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Filed Pursuant to Rule 497(e)
Registration File No.: 33-53015
DEAN WITTER
NATIONAL MUNICIPAL TRUST
PROSPECTUS-NOVEMBER 21, 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 November 21, 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
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Risk Considerations and Investment Practices ......................... 8
Investment Restrictions ............................................... 10
Purchase of Fund Shares ............................................... 10
Shareholder Services .................................................. 12
Redemptions and Repurchases ........................................... 15
Dividends, Distributions and Taxes .................................... 16
Performance Information ............................................... 17
Additional Information ................................................ 18
Financial Statements--September 30, 1994 .............................. 19
Report of Independent Accountants ..................................... 25
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 OR
(800) 526-3143
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Dean Witter Distributors Inc., Distributor
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PROSPECTUS SUMMARY
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The Fund The Fund is organized as a 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 18).
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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
15-16).
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Minimum Purchase Minimum initial purchase is $1,000; minimum
subsequent purchase is $100 (see page 10).
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Investment Objective The investment objective of the Fund is to
provide a high level of current income
exempt from federal income tax, consistent
with the preservation of capital (see page
5).
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Investment Manager Dean Witter InterCapital Inc.
("InterCapital"), the Investment 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
ninety investment companies and other
portfolios with assets of approximately
$69.5 billion at October 31, 1994 (see page
5).
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Management Fee The monthly fee is at an annual rate of
0.35% of average daily net assets (see page
5).
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Dividends and Capital Gains Distributions Income dividends are declared daily and paid
monthly; capital gains, if any, may be
distributed annually or retained for
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 page
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 10-12).
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Redemption--Contingent Deferred At net asset value; redeemable involuntarily
Sales Charge if total value of the account is less than
$100. Although no commission or sales load
is imposed upon the purchase of shares, a
contingent deferred sales charge (scaled
down from 3% to 1%) is imposed on 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 15-16).
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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 pages 8-9). The Fund may
invest in lease obligations and variable
rate obligations, including residual
interest bonds, which may entail additional
risks (see pages 6-7). 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 8-9).
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</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in the Prospectus and in the Statement of Additional Information.
2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur.
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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%
</TABLE>
A contingent deferred sales charge is imposed at the following declining
rates:
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<CAPTION>
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
<CAPTION>
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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* ...................................................... 0.52%
Total Fund Operating Expenses* ....................................... 1.47%
</TABLE>
"Management Fees" as shown above, are for the fiscal period of the Fund
ending September 30, 1995. "Other Expenses," as shown above, is based upon
estimated amounts of expenses of the Fund for the fiscal period ending
September 30, 1995.
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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 ......................... $ 45 $ 57
You would pay the following expenses on the investment, assuming no redemption ... $ 15 $ 47
</TABLE>
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.
3
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FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding for the period June 2, 1994 (commencement of operations) through
September 30, 1994 have been audited by Price Waterhouse LLP, independent
accountants. The financial highlights should be read in conjunction with the
financial statements, notes thereto and the unqualified report of the
independent accountants which are contained in this Prospectus commencing on
page 21.
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FOR THE PERIOD
JUNE 2, 1994*
THROUGH SEPTEMBER
30, 1994
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ................. $10.00
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Net investment income ............................... 0.09
Unrealized loss on investments ...................... (0.13)
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Total from investment operations ..................... (0.04)
Dividends to shareholders from net investment income (0.09)
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Net asset value, end of period ....................... $ 9.87
==================
TOTAL INVESTMENT RETURN+ .............................. (0.46)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............. $29,860
Ratio of expenses to average net assets .............. 0.60%(2)(3)
Ratio of net investment income to average net assets 3.07%(2)(3)
Portfolio turnover rate .............................. 0%
<FN>
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* Commencement of operations.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above annualized expense ratio would have been
2.08% and the above annualized net investment income ratio would have
been 1.59%.
</TABLE>
See Notes to Financial Statements
4
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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 ninety investment companies, thirty
of which are listed on the New York Stock Exchange, with combined total net
assets of approximately $67.5 billion as of October 31, 1994. The Investment
Manager also manages portfolios of pension plans, other institutions and
individuals which aggregated approximately $2.0 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 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
5
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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 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
6
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"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.
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.
The Trust may invest up to 10% of its net assets in Municipal Obligations
commonly referred to as "residual interest bonds," a type of inverse floating
rate obligation. A residual interest bond usually consists of one-half of the
principal of a conventional long-term Municipal Obligation with an auction
based floater consisting of the other one-half portion. Both residual
interest bonds and auction based floaters are issued with the same final
maturity (the maturity of the conventional long-term bond). Initially, the
coupon rate of the long-term bond is divided between the residual interest
bond and auction based floater portions at market rates determined by the
issuer and the underwriter. After the initial sale of the securities, the
auction based floater interest rate is reset periodically at a Dutch auction.
The residual interest bond rate, however, is the remainder of the initial
coupon rate, or the sum of the long-term bond rate and the difference between
the long-term rate and the short-term rate. As short-term rates decline, less
of the coupon is required to fund the auction based floater and more is
available for the residual interest bond, the interest rate of which rises.
Conversely, if short-term rates increase, more of the coupon rate is required
to fund the auction based floater and less is available for the residual
interest bond, the rate of which decreases along with the market price.
The market price of residual interest bonds is more volatile than ordinary
Municipal Obligations of similar maturity. However, if held to maturity, the
principal investment made in the residual interest bond is not at risk. In a
period of rising short-term rates, a residual interest bond holder can
purchase an auction based floater and link the two securities, thereby
establishing a single, long-term fixed rate Municipal Obligation with the
original fixed coupon rate and which trades as a regular Municipal
Obligation. If there is a significant rise in short-term rates relative to
long-term rates and such linking procedure is not done, the interest rate
payable on the residual interest bond could conceivably fall to 0%.
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
7
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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.
RISK CONSIDERATIONS AND
INVESTMENT PRACTICES
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.
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.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may enter into financial
futures contracts ("futures contracts"), options on such futures and
municipal bond index futures contracts for hedging purposes. 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 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 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
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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 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.
For a discussion of the risks of certain types of Municipal Obligations,
such as lease obligations and residual interest bonds, see above in
"Investment Objectives and Policies."
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 September 30, 1994. 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 current evaluation of an issuer's ability to meet its
debt obligations in the future, and the Investment Manager's current
assessment of future changes in the levels of interest rates on tax-exempt
securities of varying maturities. 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
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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 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 of 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 an account
executive of DWR or other Selected Broker-Dealer. 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
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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 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 various types of 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 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 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 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.
For the fiscal period ended September 30, 1994, the Fund accrued payments
under the Plan amounting to $36,430 which amount is equal to 0.60% of the
Fund's average daily net assets for the fiscal year. The payments accrued
under the Plan were calculated pursuant to clause (b) of the compensation
formula under the Plan.
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. The Distributor has advised the Fund that such excess amounts,
including the carrying charge described above, totalled $922,268 at September
30, 1994 which was equal to 3.09% of the Fund's net assets on such date.
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
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<PAGE>
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 the Fund 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 sale price on the commodities exchange on
which they trade unless the Board of Trustees 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
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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 admin-istration, 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 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 Deferred 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.
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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.
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 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 "Divi-dends,
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 Privilege by contacting their DWR or other Selected Broker-Dealer
account executive (no Exchange Privilege Authorization Form is required).
Other shareholders (and those shareholders who are clients of DWR or another
Selected Broker-Dealer but who wish to make exchanges directly by writing or
telephoning the Transfer Agent) must complete and forward to the Transfer
Agent an Exchange Privilege Authorization Form, copies of which may be
obtained from the Transfer Agent, to initiate an exchange. If the
Authorization Form is used, exchanges may be made 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.
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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>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR SINCE PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE 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 redemption;
(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 and/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 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 per share 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."
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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, together 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 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
16
<PAGE>
<PAGE>
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 their accuracy.
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 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 of the 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
17
<PAGE>
<PAGE>
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 obligations of the
Fund, requires that Fund obligations 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's 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.
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.
18
<PAGE>
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
Portfolio of Investments September 30, 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (60.2%)
GENERAL OBLIGATION (11.2%)
$1,000 Santa Margarita/Dana Point Authority, California, Impr Dists #3, 3A, 4
& 4A 1994 Ser B Refg (MBIA Insured) .................................. 5.75% 8/ 1/20 $ 905,440
500 Florida Board of Education, Cap Outlay Ser 1994 A ..................... 6.10 6/ 1/24 481,875
1,000 Atlanta, Georgia, Public Impr Ser 1994 A .............................. 6.125 12/ 1/23 954,880
1,000 Chelsea, Massachusetts, School Act of 1948 (AMBAC Insured) ........... 6.50 6/15/12 1,013,780
- ----------- ------------
3,500 3,355,975
- ----------- ------------
EDUCATIONAL FACILITIES REVENUE (6.4%)
1,000 California Educational Facilities Authority, Claremont Colleges Ser
1992 6.375 5/ 1/22 960,500
500 New York State Dormitory Authority, City University 1994 Ser 1 (AMBAC
Insured) ............................................................. 6.30 7/ 1/24 494,960
500 Rhode Island Health & Educational Building Corporation, Providence
College Ser 1993 (MBIA Insured) ...................................... 5.60 11/ 1/15 442,945
- ----------- ------------
2,000 1,898,405
- ----------- ------------
ELECTRIC REVENUE (6.1%)
900 Sacramento Municipal Utility District, California, Refg 1994 Ser I
(MBIA Insured) ....................................................... 5.75 1/ 1/15 830,160
1,000 Austin, Texas, Combined Utility Refg Ser 1994 (FGIC Insured) (a) ..... 6.25 5/15/16 981,320
- ----------- ------------
1,900 1,811,480
- ----------- ------------
HOSPITAL REVENUE (7.9%)
500 Rancho Mirage Joint Powers Financing Authority, California, Eisenhower
Memorial Hospital COPs ............................................... 7.00 3/ 1/22 500,640
300 Maryland Health & Higher Educational Facilities Authority, Kernan
Hospital Ser 1994 (Connie Lee Insured) ............................... 6.10 7/ 1/24 283,125
New Hampshire Higher Educational & Health Facilities Authority,
300 The Hitchcock Clinic Ser 1994 (MBIA Insured) ......................... 6.00 7/ 1/24 277,734
1,300 St Joseph Hospital Ser 1994 (Connie Lee Insured) ..................... 6.35 1/ 1/07 1,308,385
- ----------- ------------
2,400 2,369,884
- ----------- ------------
MORTGAGE REVENUE --MULTI-FAMILY (3.3%)
1,000 Massachusetts Housing Finance Agency, Rental 1994 Ser A (AMT) (AMBAC
Insured) ............................................................. 6.65 7/ 1/19 986,710
- ----------- ------------
MORTGAGE REVENUE --SINGLE FAMILY (6.6%)
1,000 Tennessee Housing Development Agency, Mtge Finance 1994 Ser B (AMT) .. 6.55 7/ 1/19 967,790
1,000 Utah Housing Finance Agency, Federally Insured Guaranteed 1994
Issue E (AMT) (a) .................................................... 6.50 7/ 1/26 986,640
- ----------- ------------
2,000 1,954,430
- ----------- ------------
TRANSPORTATION FACILITIES REVENUE (2.7%)
850 Regional Transportation Authority, Illinois, Ser 1994 A .............. 6.25 6/ 1/15 816,595
- ----------- ------------
WATER & SEWER REVENUE (12.8%)
1,000 Birmingham Waterworks & Sewer Board, Alabama, Ser 1994 ................ 6.00 1/ 1/20 941,770
1,000 Castaic Lake Water Agency, California, Refg Ser 1994 A COPs (MBIA
Insured) ............................................................. 6.00 8/ 1/18 948,970
1,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA Insured) ................. 6.375 1/ 1/24 974,660
500 Indiana Bond Bank, Revolving Fund Ser 1994 A .......................... 6.00 2/ 1/16 464,245
500 Santa Fe, New Mexico, Ser 1994 A (AMBAC Insured) ...................... 6.30 6/ 1/24 492,030
- ----------- ------------
4,000 3,821,675
- ----------- ------------
<PAGE>
OTHER REVENUE (3.2%)
1,000 New Jersey Economic Development Authority, Market Transition Sr ......
Lien Ser 1994 A (MBIA Insured) ....................................... 5.875% 7/ 1/11 967,310
- ----------- ------------
18,650 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $18,347,323) ................... 17,982,464
- ----------- ------------
19
<PAGE>
<PAGE>
<CAPTION>
DEAN WITTER NATIONAL MUNICIPAL TRUST
Portfolio of Investments September 30, 1994 (continued)
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS (40.5%)
$ 600 California Health Care Facilities Financing Authority, St Joseph
Health Ser B (Tender 10/3/94) ........................................ 3.50*% 7/ 1/13 $ 600,000
800 District of Columbia, General Fund Recovery Ser B-3
(Tender 10/3/94) ..................................................... 3.95* 6/ 1/03 800,000
500 Illinois Health Facilities Authority, Franciscan Sisters Corp Ser 1992
(Tender 10/3/94) ..................................................... 3.80* 1/ 1/18 500,000
1,000 Indiana Hospital Equipment Financing Authority, Ser 1985
(MBIA Insured) (Tender 10/5/94) ...................................... 3.65* 12/ 1/15 1,000,000
800 Louisiana Offshore Terminal Authority, LOOP Inc Ser 1992 A (Tender
10/3/94) ............................................................. 3.60* 9/ 1/08 800,000
1,000 Delta County Economic Development Corporation, Michigan, Mead Escanaba
Paper Ser E (Tender 10/3/94) ......................................... 3.95* 12/ 1/23 1,000,000
700 Harrison County, Mississippi, E I Du Pont de Nemours & Co Ser 1990
(Tender 10/3/94) ..................................................... 3.60* 9/ 1/10 700,000
900 New York City, New York, 1992 Ser D (FGIC Insured) (Tender 10/3/94) .. 3.95* 2/ 1/22 900,000
1,200 Port Authority of New York & New Jersey, Ser 2** (Tender 10/3/94) .... 3.90* 5/ 1/19 1,200,000
1,300 Gulf Coast Waste Disposal Authority, Texas, Amoco Oil Co Ser 1992
(Tender 10/3/94) ..................................................... 3.50* 10/ 1/17 1,300,000
1,300 Salt Lake County, Utah, Service Station Holdings British Petroleum Inc
Ser 1994 (Tender 10/3/94) ............................................ 3.95* 2/ 1/08 1,300,000
1,300 Washington Health Care Facilities Authority, Sisters of Providence Ser
1985 E (Tender 10/3/94) .............................................. 4.00* 10/ 1/05 1,300,000
700 Platte County, Wyoming, Tri-State Generation & Transmission Assn Inc
Ser 1984 B (Tender 10/3/94) .......................................... 3.65* 7/ 1/14 700,000
- ----------- ------------
12,100 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (IDENTIFIED COST $12,100,000) . 12,100,000
- ----------- ------------
$30,750 TOTAL INVESTMENTS (IDENTIFIED COST $30,447,323) (B) ................... 100.7% 30,082,464
===========
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ........................ (0.7) (222,712)
------ ------------
NET ASSETS ............................................................ 100.0% $29,859,752
====== ============
<FN>
- ---------------
AMT Alternative Minimum Tax
COPs Certificates of Participation
* Variable or floating rate securities. Coupon rate shown reflects current
rate.
** Jointly issued within New York and New Jersey.
(a) Security purchased on a when issued basis.
(b) The aggregate cost for federal income tax purposes is $30,447,323; the
aggregate gross unrealized depreciation is $364,859.
</TABLE>
See Notes to Financial Statements
20
<PAGE>
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
Financial Statements
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $30,447,323)(Note 1) .... $30,082,464
Cash ....................................... 1,188,817
Receivable for:
Shares of beneficial interest sold ....... 501,902
Interest .................................. 279,872
Deferred organizational expenses (Note 1) . 143,880
-------------
Total Assets ............................... 32,196,935
-------------
LIABILITIES:
Payable for:
Investments purchased ..................... 2,006,715
Shares of beneficial interest repurchased 165,949
Organizational expenses payable (Note 1) .. 143,880
Plan of distribution fee payable (Note 3) . 13,520
Dividends to shareholders .................. 7,119
-------------
Total Liabilities .......................... 2,337,183
-------------
NET ASSETS:
Paid-in-capital ............................ 30,224,611
Unrealized depreciation on investments .... (364,859)
-------------
Net Assets ................................. $29,859,752
=============
Net Asset Value Per Share, 3,024,810 shares
outstanding (unlimited authorized shares
of $.01 par value) ........................ $9.87
=============
<CAPTION>
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the period
June 2, 1994 through September 30, 1994 (Note 1)
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest Income ........................... $ 222,934
-------------
Expenses
Professional fees ........................ 40,500
Plan of distribution fee (Note 3) ....... 36,430
Investment management fee (Note 2) ...... 21,252
Registration fees ........................ 10,404
Organizational expenses (Note 1) ........ 10,120
Transfer agent fees and expenses (Note 4) 4,879
Other .................................... 2,589
-------------
Total Expenses before Amounts
Waived/Assumed ......................... 126,174
Less: Amounts Waived/Assumed by
Investment Manager (Note 2) ............. (89,744)
-------------
Total Expenses after Amounts
Waived/Assumed ......................... 36,430
-------------
Net Investment Income ................... 186,504
-------------
UNREALIZED LOSS ON INVESTMENTS (Note 1) ... (364,859)
-------------
Net Decrease in Net Assets Resulting
from Operations ...................... $(178,355)
=============
<PAGE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------
FOR THE PERIOD JUNE 2,
1994 THROUGH SEPTEMBER
30, 1994 (NOTE 1)
-------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................................................. $ 186,504
Unrealized depreciation on investments ................................ (364,859)
-------------
Net decrease in net assets resulting from operations ................. (178,355)
Dividends to shareholders from net investment income ................... (186,504)
Net increase from transactions in shares of beneficial interest (Note 5) 30,124,611
-------------
Total increase ....................................................... 29,759,752
NET ASSETS:
Beginning of period ................................................... 100,000
-------------
End of period ......................................................... $29,859,752
=============
</TABLE>
See Notes to Financial Statements
21
<PAGE>
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
Notes to Financial Statements
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--Dean Witter National Municipal Trust
(the "Fund") is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a diversified, open-end management investment
company. The Fund was organized as a Massachusetts business trust on March
29, 1994 and on May 10, 1994 issued 10,000 shares of beneficial interest for
$100,000 to Dean Witter InterCapital Inc. (the "Investment Manager") to
effect the Fund's initial capitalization. The Fund commenced operations on
June 2, 1994.
The following is a summary of significant accounting policies:
A. Valuation of Investments--Portfolio securities are valued for the Fund
by an outside independent pricing service approved by the Trustees. The
pricing service has informed the Fund that in valuing the Fund's portfolio
securities, it uses both a computerized matrix of tax-exempt securities and
evaluations by its staff, in each case based on information concerning market
transactions and quotations from dealers which reflect the bid side of the
market each day. The Fund's portfolio securities are thus valued by reference
to a combination of transactions and quotations for the same or other
securities believed to be comparable in quality, coupon, maturity, type of
issue, call provisions, trading characteristics and other features deemed to
be relevant. Short-term debt securities having a maturity date of more than
sixty days are valued on a mark-to-market basis, that is, at prices based on
market quotations for securities of a similar type, yield, quality and
maturity, 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 on the identified cost
method. The Fund amortizes premiums and discounts on securities purchased
over the life of the respective securities. Interest income is accrued daily.
C. Federal Income Tax Status--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders--The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. Organizational Expenses--The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $154,000. The Fund will
reimburse the Investment Manager for these expenses, exclusive of any amounts
assumed by the Investment Manager, which have been deferred and are being
amortized by the Fund on 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 with Dean Witter InterCapital Inc., the Fund pays its Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.35% 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.
22
<PAGE>
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
Notes to Financial Statements (continued)
- -----------------------------------------------------------------------------
The Investment Manager has undertaken to assume all expenses (except for
the Plan of Distribution fee and brokerage fees) and waive the compensation
provided for in the Agreement until such time as the Fund has $50 million of
net assets or until December 2, 1994, whichever occurs first.
3. PLAN OF DISTRIBUTION--Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to
Rule 12b-1 under the Act pursuant to which the Fund pays the Distributor
compensation, 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 Fund's inception (not including reinvestment of dividends or
capital gains 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 upon which such charge
has been waived; or (b) the Fund's average daily net assets. Amounts paid
under the Plan are paid to the Distributor to compensate it for the services
provided and the expenses borne by it 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 account executives of
Dean Witter Reynolds Inc., an affiliate of the Investment Manager and
Distributor, and other employees or other selected broker-dealers who engage
in or support distribution of the Fund's shares or who service shareholder
accounts, 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 be compensated under the Plan for its
opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred but not yet recovered may be recovered through future distribution
fees from the Fund and contingent deferred sales charges from the Fund's
shareholders.
The Distributor has informed the Fund that for the period ended September
30, 1994, it received approximately $4,100 in contingent deferred sales
charges from certain redemptions of the Fund's shares. The Fund's
shareholders pay such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the period ended September 30,1994 aggregated
$18,346,944 and $0, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1994, the Fund
had transfer agent fees and expenses payable of approximately $1,800.
5. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 2,
1994* THROUGH SEPTEMBER
30,1994
--------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C>
Sold ...................... 3,078,785 $30,761,843
Reinvestment of dividends 11,037 109,831
----------- -------------
3,089,822 30,871,674
Repurchased ............... (75,012) (747,063)
----------- -------------
Net increase .............. 3,014,810 $30,124,611
=========== =============
</TABLE>
- ---------------
*Commencement of operations.
23
<PAGE>
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
Notes to Financial Statements (continued)
- -----------------------------------------------------------------------------
6. SELECTED PER SHARE DATA AND RATIOS--See the "Financial Highlights" table
on page 4 of this Prospectus.
- -------------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
September 30, 1994
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<TABLE>
<CAPTION>
<S> <C>
Alabama ........... 3.1%
California ........ 15.9
District of
Columbia .......... 2.7
Florida ........... 1.6
Georgia ........... 3.2
Illinois .......... 7.7
Indiana ........... 4.9
Louisiana ......... 2.7
Maryland .......... 1.0%
Massachusetts ..... 6.7
Michigan .......... 3.4
Mississippi ....... 2.3
New Hampshire ..... 5.3
New Jersey ........ 3.2
New Mexico ........ 1.7
New York .......... 4.7
Rhode Island ...... 1.5%
Tennessee ......... 3.2
Texas ............. 7.6
Utah .............. 7.7
Washington ........ 4.3
Wyoming ........... 2.3
Jointly issued .... 4.0
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Total ............ 100.7%
=======
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</TABLE>
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1994 FEDERAL TAX NOTICE (unaudited)
During the period ended September 30, 1994, the Fund paid to shareholders
$.086778 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.
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24
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DEAN WITTER NATIONAL MUNICIPAL TRUST
Report of Independent Accountants
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To the Shareholders and Trustees of Dean Witter National 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
(appearing in the "Financial Highlights" table on page 4 of this Prospectus)
present fairly, in all material respects, the financial position of Dean
Witter National Municipal Trust (the "Fund") at September 30, 1994, and the
results of its operations, the changes in its net assets, and the financial
highlights for the period June 2, 1994 (commencement of operations) through
September 30, 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 audit. We conducted our audit 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 audit,
which included confirmation of securities owned at September 30, 1994 by
correspondence with the custodian and a broker, provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
November 8, 1994
25
<PAGE>
<PAGE>
DEAN WITTER
NATIONAL MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
BOARD OF 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 W. Willison
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
