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Filed Pursuant to Rule 497(e)
Registration File No.: 33-53015
DEAN WITTER
NATIONAL MUNICIPAL TRUST
PROSPECTUS--MAY 19, 1994
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DEAN WITTER NATIONAL 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. THE FUND INVESTS PRINCIPALLY IN TAX-EXEMPT FIXED-
INCOME SECURITIES WHICH ARE RATED IN THE THREE HIGHEST CATEGORIES BY MOODY'S
INVESTORS SERVICE, INC. OR STANDARD & POOR'S CORPORATION. (SEE "INVESTMENT
OBJECTIVE AND POLICIES.")
Shares of the Fund are continuously offered at net asset value. However,
redemptions and/or repurchases are subject in most cases to a contingent
deferred sales charge, scaled down from 3% to 1% of the amount redeemed, if
made within three years of purchase, which charge will be paid to the Fund's
Distributor, Dean Witter Distributors Inc. (See "Redemptions and Repurchases--
Contingent Deferred Sales Charge.") In addition, the Fund pays the Distributor
a distribution fee pursuant to a Plan of Distribution at the annual rate of
0.60% of the lesser of the (i) average daily aggregate net sales or (ii)
average daily net assets of the Fund. (See "Purchase of Fund Shares--Plan of
Distribution.")
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 19, 1994, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
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Prospectus Summary .............................................. 3
Summary of Fund Expenses ........................................ 4
The Fund and its Management ..................................... 5
Investment Objective and Policies ............................... 5
Risk Considerations and Hedging Activities ..................... 7
Investment Restrictions ......................................... 9
Purchase of Fund Shares ......................................... 10
Shareholder Services ............................................ 12
Redemptions and Repurchases ..................................... 14
Dividends, Distributions and Taxes .............................. 15
Performance Information ......................................... 17
Additional Information .......................................... 17
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
DEAN WITTER
NATIONAL MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550
(800) 526-3143
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Dean Witter Distributors Inc., Distributor
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PROSPECTUS SUMMARY
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THE FUND The Fund is organized as a Trust, commonly known as a
Massachusetts business trust, and is an open-end diversified
management investment company investing principally in
investment grade, tax-exempt fixed-income securities (see page
5).
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SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page
17).
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OFFERING PRICE At net asset value (see page 10). Shares redeemed within three
years of purchase are subject to a contingent deferred sales
charge under most circumstances (see pages 14-15).
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MINIMUM Minimum initial purchase is $1,000; minimum subsequent purchase
PURCHASE is $100 (see page 10).
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INVESTMENT The investment objective of the Fund is to provide a high level
OBJECTIVE of current income exempt from federal income tax, consistent
with the preservation of capital (see page 5).
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INVESTMENT Dean Witter InterCapital Inc. ("InterCapital"), the Investment
MANAGER Manager of the Fund, and its wholly-owned subsidiary, Dean
Witter Services Company Inc., serve in various investment
management, advisory, management and administrative capacities
to eighty-five investment companies and other portfolios with
assets of approximately $70.8 billion at April 30, 1994 (see
page 5).
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MANAGEMENT The monthly fee is at an annual rate of 0.35% of average daily
FEE net assets (see page 5).
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DIVIDENDS AND Income dividends are declared daily and paid monthly; capital
CAPITAL GAINS gains, if any, may be distributed annually or retained for
DISTRIBUTIONS reinvestment by the Fund. Dividends and distributions are
automatically reinvested in additional shares at net asset value
(without sales charge), unless the shareholder elects to receive
cash (see pages 15-16).
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DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor"). For its
services as Distributor, which include payment of sales
commissions to account executives and various other promotional
and sales related expenses, the Distributor receives from the
Fund a distribution fee accrued daily and payable monthly at the
rate of 0.60% per annum of the lesser of (i) the Fund's average
daily aggregate net sales or (ii) the Fund's average daily net
assets. This fee compensates the Distributor for the services it
provides in distributing shares of the Fund and for its sales
related expenses. The Distributor also receives the proceeds of
any contingent deferred sales charges (see pages 10-11).
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REDEMPTION-- At net asset value; redeemable involuntarily if total value of
CONTINGENT the account is less than $100. Although no commission or sales
DEFERRED load is imposed upon the purchase of shares, a contingent
SALES deferred sales charge (scaled down from 3% to 1%) is imposed on
CHARGE any redemption of shares if after such redemption the aggregate
current value of an account with the Fund falls below the
aggregate amount of the investor's purchase payments made during
the three years preceding the redemption. However, there is no
charge imposed on redemption of shares purchased through
reinvestment of dividends or distributions (see pages 14-15).
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RISKS The value of the Fund's portfolio securities, and therefore the
Fund's net asset value per share, may increase or decrease due
to various factors, principally changes in prevailing interest
rates and the ability of the issuers of the Fund's portfolio
securities to pay interest and principal on such obligations.
The Fund may purchase when-issued and delayed delivery
securities (see page 7). The Fund may also invest in futures and
options, which may be considered speculative in nature and which
may involve greater risks than those customarily assumed by
certain other investment companies which do not invest in such
instruments (see pages 7-9).
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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of the
Fund will incur.
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases............................. None
Maximum Sales Charge Imposed on Reinvested Dividends................... None
Contingent Deferred Sales Charge....................................... None
(as a percentage of the lesser of original purchase price or
redemption proceeds).................................................. 3.0%
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A contigent deferred sales charge is imposed at the following declining rates:
YEAR SINCE PURCHASE
PAYMENT MADE PERCENTAGE
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First............................................... 3.0%
Second ............................................. 2.0%
Third............................................... 1.0%
Fourth and thereafter............................... None
Redemption Fees..................................... None
Exchange Fee........................................ None
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ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees........................................................ 0.35%
12b-1 Fees**........................................................... 0.60%
Other Expenses*........................................................ 0.20%
Total Fund Operating Expenses*......................................... 1.15%
"Management Fees" as shown above, are for the fiscal period ending September
30, 1994. "Other Expenses," as shown above, is based upon estimated amounts of
expenses of the Fund expected to be incurred during its current fiscal period
ending September 30, 1994.
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* The Investment Manager has undertaken to assume all expenses (except for
any brokerage and 12b-1 fees) and to waive the compensation provided for in
its Management Agreement until such time as the Fund has $50 million of net
assets or until six months from the date of commencement of the Fund's
operations, whichever occurs first. The fees and expenses disclosed above
do not reflect the assumption of any expenses or the waiver of any
compensation by the Investment Manager. "Total Fund Operating Expenses," as
shown above, is based upon the sum of the 12b-1 Fees, Management Fees and
Estimated "Other Expenses," which may be incurred by the Fund.
** The 12b-1 fee is accrued daily and payable monthly, at an annual rate of
0.60% of the lesser of: (a) the average daily aggregate gross sales of the
Fund's shares since the inception of the Fund (not including reinvestments
of dividends or distributions), less the average daily aggregate net asset
value of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived, or (b) the
Fund's average daily net assets. A portion of the 12b-1 fee equal to 0.15%
of the Fund's average daily net assets is characterized as a service fee
within the meaning of National Association of Securities Dealers, Inc.
("NASD") guidelines.
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EXAMPLE 1 YEAR 3 YEARS
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You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period................. $ 42 $ 47
You would pay the following expenses on the same
investment, assuming no redemption........................ $ 12 $ 37
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The above example should not be considered a representation of past or future
expenses or performance. Actual expenses of the Fund may be greater or less
than those shown.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
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THE FUND AND ITS MANAGEMENT
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Dean Witter National Municipal Trust (the "Fund") is an open-end diversified
management investment company. The Fund is a trust of the type commonly known
as a "Massachusetts business trust" and was organized under the laws of the
Commonwealth of Massachusetts on March 29, 1994.
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 eighty-five investment companies,
thirty of which are listed on the New York Stock Exchange, with combined total
net assets of approximately $68.8 billion as of April 30, 1994. The Investment
Manager also manages portfolios of pension plans, other institutions and
individuals which aggregated approxi mately $2 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund. The Fund's
Trustees review the various services provided by 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 at the annual rate
of 0.35% of the daily net assets of the Fund.
The Fund's expenses include: the fee of the Investment Manager; taxes;
certain legal, transfer agent, custodian and auditing fees; and printing and
other expenses relating to the Fund's operations which are not expressly
assumed by the Investment Manager under its Investment Management Agreement
with the Fund. The Investment Manager has undertaken to assume all expenses
(except for brokerage and 12b-1 fees) and waive the compensation provided for
in its Investment Management Agreement until such time as the Fund has $50
million of net assets or until six months from the date of commencement of the
Fund's operations, whichever occurs first.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is to provide a high level of current
income which is exempt from federal income tax, consistent with the
preservation of capital. There is no assurance that this objective will be
achieved. This objective is fundamental and may not be changed without
shareholder approval. The Fund seeks to achieve its investment objective by
investing its assets in accordance with the following policies:
1. At least 75% of the Fund's total assets will be invested 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 and A-1 by S&P.
2. The Fund may invest up to 25% of its total assets in Municipal
Obligations which are unrated or, if rated, are not within the three highest
Bond rating categories of Moody's or S&P or the two highest Note rating
categories of Moody's or S&P. The Fund does not intend to invest in Municipal
Bonds which are rated below either Baa by Moody's or BBB by S&P (the lowest
ratings considered investment grade) or, if not rated, are deemed by the
Investment Manager to
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be below investment grade, in amounts exceeding 5% of its net assets.
Investments in Municipal Bonds rated either Baa by Moody's or BBB by S&P
have speculative characteristics and, therefore, changes in economic conditions
or other circumstances are more likely to weaken their capacity to make
principal and interest payments than would be the case with investments in
securities with higher credit ratings. Municipal Bonds rated below investment
grade may not currently be paying any interest and may have extremely poor
prospects of ever attaining any real investment standing. Any subsequent change
in any rating of any security below investment grade which causes the Fund to
be invested in such securities in an amount exceeding 5% of its net assets will
result in the elimination of that security from the Fund's portfolio as soon as
practicable without adverse market or tax consequences to the Fund.
3. Certain Municipal Obligations in which the Fund may invest without limit
may subject certain investors to the alternative minimum tax and, therefore, a
substantial portion of the income produced by the Fund may be taxable for such
investors under the alternative minimum tax. The Fund, therefore, may not
ordinarily 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 such investor's tax
position. See "Dividends, Distributions and Taxes."
4. Up to 25% of the Fund's total assets may be invested in taxable money
market instruments under any one or more of the following circumstances:
(a) pending investment of proceeds of sale of Fund shares or of portfolio
securities; (b) pending settlement of purchases of portfolio securities;
and (c) to maintain liquidity for the purpose of meeting anticipated
redemptions. In addition, the Fund may temporarily invest more than 25% of its
total assets in taxable securities 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 securities in which the Fund may
temporarily invest are limited to the following short-term fixed-income
securities (maturing in one year or less from the time of purchase): (i)
obligations of the United States Government, its agencies, instrumentalities or
authorities; (ii) commercial paper rated P-1 by Moody's or A-1 by S&P; (iii)
certificates of deposit of domestic banks with assets of $1 billion or more;
and (iv) repurchase agreements with respect to any of the foregoing portfolio
securities.
The average dollar weighted maturity of the Fund's portfolio under normal
circumstances is expected to be in excess of 20 years, but the average
maturity, as well as the emphasis on longer-term obligations, may vary
depending upon market conditions.
Municipal Obligations are debt obligations of states, cities, municipalities
and municipal agencies which generally have maturities, at the time of their
issuance, of either one year or more (Bonds) or from six months to three years
(Notes). Municipal Commercial Paper refers to short-term obligations of
municipalities. Any Municipal Obligation which depends directly or indirectly
on the credit of the Federal Government shall be considered to have a rating of
Aaa/AAA.
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 government 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
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other cases, a special tax or other charge may augment user fees.
Included within the revenue category are participations in lease obligations
or installment purchase contracts (hereinafter collectively called "lease
obligations") of municipalities. State and local governments issue lease
obligations to acquire equipment and facilities.
Lease obligations may have risks not normally associated with general
obligation or other revenue bonds. Leases and installment purchase or
conditional sale contracts (which may provide for title to the leased asset to
pass eventually to the issuer) 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.
Lease obligations represent a relatively new type of financing that has not
yet developed the depth of marketability associated with more conventional
municipal obligations, and, as a result, certain of such lease obligations, may
be considered illiquid securities. To determine whether or not the Fund will
consider such securities to be illiquid (the Fund may not invest more than ten
percent of its net assets in illiquid securities), the Trustees of the Fund
have established guidelines to be utilized by the Fund in determining the
liquidity of a lease obligation. The factors to be considered in making the
determination include: (1) the frequency of trades and quoted prices for the
obligation; (2) the number of dealers willing to purchase or sell the security
and the number of other potential purchasers; (3) the willingness of dealers
to undertake to make a market in the security; and (4) the nature of the
marketplace trades, including the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer.
The foregoing percentage and rating policies apply at the time of acquisition
of a security based on the last previous determination of the Fund's net asset
value. Any subsequent change in any rating by a rating service or change in
percentages resulting from market fluctuations or other changes in the Fund's
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.
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.
PORTFOLIO CHARACTERISTICS
VARIABLE RATE OBLIGATIONS. The interest rates payable on certain Municipal
Bonds and Municipal Notes are not fixed and may fluctuate based upon changes in
market rates. Municipal obligations of this type are called "variable rate"
obligations. The interest rate payable on a variable rate obligation is
adjusted either at predesignated periodic intervals or whenever there is a
change in the market rate of interest on which the interest rate payable is
based.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase tax-exempt
securities on a when-issued or delayed delivery basis; i.e., delivery and
payment can take place a month or more after the date of the transaction. These
securities are subject to market fluctuation and no interest accrues to the
purchaser prior to settlement. At the time the Fund makes the commitment to
purchase such securities, it will record the transaction and thereafter reflect
the value, each day, of such securities in determining its net asset value. 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.
RISK CONSIDERATIONS AND
HEDGING ACTIVITIES
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
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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.
The Fund may enter into financial futures contracts ("futures contracts"),
options on such futures and municipal bond index futures contracts for hedging
purposes.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may invest in futures
contracts and related options thereon. The Fund may sell a futures contract or
a call option thereon 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 Fund's portfolio securities. If the Investment
Manager anticipates that interest rates will decline, the Fund may purchase a
futures contract or a call option thereon or sell a put option on such futures
contract, to protect against an increase in the price of the securities 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 creates 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 exhange 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 effected by entering into an offsetting
purchase or sale transaction.
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 (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 not daily payments of cash to reflect the
change in the value of the underlying contract as there are 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.
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 Fund's portfolio securities. The risk of imperfect correlation
may be increased by the fact that the Fund will invest in futures contracts on
taxable 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 futures contracts for the sale of securities in anticipation of an
increase in interest rates, and then interest rates went down instead, causing
bond prices to rise, the Fund would lose money on the sale.
In addition to the risks that apply to all options transactions (see the
Statement of Additional Information for a description of the characteristics
of, and the risks of investing in, options on debt securities), there are
several special risks relating to options on futures; in particular, the
ability to establish and close out positions on options on futures will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or be maintained.
MUNICIPAL BOND INDEX FUTURES. The Fund may utilize municipal bond index
futures contracts and options thereon 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
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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 may not enter into futures contracts or purchase related options
thereon if immediately thereafter the amount committed to margin plus the
amount paid for premiums for unexpired options on futures contracts exceeds 5%
of the value of the Fund's total assets. The Fund may not purchase or sell
futures contracts or related options thereon if, immediately thereafter, more
than one-third of its net assets would be hedged.
PORTFOLIO MANAGEMENT
The Fund is actively managed by the Investment Manager with a view to
achieving the Fund's investment objective. 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 InterCapital, the views of 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. The Fund is
managed within InterCapital's Municipal Fixed Income Group, which manages 36
tax-exempt municipal funds and fund portfolios, with approximately $12 billion
in assets as of March 31, 1993. James F. Willison, Senior Vice President of
InterCapital and Manager of InterCapital's Municipal Fixed Income Group, is the
primary portfolio manager of the Fund and has been managing portfolios of
municipal securities at InterCapital for over five years.
Securities are purchased and sold principally in response to the Investment
Manager's cur rent evaluation of an issuer's ability to meet its debt
obligations in the future, and the Investment Manager's current assessment of
future changes in the levels of interest rates on tax-exempt securities of
varying maturities. Securities purchased by the Fund are, generally, sold by
dealers acting as principal for their own accounts. Pursuant to an order of the
Securities and Exchange Commission, the Fund may effect principal transactions
in certain money market instruments with DWR. In addition, the Fund may incur
brokerage commissions on transactions conducted through DWR.
The portfolio trading engaged in by the Fund may result in its portfolio
turnover rate exceeding 100%. The Fund will incur underwriting discount costs
(on underwritten securities) commensurate with its portfolio turnover rate.
Additionally, see "Dividends, Distributions and Taxes" for a discussion of the
tax policy of the Fund. A more extensive discussion of the Fund's portfolio
brokerage policies is set forth in the Statement of Additional Information.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as
such, may be changed without shareholder approval.
INVESTMENT RESTRICTIONS
- ----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions 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; (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 or other changes in the Fund's total assets does not
require elimination of any security from the portfolio.
The Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (other than obligations issued
or guaranteed
9
<PAGE>
by the United States Government, its agencies or instrumentalities).
2. As to 75% of its total assets, purchase more than 10% of all outstanding
voting securities or any one issuer (other than obligations issued, or
guaranteed as to principal and interest, by the United States Government, its
agencies or instrumentalities).
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities (industrial development and pollution control bonds are
grouped into industries based upon the business in which the issuers of such
obligations are engaged).
4. Invest more than 5% of the value of its total assets in taxable
securities of issuers having a record, together with predecessors, of less than
three years of continuous operation. This restriction shall not apply to any
obligation of the United States Government, its agencies or instrumentalities.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers who have entered into 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. Subsequent purchases of $100 or more
may be made by sending a check, payable to Dean Witter National Municipal
Trust, directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box
1040, Jersey City, N.J. 07303 or by contacting a DWR or other Selected Broker-
Dealer account executive. In the case of purchases made pursuant to systematic
payroll deduction plans, the Fund, in its discretion, may accept such purchases
without regard to any minimum amounts which would otherwise be required if the
Fund has reason to believe that additional purchases will increase the amount
of the purchase of shares 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 on a normal five
business day settlement basis; that is payment generally is due on or before
the fifth business day (settlement date) after the order is placed with the
Distributor. Shares purchased through the Distributor are entitled to dividends
beginning on the next business day following settlement date. Since the
Distributor forwards investors' funds on settlement date, it will benefit from
the temporary use of the funds if payment is made prior thereto. Shares
purchased through the Transfer Agent are entitled to dividends beginning on the
next business day following receipt of an order. As noted above, orders placed
directly with the Transfer Agent must be accompanied by payment. Investors will
be entitled to receive capital gains distributions if their order is received
by the close of business on the day prior to the record date for such
distributions. The offering price will be the net asset value per share next
determined following receipt of an order (see "Determination of Net Asset
Value" below). While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge may be imposed at the time of
redemption (see "Redemptions and Repurchases"). Sales personnel of a Selected
Broker-Dealer are compensated for selling shares of the Fund at the time of
their sale by the Distributor or any of its affiliates and/or the Selected
Broker-Dealer. In addition, some sales personnel of the Selected Broker-Dealer
will receive non-cash compensation in the form of trips to educational and/or
business seminars and merchandise as special sales incentives. The Fund and the
Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 0.60% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital
gains distributions), less the average daily aggregate net asset value of the
Fund's shares
10
<PAGE>
redeemed since the Fund's inception upon which a contingent deferred sales
charge has been imposed or waived; or (b) the Fund's average daily net assets.
This fee is treated by the Fund as an expense in the year it is accrued. A
portion of the fee payable pursuant to the Plan, equal to 0.15% of the Fund's
average daily net assets, is characterized as a service fee within the meaning
of NASD guidelines.
Amounts paid under the Plan are paid to the Distributor to compensate it for
the services provided and the expenses borne by the Distributor and others in
the distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to and expenses of DWR's
account executives and others who engage in or support distribution of shares,
including overhead and telephone expenses; printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders; and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan to compensate DWR and
other Selected Broker-Dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed distribution expenses.
At any given time, the expenses in distributing shares of the Fund may be in
excess of the total of (i) the payments made by the Fund pursuant to the Plan,
and (ii) the proceeds of contingent deferred sales charges paid by investors
upon the redemption of shares (see "Redemptions and Repurchases--Contingent
Deferred Sales Charge"). For example, if $1 million in expenses in distributing
shares of the Fund had been incurred and $750,000 had been received as
described in (i) and (ii) above, the excess expense would amount to $250,000.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all expenses or any requirement that the Plan be continued from
year to year, this excess amount does not constitute a liability of the Fund.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan, and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or contingent
deferred sales charges, may or may not be recovered through future distribution
fees or contingent deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time, on each day that the New York Stock Exchange is open by
taking the value of all assets of the Fund, subtracting its liabilities,
dividing by the number of shares outstanding and adjusting to the nearest cent.
The net asset value per share will not be determined on Good Friday and on such
other federal and non-federal holidays as are observed by the New York Stock
Exchange.
Portfolio securities (other than short-term taxable debt securities, futures
and options) are valued for theFund 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 services are more likely to
approximate the fair value of such securities.
Short-term taxable debt securities with remaining maturities of sixty days
or less at time of purchase are valued at amortized cost, unless the Board
determines such does not reflect the securities' fair value, in which case
these securities will be valued at their market value as determined by the
Board of Trustees. Other taxable short-term debt securities with maturities of
more than sixty days will be valued on a mark to market basis until such time
as they reach a maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Trustees determine
such does not reflect the securities' fair value, in which case these
securities will be valued at their fair market value as determined by the Board
of Trustees. Listed options on debt securities are valued at the latest sale
price on the exchange on which they are listed unless no sales of such options
have taken place that day, in which case, they will be valued at the mean
between their closing bid and asked prices. Unlisted options on debt securities
are valued at the mean between their latest bid and asked price. Futures are
valued at the latest
11
<PAGE>
sale price on the commodities exchange on which they trade unless the Board of
Trus tees determines that such price does not reflect their market value, in
which case they will be valued at their fair value as determined by the Board
of Trustees. All other securities and other assets are valued at their fair
value as determined in good faith under procedures established by and under the
supervision of the Board of Trustees.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of 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. Shares so acquired are not subject to the
imposition of a contingent deferred sales charge upon their redemption (see
"Redemptions and Repurchases"). Such dividends and distributions will be paid,
at the net asset value per share, in shares of the Fund (or in cash if the
shareholder so requests) on the monthly payment date, which generally will be
no later than the last business day of the month for which the dividend or
distribution is payable. Processing of dividend checks begins immediately
following the monthly payment date. Shareholders who have requested to receive
dividends in cash will normally receive their monthly dividend check during the
first ten days of the following month.
EASYINVEST(SM). 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.
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September,
December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on shares redeemed under the
Withdrawal Plan (See "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). Therefore, any shareholder participating in the Withdrawal Plan will
have sufficient shares redeemed from his or her account so that the proceeds
(net of any applicable contingent deferred sales charge) to the shareholder
will be the designated monthly or quarterly amount.
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.
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 account executive or the Transfer
Agent.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of other Dean Witter
Funds sold with a contingent deferred sales charge ("CDSC funds"), and for
shares of Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term
Municipal Trust, Dean Witter Short-Term Bond Fund and five Dean Witter Funds
which are money market funds (the foregoing eight non-CDSC funds are
hereinafter referred to as the "Exchange Funds"). Exchanges may be made after
the shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market 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 the
12
<PAGE>
Fund, shares of the Fund are redeemed out of the Fund at their next calculated
net asset value and the proceeds of the redemption are used to purchase shares
of the money market fund at their net asset value determined the following day.
Subsequent exchanges between any of the money market funds and any of the CDSC
funds can be effected on the same basis. No contingent deferred sales charge
("CDSC") is imposed at the time of any exchange, although any applicable CDSC
will be imposed upon ultimate redemption. Shares of the Fund which are
exchanged for shares of another CDSC fund having a higher CDSC schedule than
the Fund will be subject to the CDSC schedule of the other CDSC fund, even if
shares are subsequently reexchanged for shares of the Fund prior to redemption.
During the period of time the shareholder remains invested in the Exchange Fund
(calculated from the last day of the month in which the Exchange Fund shares
were acquired), the holding period (for the purpose of determining the rate of
the CDSC) is frozen. If those shares are subsequently reexchanged for shares of
a CDSC fund, the holding period previously frozen when the first exchange was
made resumes on the last day of the month in which shares of a CDSC fund are
reacquired. Thus, the CDSC is based upon the time (calculated as described
above) the shareholder was invested in shares of a CDSC fund (see "Redemptions
and Repurchases--Contingent De-ferred Sales Charge"). However, in the case of
shares of the Fund exchanged into an Exchange Fund upon a redemption of shares
which results in a CDSC being imposed, a credit (not to exceed the amount of
the CDSC) will be given in an amount equal to the Exchange Fund 12b-1
distribution fees incurred on or after that date which are attributable to
those shares. (Exchange Fund 12b-1 distribution fees, if any, are described in
the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
certain Dean Witter Funds sold with a front-end sales charge ("front-end sales
charge funds"), but shares of the Fund, however acquired, may not be exchanged
for shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of 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 shoud 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 share holder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the Fund
and/or any of such Dean Witter Funds for which shares of the Fund may be
exchanged, upon such notice as may be required by applicable regulatory
agencies. Shareholders main tain ing margin accounts with DWR or another
Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in their margin account.
The current prospectus for each fund describes its investment objectives and
policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement and
other conditions imposed by each fund. In the case of any shareholder holding a
share certificate or certificates, no exchanges may be made until the share
certificate(s) have been received by the Transfer Agent and deposited in the
shareholder's account. An exchange will be treated for federal income tax
purposes as a redemption or repurchase of shares, on which the shareholder may
realize a capital gain or loss. However, the ability to deduct capital losses
on an exchange is limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. There are also limits on the
deduction of losses after the payment of exempt-interest dividends for shares
held for less than six months (see "Dividends, Distributions and Taxes"). 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 Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
13
<PAGE>
Privilege by contacting their DWR or other Selected Broker-Dealer account
executive (no Exchange Privilege Authorization Form is required). Other
shareholders (and those share holders 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 by contacting the Transfer Agent at (800) 526-3143
(toll free). The Fund will employ reasonable procedures to confirm that
exchange instructions communicated over the telephone are genuine. Such
procedures may include requiring various forms of personal identification such
as name, mailing address, social security or other tax identification number
and DWR or other Selected Broker-Dealer account number (if any). Telephone
instructions may also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a
written exchange request (see "Redemptions and Repurchases"). Shareholders are
advised that during periods of drastic economic or market changes, it is
possible that the telephone exchange procedures may be difficult to implement,
although this has not been the case with the Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their account executive or the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds
will be reduced by the amount of any applicable contingent deferred sales
charges (see below). If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 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
information required by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held three
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than three years after purchase may,
however, be subject to a charge upon redemption. This charge is called a
"contingent deferred sales charge" ("CDSC"), which will be a percentage of the
dollar amount of shares redeemed and will be assessed on an amount equal to the
lesser of the current market value or the cost of the shares being redeemed.
The size of this percentage will depend upon how long the shares have been
held, as set forth in the table below:
<TABLE>
<CAPTION>
YEAR SINCE CONTINGENT DEFERRED SALES
PURCHASE CHARGE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ------------ -----------------
<S> <C>
First................................. 3.0%
Second................................ 2.0%
Third................................. 1.0%
Fourth and thereafter................. None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the three years preceding the redemp-tion;
(ii) the current net asset value of shares purchased more than three years
prior to the redemption; and (iii) the current net asset value of shares
purchased through reinvestment of dividends or distributions nd/or shares
acquired in exchange for shares of Dean Witter Funds sold with a front-end
sales charge or of other Dean Witter Funds acquired in exchange for such
shares. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order)
are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of: (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are (a) registered either in the name
14
<PAGE>
of an individual shareholder (not a trust), or in the names of such shareholder
and his or her spouse as joint tenants with right of survivorship, or (b) held
in a qualified corporate or self-employed retirement plan, Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code, provided in either case that the redemption is requested within
one year of the death or initial determination of disability, and (ii)
redemptions in connection with the following retirement plan distributions: (a)
lump-sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or in the case of a "key-employee" of a
"top heavy" plan, following attainment of age 59 1/2); (b) distributions from
an Individual Retirement Account or Custodial Account under Section 403(b)(7)
of the Internal Revenue Code following attainment of age 59 1/2; and (c) a
tax-free return of an excess contribution to an IRA. For the purpose of
determining disability, the Distributor utilizes the definition of disability
contained in Section 72(m)(7) of the Internal Revenue Code, which relates to
the inability to engage in gainful employment. All waivers will be granted only
following receipt by the Distributor of confirmation of the investor's
entitlement.
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") after such repurchase
order is received by DWR or other Selected Broker-Dealer, reduced by the
applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund, the Distributor,
DWR or other Selected Broker-Dealers. The offers by DWR and other Selected
Broker-Dealers to repurchase shares may be suspended without notice by them at
any time. In that event, shareholders may redeem their shares through the
Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such 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 investment of the check by
the Transfer Agent). Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their account executive
regarding restrictions on redemption of shares of the Fund pledged in the
margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption or
repurchase in shares of the Fund at their net asset value next determined after
a reinstatement request, to gether with the proceeds, is received by the
Transfer Agent and receive a pro-rata credit for any CDSC paid in connection
with such redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, on sixty
days' notice, and at net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or Custodial Account under
Section 403(b)(7) of the Code) whose shares have a value of less than $100 as a
result of redemptions or repurchases, or such lesser amount as may be fixed by
the Board of Trustees. 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 the shareholder to make an additional
investment in an amount which will increase the value of the account to $100 or
more before the redemption is processed. No CDSC will be imposed on any
involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends from net investment
income on each day the New York Stock Exchange is open for business (see
"Purchase of Fund Shares"). Such dividends are paid
15
<PAGE>
monthly. The Fund intends to distribute all of the Fund's net investment income
on an annual basis.
The Fund will distribute at least once each year all net realized short-term
capital gains in excess of any realized net long-term capital losses, if any.
The Fund intends to distribute all of its realized net long-term capital gains,
if any, in excess of any realized net short-term capital losses and any
available net capital loss carryovers, at least once per fiscal year, although
it may elect to retain all or part of such gains for reinvestment. Taxable
capital gains may be generated by the sale of portfolio securities and by
transactions in options and futures contracts engaged in by the Fund. All
dividends and capital gains distributions will be paid
in additional Fund shares (without sales charge) and automatically credited to
the shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends be paid in cash and such
request is received by the close of business on the day prior to the record
date for such distributions (see "Shareholder Services--Automatic Investment of
Dividends and Distributions"). Any dividends declared in the last quarter of
any year which are paid in the following year prior to February 1 will be
deemed received by the shareholder in the prior year.
TAXES. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and intends to otherwise 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.
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by maintaining, as of the close of each quarter of its taxable
year, at least 50% of the value of its total assets in tax-exempt securities.
If the Fund satisfies such requirement, distributions from net investment
income to shareholders, whether taken in cash or reinvested in additional
shares, will be excludable from gross income for federal income tax purposes to
the extent net investment 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 Internal Revenue Code may subject interest received on
certain otherwise tax-exempt securities to an alternative minimum tax. This
alternative minimum tax may be incurred due to interest received on certain
"private activity bonds" (in general, bonds that benefit non-government
entities) issued after August 7, 1986 which, although tax-exempt, are used for
purposes other than those generally performed by government 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. The Fund anticipates that a portion of
its investments will be made in such "private activity bonds," with the result
that a portion of the exempt-interest dividends paid by the Fund will 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 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.
Under the Revenue Reconciliation Act of 1993, all or a portion of the Fund's
gain from the sale or redemption of tax-exempt obligations purchased at a
market discount after April 30, 1993 will be treated as ordinary income rather
than capital gain. This rule may increase the amount of ordinary income
dividends received by shareholders.
Within sixty days after the end of its fiscal year, the Fund will mail to its
shareholders a statement indicating the percentage of the dividend
distributions for such fiscal year which constitutes exempt-interest dividends
and the percentage, if any, that is taxable, and the percentage, if any, of the
exempt-interest dividends which constitutes an item of tax preference.
Shareholders will normally 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, if any. Distributions of long-term capital gains,
if any, are taxable as long-term capital gains, regardless of how long the
shareholder has held the Fund shares and regardless of whether the distribution
is received in additional shares or in cash. To avoid being subject to a 31%
federal backup withholding tax on taxable dividends, capital gains
distributions and proceeds of redemptions or repurchases, shareholders'
taxpayer identification numbers must be furnished and certified as to
accuracy.
Any loss on the sale or exchange of shares of the Fund which are held for six
months or less is
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disallowed to the extent of the amount of any exempt-interest dividend paid
with respect to such shares. Treasury Regulations may provide for a reduction
in such required holding periods. If a shareholder receives a distribution that
is taxed as a long-term capital gain on shares held for six months or less and
sells those shares at a loss, the loss will be treated as a long-term capital
loss.
Interest on indebtedness incurred by shareholders 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.
The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any state
or local taxing authority. Thus, shareholders ofthe Fund may be subject to
state and local taxes on exempt-interest dividends.
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 in the Fund of $1,000 over periods of one, five and ten
years, or over the life of the Fund if less than any of the foregoing. Average
annual total return reflects all income earned by the Fund, any appreciation or
depreciation of the Fund's assets, all expenses incurred by the Fund and all
sales charges which would be incurred by redeeming shareholders, 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. Such calculations may or may not reflect the
deduction of the contingent deferred sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations
(such as mutual fund performance rankings of Lipper Analytical Services, Inc.).
ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $.01 par
value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or
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obligations of the Fund, requires that Fund obligations include such
disclaimer, and provides for indemni fication and reimbursement of expenses out
of the Fund's property for any share holder 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's being unable to meet its
obligations is remote and, in theopinion of Massachusetts counsel to the Fund,
the risk to Fund shareholders of personal liability is remote.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
The Investment Manager provided the initial capital for the Fund by
purchasing 10,000 shares of the Fund for $100,000 on May 10, 1994. As of the
date of this Prospectus, the Investment Manager owned 100% of the outstanding
shares of the Fund. The Investment Manager may be deemed to control the Fund
until such time as it owns less than 25% of the outstanding shares of the Fund.
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DEAN WITTER
NATIONAL MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
110 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
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
