InterCapital. To the extent that any
payments made by the Fund to the Distributor or InterCapital, including the
payment of any management fees, should be deemed to be indirect financing of
any activity primarily intended to result in the sales of shares of the Fund
within the purview of Rule 12b-1 under the Act, then such payments shall be
deemed to be authorized by this Plan.
4. The Distributor shall provide the Fund for review by the Board of
Trustees, and the Board of Trustees shall review, promptly after the end of
each fiscal quarter a written report regarding the distribution expenses
incurred by the Distributor, DWDC, InterCapital or DWR on behalf of the Fund
during such fiscal quarter, which report shall include: (1) an itemization of
the types of expenses and the purpose therefor; (2) the amounts of such
expenses; and (3) a description of the benefits derived by the Fund.
5. This Plan shall become effective upon approval by a vote of the
Board of Trustees of the Fund, and of the Trustees who are not "interested
persons" of the Fund, as defined in the Act, and who have no direct or indirect
financial interest in the operation of this Plan, cast in person at a meeting
called for the purpose of voting on this Plan.
<PAGE>
6. This Plan shall continue in effect until April 30, 1994, and from
year to year thereafter, provided such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph 5
hereof. This Plan may not be amended to institute the assumption of any
payments to be made directly by the Fund for any services provided herein, and
no material amendments to this Plan shall be made unless approved in the manner
provided for approval in paragraph 5 hereof.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Trustees who are not "interested persons"
of the Fund, as defined in the Act, and who have no direct or indirect
financial interest in the operation of this Plan, or by the Fund by a vote of a
majority of the outstanding voting securities of the Fund, as defined in the
Act, on not more than 30 days' written notice to any other party to this Plan.
8. While this Plan is in effect, the selection and nomination of
Trustees who are not interested persons of the Fund shall be committed to the
discretion of the Trustees who are not interested persons.
9. The Fund shall preserve copies of this Plan and all reports made
pursuant to paragraph 4 hereof, for a period of not less than six years from
the date of this Plan or any such report, as the case may be, the first two
years in an easily accessible place.
10.This Plan shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
11. The Declaration of Trust establishing Dean Witter Limited Term
Municipal Trust, dated February 25, 1993, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter 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.
IN WITNESS WHEREOF, the Fund and the Distributor have executed this Plan
of Distribution as of the day and year set forth below in New York, New York.
Dated:July 7, 1993
DEAN WITTER LIMITED TERM MUNICIPAL
TRUST
By:......................................
Attest:
...............................
DEAN WITTER DISTRIBUTORS INC.
By:......................................
Attest:
...............................
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-96 RETURN - TR YEARS - n COMPOUND RETURN
- ------------ --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
31-Mar-95 $1,084.20 8.42% 1.00 8.42%
12-Jul-93 $1,115.30 11.53% 2.72 4.10%
</TABLE>
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) 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 11.53 $11,153 $55,765 $111,530
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 71,689,880
<INVESTMENTS-AT-VALUE> 71,347,426
<RECEIVABLES> 1,354,211
<ASSETS-OTHER> 232,350
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 72,933,987
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 168,052
<TOTAL-LIABILITIES> 168,052
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,663,013
<SHARES-COMMON-STOCK> 7,310,483
<SHARES-COMMON-PRIOR> 8,946,383
<ACCUMULATED-NII-CURRENT> 16,444
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,571,068)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (342,454)
<NET-ASSETS> 72,765,935
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,978,412
<OTHER-INCOME> 0
<EXPENSES-NET> 690,190
<NET-INVESTMENT-INCOME> 3,288,222
<REALIZED-GAINS-CURRENT> (204,169)
<APPREC-INCREASE-CURRENT> 3,701,666
<NET-CHANGE-FROM-OPS> 6,785,719
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,271,778
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41,325,172
<NUMBER-OF-SHARES-REDEEMED> (60,082,885)
<SHARES-REINVESTED> 2,510,255
<NET-CHANGE-IN-ASSETS> (12,733,517)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8,366,899)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 401,513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 696,063
<AVERAGE-NET-ASSETS> 80,302,536
<PER-SHARE-NAV-BEGIN> 9.56
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 0.39
<PER-SHARE-DIVIDEND> (0.41)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
