AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 1995
REGISTRATION NO.: 33-53015
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 2 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 3 [X]
DEAN WITTER NATIONAL MUNICIPAL TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT FILED THE RULE 24F-2 NOTICE
FOR ITS FISCAL YEAR ENDING SEPTEMBER 30, 1995 WITH THE SECURITIES AND
EXCHANGE COMMISSION ON NOVEMBER 17, 1995.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM
N-1A
ITEM CAPTION
- -------------------------------------------- -------------------------------------------------------
PART A PROSPECTUS
- -------------------------------------------- -------------------------------------------------------
<S> <C>
1. ......................................... Cover Page
2. ......................................... Prospectus Summary; Summary of Fund Expenses
Financial Highlights; Performance Information;
3. ......................................... Financial Statements
Investment Objective and Policies; The Fund and its
Management; Cover Page; Investment Restrictions;
4. ......................................... Prospectus Summary; Financial Highlights
The Fund and Its Management; Back Cover; Investment
5. ......................................... Objective and Policies
Dividends, Distributions and Taxes; Additional
6. ......................................... Information
7. ......................................... Purchase of Fund Shares; Shareholder Services
8. ......................................... Redemptions and Repurchases; Shareholder Services
9. ......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
- -------------------------------------------- -------------------------------------------------------
10. ........................................ Cover Page
11. ........................................ Table of Contents
12. ........................................ The Fund and Its Management
Investment Practices and Policies; Investment
13. ........................................ Restrictions; Portfolio Transactions and Brokerage
14. ........................................ The Fund and Its Management; Trustees and Officers
15. ........................................ Trustees and Officers
The Fund and Its Management; The Distributor;
Shareholder Services; Custodian and Transfer Agent;
16. ........................................ Independent Accountants
17. ........................................ Portfolio Transactions and Brokerage
18. ........................................ Description of Shares
The Distributor; Redemptions and Repurchases;
19. ........................................ Shareholder Services
20. ........................................ Dividends, Distributions and Taxes
21. ........................................ Purchase of Fund Shares
22. ........................................ Dividends, Distributions and Taxes
23. ........................................ Performance Information
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
NOVEMBER 22, 1995
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 22, 1995, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone numbers listed below.
The Statement of Additional Information is incorporated herein by reference.
Dean Witter
National Municipal Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll free)
TABLE OF CONTENTS
Prospectus Summary/ 2
Summary of Fund Expenses/ 3
Financial Highlights/ 4
The Fund and its Management/ 4
Investment Objective and Policies/ 5
Risk Considerations and Investment Practices/ 8
Investment Restrictions/ 10
Purchase of Fund Shares/ 11
Shareholder Services/ 13
Redemptions and Repurchases/ 16
Dividends, Distributions and Taxes/ 18
Performance Information/ 19
Additional Information/ 20
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and
Fund is an open-end diversified management investment company investing principally in
investment grade, tax-exempt fixed-income securities (see page 4).
- ------------------ ----------------------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $0.01 par value (see page 20).
- ------------------ ----------------------------------------------------------------------------------------
Offering Price At net asset value (see page 11). Shares redeemed within three years of purchase are
subject to a contingent deferred sales charge under most circumstances (see pages
16-17).
- ------------------ ----------------------------------------------------------------------------------------
Minimum Minimum initial purchase is $1,000; minimum subsequent purchase is $100 (see page 11).
Purchase
- ------------------ ----------------------------------------------------------------------------------------
Investment The investment objective of the Fund is to provide a high level of current income exempt
Objective from federal income tax, consistent with the preservation of capital (see page 5).
- ------------------ ----------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and
Manager its wholly-owned subsidiary, Dean Witter Services Company Inc., serve in various
investment management, advisory, management and administrative capacities to ninety-six
investment companies and other portfolios with assets of approximately $76.9 billion at
October 31, 1995 (see page 5).
- ------------------ ----------------------------------------------------------------------------------------
Management Fee The monthly fee is at an annual rate of 0.35% of average daily net assets (see page 5).
- ------------------ ----------------------------------------------------------------------------------------
Dividends and Income dividends are declared daily and paid monthly; capital gains, if any, may be
Capital Gains distributed annually or retained for reinvestment by the Fund. Dividends and
Distributions distributions are automatically reinvested in additional shares at net asset value
(without sales charge), unless the shareholder elects to receive cash (see page 18).
- ------------------ ----------------------------------------------------------------------------------------
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 11-12).
- ------------------ ----------------------------------------------------------------------------------------
Redemption-- At net asset value; redeemable involuntarily if total value of the account is less than
Contingent $100. Although no commission or sales load is imposed upon the purchase of shares, a
Deferred contingent deferred sales charge (scaled down from 3% to 1%) is imposed on any
Sales redemption of shares if after such redemption the aggregate current value of an account
Charge 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 16-17).
- ------------------ ----------------------------------------------------------------------------------------
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 which may entail additional risks
(see pages 7-8). 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).
- ------------------ ----------------------------------------------------------------------------------------
</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
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth are for the fiscal
year ended September 30, 1996.
<TABLE>
<CAPTION>
<S> <C>
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:
<TABLE>
<CAPTION>
<S> <C>
Year Since Purchase Payment Made Percentage
- ----------------------------------- --------------
First .............................. 3.0%
Second ............................. 2.0%
Third .............................. 1.0%
Fourth and thereafter .............. None
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
Management Fees* ......................................................... 0.08%
12b-1 Fees** ............................................................. 0.60%
Other Expenses* .......................................................... 0.29%
Total Fund Operating Expenses* ........................................... 0.97%
=========
</TABLE>
- ------------
"Management Fees" (after fee waiver), "12b-1 fees" and "Other Expenses"
(after expense assumptions) as shown above are based upon estimated amounts
of management fees, 12b-1 fees and other expenses of the Fund for the fiscal
year ending September 30, 1996.
* 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 December 31, 1995, and, from January 1, 1996
through December 31, 1996, has undertaken to waive management fees and assume
expenses (except for brokerage and 12b-1 fees) to the extent they exceed
0.50% of the daily net assets of the Fund. For the fiscal year ended September
30, 1995, the Fund's total operating expenses, consisting only of 12b-1 fees,
amounted to 0.60% of the Fund's daily net assets.
** 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 (see "Purchase of Fund Shares").
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period ......................................... $40 41 54 54
You would pay the following expenses on the investment,
assuming no redemption ...................................... $10 $31 119 119
</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.
It is estimated that Total Fund Operating Expenses for the Fund for the
fiscal year ending September 30, 1996, assuming no waiver of management fees
or assumption of expenses would be:
<TABLE>
<CAPTION>
<S> <C>
Management Fees .............. 0.35%
12b-1 Fees ................... 0.60%
Other Expenses ............... 0.39%
-------
Total Fund Operating Expenses 1.34%
=======
</TABLE>
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 equiv- alent of the maximum front-end
sales charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of the independent accountants which are contained in the Statement of
Additional Information.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JUNE 2, 1994*
ENDED SEPTEMBER THROUGH SEPTEMBER
30, 1995 30, 1994
----------------- ------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ....... $ 9.87 $10.00
----------------- ------------------
Net investment income ....................... 0.50 0.09
Net realized and unrealized gain (loss) .... 0.52 (0.13)
----------------- ------------------
Total from investment operations ............ 1.02 (0.04)
Dividends from net investment income ....... (0.50) (0.09)
----------------- ------------------
Net asset value, end of period .............. $10.39 $ 9.87
================= ==================
TOTAL INVESTMENT RETURN + ................... 10.54% (0.46)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... 0.60%(4) 0.60%(2)(3)
Net investment income ....................... 4.93%(4) 3.07%(2)(3)
SUPPLEMENTAL DATA:
Net asset value, end of period, in thousands $64,276 $29,860
--
%
Portfolio turnover rate ..................... 2%
</TABLE>
- ------------
* Commencement of operations .
Does not reflect the deduction of sales charge.
(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 and net investment
income ratios would have been 2.08% and 1.59%, respectively.
(4) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above expense and net investment income
ratios would have been 1.34% (which includes 0.01% gross-up for
custody cash credits) and 4.20%, respectively.
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
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.
4
<PAGE>
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-six investment companies,
thirty of which are listed on the New York Stock Exchange, with combined
total net assets of approximately $74.5 billion as of October 31, 1995. The
Investment Manager also manages portfolios of pension plans, other
institutions and individuals which aggregated approximately $2.4 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 December 31, 1995, and, from
January 1, 1996 through December 31, 1996, has undertaken to waive management
fees and expenses (except for brokerage and 12b-1 fees) to the extent they
exceed 0.50% of the daily net assets of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
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
5
<PAGE>
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
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 Fund may also purchase Municipal
Obligations which had originally been issued by the same issuer as two
separate series of the same issue with different interest rates, but which
are now linked together to form one series.
The two principal classifications of Municipal Obligations and Commercial
Paper are "general
6
<PAGE>
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 "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 foregoing percentage and rating policies apply at the time of
acquisition of a security based
7
<PAGE>
on the last previous determination of the Fund's net asset value. Any
subsequent change in any rating by a rating service or change in percentages
resulting from market fluctuations or other changes in the Fund's total
assets will not require elimination of any security from the Fund's portfolio
until such time as the Investment Manager determines that it is practicable
to sell the security without undue market or tax consequences to the Fund.
The ratings assigned by Moody's and S&P represent their opinions as to the
quality of the securities which they undertake to rate (see the Appendix to
the Statement of Additional Information). It should be emphasized, however,
that the ratings are general and not absolute standards of quality.
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
8
<PAGE>
at the point of sale, there are not daily payments of cash to reflect the
change in the value of the underlying contract as there are by a purchaser or
seller of a futures contract. The value of the option does change and is
reflected in the net asset value of the Fund.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject
to futures contracts may correlate imperfectly with the behavior of the cash
prices of the Fund's portfolio securities. The risk of imperfect correlation
may be increased by the fact that the Fund will invest in futures contracts
on taxable securities and there is no guarantee that the prices of taxable
securities will move in a similar manner to the prices of tax-exempt
securities. The correlation may be distorted by the fact that the futures
market is dominated by short- term traders seeking to profit from the
difference between a contract or security price objective and their cost of
borrowed funds. Such distortions are generally minor and would diminish as
the contract approached maturity.
Another risk is that the Investment Manager could be incorrect in its
expectations as to the direction or extent of various interest rate movements
or the time span within which the movements take place. For example, if the
Fund sold futures contracts for the sale of securities in anticipation of an
increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Fund would lose money on the sale.
In addition to the risks that apply to all options transactions (see the
Statement of Additional Information for a description of the characteristics
of, and the risks of investing in, options on debt securities), there are
several special risks relating to options on futures; in particular, the
ability to establish and close out positions on options on futures will be
subject to the development and maintenance of a liquid secondary market. It
is not certain that this market will develop or be maintained.
Municipal Bond Index Futures. The Fund may utilize municipal bond index
futures contracts and options thereon for hedging purposes. The Fund's
strategies in employing such contracts will be similar to that discussed
above with respect to financial futures and options thereon. A municipal bond
index is a method of reflecting in a single number the market value of many
different municipal bonds and is designed to be 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
9
<PAGE>
deems relevant. The Fund is managed within InterCapital's Tax-Exempt Income
Group, which manages 40 tax-exempt municipal funds and fund portfolios, with
approximately $10.6 billion in assets as of October 31, 1995. James F.
Willison, Senior Vice President of InterCapital and Manager of InterCapital's
Tax-Exempt 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 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
Infor- mation.
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).
10
<PAGE>
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 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.
Analogous Dean Witter Funds. The Distributor and the Investment Manager
serve in the same capacities for Dean Witter Tax-Exempt Securities Trust, an
open-end investment company with investment objectives and policies similar
to those of the Fund. Unlike the Fund, however, shares of Dean Witter
Tax-Exempt Securities Trust are offered to the public with a sales charge
imposed at the time of purchase, rather than a contingent deferred sales
charge assessed upon redemptions within three years of purchase. These two
Dean Witter Funds have differing fees and expenses, which will affect
performance. Investors who would like to receive a prospectus for Dean Witter
Tax-Exempt Securities Trust should call the telephone numbers listed on the
front cover of this Prospectus, or may call their account executive for
additional information.
11
<PAGE>
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 year ended September 30, 1995, the Fund accrued payments
under the Plan amounting to $271,201 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 (a) 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 $1,667,655 at
September 30, 1995 which was equal to 2.59% 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 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 (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting 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.
12
<PAGE>
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.
EasyInvestSM. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund.
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September, December) checks in any dollar amount, not less than $25, or in
any whole percentage of the account balance, on an annualized basis.
13
<PAGE>
Any applicable contingent deferred sales charge will be imposed on shares
redeemed under the Withdrawal Plan (See "Redemptions and Repurchases--
Contingent Deferred Sales Charge"). Therefore, any shareholder participating
in the Withdrawal Plan will have sufficient shares redeemed from his or her
account so that the proceeds (net of any applicable contingent deferred sales
charge) to the shareholder will be the designated monthly or quarterly
amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
Tax-Sheltered Retirement Plans. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the
Transfer Agent.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of other Dean Witter
Funds sold with a contingent deferred sales charge ("CDSC funds"), and for
shares of Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited
Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced
Income Fund, Dean Witter Balanced Growth Fund, Dean Witter Intermediate Term
U.S. Treasury Trust and five Dean Witter Funds which are money market funds
(the foregoing eleven 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.)
14
<PAGE>
In addition, shares of the Fund may be acquired in exchange for shares of
certain Dean Witter Funds sold with a front-end sales charge ("front-end
sales charge funds"), but shares of the Fund, however acquired, may not be
exchanged for shares of front-end sales charge funds. Shares of a CDSC fund
acquired in exchange for shares of a front-end sales charge fund (or in
exchange for shares of other Dean Witter Funds for which shares of a
front-end sales charge fund have been exchanged) are not subject to any CDSC
upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of the Fund and its other shareholders, investors 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 "Dividends,
Distributions and Taxes"). The Exchange Privilege is only available in states
where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean
Witter Funds (for which the Exchange Privilege is available) pursuant to this
Exchange 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) 869-NEWS (toll free). The Fund will employ reasonable
procedures to confirm that exchange instructions communicated over the
telephone are genuine. Such procedures may include requiring various forms of
personal identification such as name, mailing address, social security or
other tax identification number and DWR or other
15
<PAGE>
Selected Broker-Dealer account number (if any). Telephone instructions may
also be recorded. If such procedures are not employed, the Fund may be liable
for any losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m.and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request (see "Redemptions and Repurchases"). Shareholders are
advised that during periods of drastic economic or market changes, it is
possible that the telephone exchange procedures may be difficult to
implement, although this has not been the case with the Dean Witter Funds in
the past.
For further information regarding the Exchange Privilege, shareholders
should contact their account executive or the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds
will be reduced by the amount of any applicable contingent deferred sales
charges (see below). If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption, along with any additional
information required by the Transfer Agent.
Contingent Deferred Sales Charge. Shares of the Fund which are held three
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than three years after purchase may,
however, be subject to a charge upon redemption. This charge is called a
"contingent deferred sales charge" ("CDSC"), which will be a percentage of
the dollar amount of shares redeemed and will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The size of this percentage will depend upon how long the shares
have been held, as set forth in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
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
16
<PAGE>
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."
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.
17
<PAGE>
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 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
18
<PAGE>
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 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
19
<PAGE>
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.
Code of Ethics. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and option transactions and profiting on
short-term trading (that is, a purchase within sixty days of a sale or a sale
within sixty days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within thirty days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the recent report by the Investment Company Institute
Advisory Group on Personal Investing.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
20
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
Dean Witter Liquid Asset Fund Inc.
Dean Witter Tax-Free Daily Income Trust
Dean Witter U.S. Government Money Market Trust
Dean Witter California Tax-Free Daily Income Trust
Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Natural Resource Development Securities Inc.
Dean Witter Dividend Growth Securities Inc.
Dean Witter Developing Growth Securities Trust
Dean Witter World Wide Investment Trust
Dean Witter Value-Added Market Series
Dean Witter Utilities Fund
Dean Witter Capital Growth Securities
Dean Witter European Growth Fund Inc.
Dean Witter Precious Metals and Minerals Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter International SmallCap Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
Dean Witter National Municipal Trust
Dean Witter High Income Securities
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Intermediate Term U.S. Treasury Trust
DEAN WITTER RETIREMENT SERIES
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
ASSET ALLOCATION FUNDS
Dean Witter Managed Assets Trust
Dean Witter Strategist Fund
Dean Witter Global Asset Allocation Fund
ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
<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
Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
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.
DEAN WITTER
NATIONAL
MUNICIPAL
TRUST
PROSPECTUS--NOVEMBER 22, 1995
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 22, 1995
DEAN WITTER
NATIONAL
MUNICIPAL
TRUST
- -----------------------------------------------------------------------------
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 Practices and Policies.")
A Prospectus for the Fund dated November 22, 1995, which provides the
basic information you should know before investing in the Fund, may be
obtained without charge from the Fund at its address or telephone numbers
listed below or from the Fund's Distributor, Dean Witter Distributors Inc.,
or from Dean Witter Reynolds Inc. at any of its branch offices. This
Statement of Additional Information is not a Prospectus. It contains
information in addition to and more detailed than that set forth in the
Prospectus. It is intended to provide additional information regarding the
activities and operations of the Fund, and should be read in conjunction with
the Prospectus.
Dean Witter
National Municipal Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management ...................... 3
Trustees and Officers ............................ 6
Investment Practices and Policies ................ 12
Investment Restrictions .......................... 18
Portfolio Transactions and Brokerage ............. 19
The Distributor .................................. 20
Determination of Net Asset Value ................. 23
Shareholder Services ............................. 24
Redemptions and Repurchases ...................... 28
Dividends, Distributions and Taxes ............... 31
Performance Information .......................... 32
Description of Shares ............................ 34
Custodian and Transfer Agent ..................... 34
Independent Accountants .......................... 35
Reports to Shareholders .......................... 35
Legal Counsel .................................... 35
Experts .......................................... 35
Registration Statement ........................... 35
Financial Statements -- September 30, 1995 ....... 36
Report of Independent Accountants ................ 46
Appendix ......................................... 47
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund was organized as a Massachusetts business trust on March 29,
1994.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or
"InterCapital"), whose address is Two World Trade Center, New York, New York
10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation.
In an internal reorganization which took place in January, 1993, InterCapital
assumed the investment advisory, administrative and management activities
previously performed by the InterCapital Division of Dean Witter Reynolds
Inc. ("DWR"), a broker-dealer affiliate of InterCapital. (As hereinafter used
in this Statement of Additional Information, the terms "InterCapital" and
"Investment Manager" refer to DWR's InterCapital Division prior to the
internal reorganization and to Dean Witter InterCapital Inc. thereafter.) The
daily management of the Fund and research relating to the Fund's portfolio is
conducted by or under the direction of officers of the Fund and of the
Investment Manager, subject to periodic review by the Fund's Board of
Trustees. In addition, Trustees of the Fund provide guidance on economic
factors and interest rate trends. Information as to these trustees and
officers is contained under the caption "Trustees and Officers."
InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., Dean Witter High Yield Securities Inc.,
Dean Witter Tax-Free Daily Income Trust, Dean Witter Developing Growth
Securities Trust, Dean Witter American Value Fund, Dean Witter Dividend
Growth Securities Inc., Dean Witter Natural Resource Development Securities
Inc., Dean Witter U.S. Government Money Market Trust, Dean Witter California
Tax-Free Income Fund, Dean Witter Variable Investment Series, Dean Witter
World Wide Investment Trust, Dean Witter Select Municipal Reinvestment Fund,
Dean Witter U.S. Government Securities Trust, Dean Witter New York Tax-Free
Income Fund, Dean Witter Convertible Securities Trust, Dean Witter Federal
Securities Trust, Dean Witter Value-Added Market Series, High Income
Advantage Trust, High Income Advantage Trust II, High Income Advantage Trust
III, Dean Witter Government Income Trust, Dean Witter California Tax-Free
Daily Income Trust, Dean Witter Utilities Fund, Dean Witter Managed Assets
Trust, Dean Witter Strategist Fund, Dean Witter World Wide Income Trust, Dean
Witter Intermediate Income Securities, Dean Witter Capital Growth Securities,
Dean Witter European Growth Fund Inc., Dean Witter Pacific Growth Fund Inc.,
Dean Witter Precious Metals and Minerals Trust, Dean Witter Global Short-Term
Income Fund Inc., Dean Witter Multi-State Municipal Series Trust, Dean Witter
New York Municipal Money Market Trust, InterCapital Quality Municipal
Investment Trust, Dean Witter Premier Income Trust, Dean Witter Short-Term
U.S. Treasury Trust, InterCapital Insured Municipal Bond Trust, InterCapital
Insured Municipal Trust, InterCapital Quality Municipal Income Trust, Dean
Witter Diversified Income Trust, Dean Witter Health Sciences Trust, Dean
Witter Retirement Series, InterCapital Quality Municipal Securities,
InterCapital California Quality Municipal Securities, InterCapital New York
Quality Municipal Securities, Dean Witter Global Dividend Growth Securities,
Dean Witter Global Utilities Fund, Dean Witter High Income Securities, Dean
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean
Witter International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean
Witter Select Dimensions Series, Dean Witter Balanced Growth Fund, Dean
Witter Balanced Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter
Capital Appreciation Fund, Dean Witter Intermediate Term U.S. Treasury Trust,
Dean Witter Information Fund, InterCapital Insured Municipal Securities,
InterCapital Insured California Municipal Securities, InterCapital Insured
Municipal Income Trust, InterCapital California Insured Municipal Income
Trust, Active Assets Money Trust, Active Assets California Tax-Free Trust,
Active Assets Tax-Free Trust, Active Assets Government Securities Trust,
Municipal Income Trust, Municipal Income Trust II, Municipal Income Trust
III, Municipal Income Opportunities Trust, Municipal Income Opportunities
Trust II, Municipal Income Opportunities Trust III, Municipal Premium Income
Trust and Prime Income Trust. The foregoing investment companies, together
with the Fund, are collectively referred to as the Dean Witter Funds.
3
<PAGE>
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following companies for
which TCW Funds Management, Inc. is the investment adviser: TCW/DW Core
Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Global Convertible Trust, TCW/DW Total
Return Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002, TCW/DW Term
Trust 2003 and TCW/DW Emerging Markets Opportunities Trust (the "TCW/DW
Funds"). InterCapital also serves as: (i) sub-adviser to Templeton Global
Opportunities Trust, an open-end investment company; (ii) administrator of
The BlackRock Strategic Term Trust Inc., a closed-end investment company; and
(iii) sub- administrator of MassMutual Participation Investors and Templeton
Global Governments Income Trust, closed-end investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective and policies.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, bookkeeping and legal services as the Fund may
reasonably require in the conduct of its business, including the preparation
of prospectuses, proxy statements and reports required to be filed with
federal and state securities commissions (except insofar as the participation
or assistance of independent accountants and attorneys is, in the opinion of
the Investment Manager, necessary or desirable). In addition, the Investment
Manager pays the salaries of all personnel, including officers of the Fund,
who are employees of the Investment Manager. The Investment Manager also
bears the cost of telephone service, heat, light, power and other utilities
provided to the Fund. The Investment Manager has retained DWSC to perform its
administrative services under the Agreement.
Expenses not expressly assumed by the Investment Manager under the
Agreement or by the Distributor of the Fund's shares, Dean Witter
Distributors Inc. ("Distributors" or the "Distributor") (see "The
Distributor"), will be paid by the Fund. The expenses borne by the Fund
include, but are not limited to: charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage
commissions; taxes; engraving and printing share certificates; registration
costs of the Fund and its shares under federal and state securities laws; the
cost and expense of printing, including typesetting, and distributing
Prospectuses and Statements of Additional Information of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Trustees' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Trustees
or members of any advisory board or committee who are not employees of the
Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to any dividend, withdrawal or redemption options; charges
and expenses of any outside service used for pricing of the Fund's shares;
fees and expenses of legal counsel, including counsel to the Trustees who are
not interested persons of the Funds or of the Investment Manager (not
including compensation or expenses of attorneys who are employees of the
Investment Manager) and independent accountants; membership dues of industry
associations; interest on Fund borrowings; postage; insurance premiums on
property or personnel (including officers and trustees) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation. As full
compensation for the services and facilities furnished to the Fund and
expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily at the annual rate
of 0.35% of the daily net assets of the Fund. The Investment Manager has
undertaken to assume all expenses (except for brokerage and 12b-1 fees) and
to waive the compensation provided for in its Management Agreement until
December 31, 1995, and, from January 1, 1996 through December 31,
4
<PAGE>
1996, has undertaken to waive management fees and assume expenses (except for
brokerage and 12b-1 fees) to the extent they exceed 0.50% of the Fund's daily
net assets. During the fiscal year ended September 30, 1995, the fee payable
($38,350) under the management agreement was waived by the Investment Manager
pursuant to this undertaking.
Pursuant to the Agreement, total operating expenses of the Fund are
subject to applicable limitations under rules and regulations of states where
the Fund is authorized to sell its shares. Therefore, operating expenses are
effectively subject to the most restrictive of such limitations as the same
may be amended from time to time. Presently, the most restrictive limitations
are as follows: if, in any fiscal year, the Fund's total operating expenses,
including the investment management fee but exclusive of taxes, interest,
brokerage fees, distribution fees and extraordinary expenses (to the extent
permitted by applicable state securities laws and regulations), exceed 2 1/2
% of the first $30,000,000 of the average daily net assets, 2% of the next
$70,000,000 of average daily net assets and 1 1/2 % of any excess over
$100,000,000, the Investment Manager will reimburse the Fund for the amount
of such excess. Such amount, if any, will be calculated daily and credited on
a monthly basis. For the fiscal period June 2, 1994 through September 30,
1994 and for the fiscal year ended September 30, 1995, the Fund did not
exceed such limitation.
The Investment Manager has paid the organizational expenses of the Fund,
in the amount of approximately $154,000, incurred prior to the offering of
the Fund's shares. The Fund will reimburse the Investment Manager for such
expenses exclusive of any amounts assumed by the Investment Manager. The Fund
has deferred and is amortizing the reimbursed expenses on the straight line
method over a period not to exceed five years from the date of commencement
of the Fund's operations.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
The Agreement was initially approved by the Trustees on May 10, 1994 and
by InterCapital as the sole Shareholder on May 10, 1994. The Agreement may be
terminated at any time, without penalty, on thirty days' notice, by the Board
of Trustees of the Fund, by the holders of a majority, as defined in the
Investment Company Act of 1940, as amended (the "Act"), of the outstanding
shares of the Fund, or by the Investment Manager. The Agreement will
automatically terminate in the event of its assignment (as defined in the
Act).
Under its terms, the Agreement had an initial term ending April 30, 1995,
and will continue from year to year thereafter, provided continuance of the
Agreement is approved at least annually by the vote of the holders of a
majority (as defined in the Act) of the outstanding shares of the Fund, or by
the Board of Trustees of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Independent
Trustees of the Fund who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party (the "Independent
Trustees"), which vote must be cast in person at a meeting called for the
purpose of voting on such approval. At its meeting held on April 20, 1995,
the Fund's Board of Trustees, including all of the Independent Trustees,
approved the continuation of the Agreement until April 30, 1996.
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use or, at any
time, permit others to use, the name "Dean Witter". The Fund has also agreed
that in the event the investment management contract between the Investment
Manager and the Fund is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate
the name "Dean Witter" from its name if DWR or its parent company shall so
request.
5
<PAGE>
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the 80 Dean Witter Funds and the 12 TCW/DW Funds, are
shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- --------------------------------------------- --------------------------------------------------------
<S> <C>
Jack F. Bennett (71) Retired; Director or Trustee of the Dean Witter Funds; formerly
Trustee Senior Vice President and Director of Exxon Corporation
c/o Gordon Altman Butowsky (1975-January, 1989) and Under Secretary of the U.S. Treasury
Weitzen Shalov & Wein for Monetary Affairs (1974-1975); Director of Philips
Counsel to the Independent Trustees Electronics N.V., Tandem Computers Inc. and Massachusetts
114 West 47th Street Mutual Insurance Company; director or trustee of various
New York, New York not-for-profit and business organizations.
Michael Bozic (54) Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly Chairman and Chief Executive Officer (January,
1987-August, 1990) and President and Chief Operating Officer
(August, 1990-February, 1991) of the Sears Merchandise Group
of Sears, Roebuck and Co.; Director of Eaglemark Financial
Services Inc., the United Negro College Fund, Weirton Steel
Corporation and Domain Inc. (home decor retailer).
Charles A. Fiumefreddo* (62) Chairman, Chief Executive Officer and Director of InterCapital,
Chairman of the Board, President and Chief Distributors and DWSC; Executive Vice President and Director
Executive Officer and Trustee of DWR; Chairman, Director or Trustee, President and Chief
Two World Trade Center Executive Officer of the Dean Witter Funds; Chairman, Chief
New York, New York Executive Officer and Trustee of the TCW/DW Funds; Chairman
and Director of Dean Witter Trust Company ("DWTC"); Director
and/or officer of various DWDC subsidiaries; formerly Executive
Vice President and Director of DWDC (until February, 1993).
Edwin J. Garn (63) Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah) (1974- 1992) and Chairman, Senate
c/o Huntsman Chemical Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
500 Huntsman Way City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman Chemical
Corporation (since January, 1993); Director of Franklin Quest
(time management systems) and John Alden Financial Corp.;
member of the board of various civic and charitable
organizations.
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- --------------------------------------------- --------------------------------------------------------
John R. Haire (70) Chairman of the Audit Committee and Chairman of the Committee
Trustee of the Independent Directors or Trustees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly
New York, New York President, Council for Aid to Education (1978-October, 1989)
and Chairman and Chief Executive Officer of Anchor Corporation,
an Investment Adviser (1964-1978); Director of Washington
National Corporation (insurance).
Dr. Manuel H. Johnson (46) Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Koch Professor of International Economics and Director
c/o Johnson Smick International, Inc. of the Center for Global Market Studies at George Mason
1133 Connecticut Avenue, N.W. University (since September, 1990); Co-Chairman and a founder
Washington, DC of the Group of Seven Council (G7C), an international economic
commission (since September, 1990); Director or Trustee of
the Dean Witter Funds; Trustee of the TCW/DW Funds; Director
of NASDAQ (since June, 1995); Director of Greenwich Capital
Markets Inc. (broker-dealer); formerly Vice Chairman of the
Board of Governors of the Federal Reserve System (February,
1986-August, 1990) and Assistant Secretary of the U.S. Treasury
(1982-1986).
Paul Kolton (72) Director or Trustee of the Dean Witter Funds; Chairman of
Trustee the Audit Committee and Chairman of the Committee of Independent
c/o Gordon Altman Butowsky Trustees and Trustee of the TCW/DW Funds; formerly Chairman
Weitzen Shalov & Wein of the Financial Accounting Standards Advisory Council and
Counsel to the Independent Trustees Chairman and Chief Executive Officer of the American Stock
114 West 47th Street Exchange; Director of UCC Investors Holding Inc. (Uniroyal
New York, New York Chemical Company, Inc.); director or trustee of various not-for-
profit organizations.
Michael E. Nugent (59) General Partner, Triumph Capital, LP., a private investment
Trustee partnership (since April, 1988); Director or Trustee of the
c/o Triumph Capital, LP Dean Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital Corporation
New York, New York (1984- 1988); Director of various business organizations.
Philip J. Purcell* (52) Chairman of the Board of Directors and Chief Executive Officer
Trustee of DWDC, DWR and Novus Credit Services Inc.; Director of
Two World Trade Center InterCapital, DWSC and Distributors; Director or Trustee of
New York, New York the Dean Witter Funds; Director and/or officer of various
DWDC subsidiaries.
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- --------------------------------------------- --------------------------------------------------------
John L. Schroeder (65) Retired; Director or Trustee of the Dean Witter Funds; Director
Trustee of Citizens Utilities Company; Executive Vice President and
c/o Gordon Altman Butowsky Chief Investment Officer of the Home Insurance Company (August,
Weitzen Shalov & Wein 1991-September, 1995); formerly Chairman and Chief Investment
Counsel to the Independent Trustees Officer of Axe-Houghton Management and the Axe-Houghton Funds
114 West 47th Street (April, 1983- June, 1991) and President of USF&G Financial
New York, New York Services, Inc. (June 1990-June, 1991).
Sheldon Curtis (63) Senior Vice President, Secretary and General Counsel of
Vice President, Secretary InterCapital and DWSC; Senior Vice President and Secretary
and General Counsel of DWTC; Senior Vice President, Assistant Secretary and
Two World Trade Center Assistant General Counsel of Distributors; Assistant Secretary
New York, New York of DWR; Vice President, Secretary and General Counsel of the
Dean Witter Funds and the TCW/DW Funds.
James F. Willison (52) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (49) First Vice President (since May, 1991) and Assistant Treasurer
Treasurer (since January, 1993) of InterCapital; First Vice President
Two World Trade Center and Assistant Treasurer of DWSC and Treasurer of the Dean
New York, New York Witter Funds and the TCW/DW Funds; previously Vice President
of InterCapital.
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC and Distributors and President
and Director of DWTC, Edmund C. Puckhaber, Executive Vice President of
InterCapital, and Robert S. Giambrone, Senior Vice President of InterCapital,
DWSC, Distributors and DWTC, Joseph J. McAlinden, Peter M. Avelar and
Jonathan R. Page, Senior Vice Presidents of InterCapital, are Vice Presidents
of the Fund, and Marilyn K. Cranney and Barry Fink, First Vice Presidents and
Assistant General Counsels of InterCapital and DWSC, and Lou Anne D. McInnis
and Ruth Rossi, Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Carsten Otto, a Staff Attorney with InterCapital,
are Assistant Secretaries of the Fund.
BOARD OF TRUSTEES; RESPONSIBILITIES AND COMPENSATION OF INDEPENDENT TRUSTEES
As mentioned above under the caption "The Fund and its Management," the
Fund is one of the Dean Witter Funds, a group of investment companies managed
by InterCapital. As of the date of this Statement of Additional Information,
there are a total of 80 Dean Witter Funds, comprised of 120 portfolios. As of
September 30, 1995, the Dean Witter Funds had total net assets of
approximately $68.4 billion and more than five million shareholders.
The Board of Directors or Trustees, consisting of ten (10) directors or
trustees, is the same for each of the Dean Witter Funds. Some of the Funds
are organized as business trusts, others as corporations, but the functions
and duties of directors and trustees are the same. Accordingly, directors and
trustees of the Dean Witter Funds are referred to in this section as
Trustees.
8
<PAGE>
Eight Trustees, that is, 80% of the total number, have no affiliation or
business connection with InterCapital or any of its affiliated persons and do
not own any stock or other securities issued by InterCapital's parent
company, DWDC. These are the "disinterested" or "independent" Trustees. Five
of the eight Independent Trustees are also Independent Trustees of the TCW/DW
Funds. As of the date of this Statement of Additional Information, there are
a total of 13 TCW/DW Funds. Two of the Funds' Trustees, that is, the
management Trustees, are affiliated with InterCapital.
As noted in a federal court ruling, "[T]he independent directors . . . are
expected to look after the interests of shareholders by 'furnishing an
independent check upon management,' especially with respect to fees paid to
the investment company's sponsor." In addition to their general "watchdog"
duties, the Independent Trustees are charged with a wide variety of
responsibilities under the Act. In order to perform their duties effectively,
the Independent Trustees are required to review and understand large amounts
of material, often of a highly technical and legal nature.
The Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; that is, people whose advice and counsel are valuable and in demand
by others and for whom there is often competition. To accept a position on
the Funds' Boards, such individuals may reject other attractive assignments
because of the demands made on their time by the Funds. Indeed, to serve on
the Funds' Boards, certain Trustees who would be qualified and in demand to
serve on bank boards would be prohibited by law from serving at the same time
as a director of a national bank and as a Trustee of a Fund.
The Independent Trustees are required to select and nominate individuals
to fill any Independent Trustee vacancy on the Board of any Fund that has a
Rule 12b-1 plan of distribution. Since most of the Dean Witter Funds have
such a plan, and since all of the Funds' Boards have the same members, the
Independent Trustees effectively control the selection of other Independent
Trustees of all the Dean Witter Funds.
GOVERNANCE STRUCTURE OF THE DEAN WITTER FUNDS
While the regulatory system establishes both general guidelines and
specific duties for the Independent Trustees, the governance arrangements
from one investment company group to another vary significantly. In some
groups the Independent Trustees perform their role by attendance at periodic
meetings of the board of directors with study of materials furnished to them
between meetings. At the other extreme, an investment company complex may
employ a full-time staff to assist the Independent Trustees in the
performance of their duties.
The governance structure of the Dean Witter Funds lies between these two
extremes. The Independent Trustees and the Funds' Investment Manager alike
believe that these arrangements are effective and serve the interests of the
Funds' shareholders. All of the Independent Trustees serve as members of the
Audit Committee and the Committee of the Independent Trustees. Three of them
also serve as members of the Derivatives Committee.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements, continually
reviewing Fund performance, checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex, and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of
9
<PAGE>
audit and non-audit fees; reviewing the adequacy of the Fund's system of
internal controls; advising the independent accountants and management
personnel that they have direct access to the Committee at all times; and
preparing and submitting Committee meeting minutes to the full Board.
Finally, the Board of each Fund has established a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
During the calendar year ended December 31, 1994, the three Committees
held a combined total of eleven meetings. The Committee meetings are
sometimes held away from the offices of InterCapital and sometimes in the
Board room of InterCapital. These meetings are held without management
directors or officers being present, unless and until they may be invited to
the meeting for purposes of furnishing information or making a report. These
separate meetings provide the Independent Trustees an opportunity to explore
in depth with their own independent legal counsel, independent auditors and
other independent consultants, as needed, the issues they believe should be
addressed and resolved in the interests of the Funds' shareholders.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He
screens and/or prepares written materials and identifies critical issues for
the Independent Trustees to consider, develops agendas for Committee
meetings, determines the type and amount of information that the Committees
will need to form a judgment on the issues, and arranges to have the
information furnished. He also arranges for the services of independent
experts to be provided to the Committees and consults with them in advance of
meetings to help refine reports and to focus on critical issues. Members of
the Committees believe that the person who serves as Chairman of all three
Committees and guides their efforts is pivotal to the effective functioning
of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In
effect, the Chairman of the Committees serves as a combination of chief
executive and support staff of the Independent Trustees.
The Chairman of the Committees is not employed by any other organization
and devotes his time primarily to the services he performs as Committee
Chairman and Independent Trustee of the Dean Witter Funds and as an
Independent Trustee of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.
VALUE OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN WITTER
FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds is in the best
interests of all the Funds' shareholders. This arrangement avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. It is believed that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the likelihood of separate
groups of Independent Trustees arriving at conflicting decisions regarding
operations and management of the Funds and avoids the cost and confusion that
would likely ensue. Finally, it is believed that having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.
10
<PAGE>
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee
of the Independent Trustees an additional annual fee of $2,400, in each case
inclusive of the Committee meeting fees). The Fund also reimburses such
Trustees for travel and other out-of-pocket expenses incurred by them in
connection with attending such meetings. Trustees and officers of the Fund
who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund. The
Fund commenced operations on June 12, 1994 and paid no compensation to the
Independent Trustees for the fiscal year ended September 30, 1995. Payments
will commence as of the time the Fund begins paying management fees which,
pursuant to an undertaking by the Investment Manager, will be on January 1,
1996.
At such time as the Fund has paid fees to the Independent Trustees for a
full fiscal year, and assuming that during such fiscal year the Fund holds
the same number of Board and committee meetings as were held by the other
Dean Witter Funds during the calendar year ended December 31, 1994, it is
estimated that compensation paid to the Fund's Independent Trustees by the
Fund during such fiscal year will be the amount shown in the following table.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------------- ---------------
<S> <C>
Jack F. Bennett ..................... $1,750
Michael Bozic ....................... 1,750
Edwin J. Garn ....................... 1,750
John R. Haire ....................... 1,450*
Dr. Manuel H. Johnson ............... 1,750
Paul Kolton ......................... 1,750
Michael E. Nugent ................... 1,750
John L. Schroeder ................... 1,750
</TABLE>
- ------------
* Of Mr. Haire's compensation from the Fund, $3,150 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($750).
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1994 for
services to the 73 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Kolton and Nugent, the 13 TCW/DW Funds that were in operation at
December 31, 1994. With respect to Messrs. Haire, Johnson, Kolton and Nugent,
the TCW/DW Funds are included solely because of a limited exchange privilege
between those Funds and five Dean Witter Money Market Funds. Mr. Schroeder
was elected as a Trustee of the TCW/DW Funds on April 20, 1995.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
FOR SERVICE AS CHAIRMAN OF TOTAL CASH
DIRECTOR OR FOR SERVICE AS COMMITTEES OF COMPENSATION
TRUSTEE AND TRUSTEE AND INDEPENDENT FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER DIRECTORS/ 73 DEAN WITTER
NAME OF INDEPENDENT OF 73 DEAN WITTER OF 13 TCW/DW TRUSTEES AND FUNDS AND 13
TRUSTEE FUNDS FUNDS AUDIT COMMITTEES TCW/DW FUNDS
- -------------------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Jack F. Bennett ........... $125,761 -- -- $125,761
Michael Bozic ............. 82,637 -- -- 82,637
Edwin J. Garn ............. 125,711 -- -- 125,711
John R. Haire ............. 101,061 $66,950 $225,563** 393,574
Dr. Manuel H. Johnson .... 122,461 60,750 -- 183,211
Paul Kolton ............... 128,961 51,850 34,200*** 215,011
Michael E. Nugent ......... 115,761 52,650 -- 168,411
John L. Schroeder ......... 85,938 -- -- 85,938
</TABLE>
- ------------
** For the 73 Dean Witter Funds.
*** For the 13 TCW/DW Funds.
11
<PAGE>
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
PORTFOLIO SECURITIES
The payment of principal and interest by issuers of certain Municipal
Bonds and Notes ("Municipal Obligations") purchased by the Fund may be
guaranteed by letters of credit or other credit facilities offered by banks
or other financial institutions. Such guarantees will be considered in
determining whether a Municipal Obligation meets the Fund's investment
quality requirements. In addition, some issues may contain provisions which
permit the Fund to demand from the issuer repayment of principal at some
specified period(s) prior to maturity.
Municipal Bonds. Municipal Bonds, as referred to in the Prospectus, are
debt obligations of a state, its cities, municipalities and municipal
agencies (all of which are generally referred to as "municipalities") which
generally have a maturity at the time of issuance of one year or more, and
the interest from which is, in the opinion of bond counsel, exempt from
federal income tax. They are issued to raise funds for various public
purposes, such as construction of a wide range of public facilities, to
refund outstanding obligations and to obtain funds for general operating
expenses or to loan to other public institutions and facilities. In addition,
certain types of industrial development bonds and pollution control bonds are
issued by or on behalf of public authorities to provide funding for various
privately operated facilities.
Municipal Notes. Municipal Notes are short-term obligations of
municipalities, generally with a maturity at the time of issuance ranging
from six months to three years, the interest from which is, in the opinion of
bond counsel, exempt from federal income tax. The principal types of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes, although there are other types
of Municipal Notes in which the Fund may invest. Notes sold in anticipation
of collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project Notes are
issued by local agencies and are guaranteed by the United States Department
of Housing and Urban Development. Such notes are secured by the full faith
and credit of the United States Government. Project Notes are not currently
being issued.
Municipal Commercial Paper. Municipal Commercial Paper refers to
short-term obligations of municipalities the interest from which is, in the
opinion of bond counsel, exempt from federal income tax, and which may be
issued at a discount and is sometimes referred to as Short-Term Discount
Notes. Municipal Commercial Paper is likely to be used to meet seasonal
working capital needs of a municipality or interim construction financing and
to be paid from general revenues of the municipality or refinanced with
long-term debt. In most cases, Municipal Commercial Paper is backed by
letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions.
Obligations of issuers of Municipal Bonds, Municipal Notes and Municipal
Commercial Paper are subject to provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Act, and laws, if any, which may be enacted by Congress or
any state extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon
municipalities to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of any one or more
issuers to pay, when due, principal of and interest on its, or their,
Municipal Bonds, Municipal Notes and Municipal Commercial Paper may be
materially affected.
Special Investment Considerations. The percentage and rating policies in
the Prospectus apply at the time of acquisition of a security based upon the
last previous determination of the Fund's net asset value; any subsequent
change in any ratings by a rating service or change in percentages resulting
from market fluctuations or other changes in the amount of total assets will
not require elimination of any security from the Fund's portfolio until such
time as the Investment Manager determines that it is
12
<PAGE>
practicable to sell the security without undue market or tax consequences to
the Fund. Therefore, the Fund may hold securities which have been downgraded
to ratings of Ba or BB or lower by Moody's or S&P. Such securities are
considered to be speculative investments. However, the Fund does not intend
to invest in Municipal Obligations 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. 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.
Furthermore, the Fund does not have any minimum quality rating standard
for its downgraded or lower-rated investments. As such, the Fund may invest
in securities rated as low as Caa, Ca or C by Moody's or CCC, CC, C, CI or D
by S&P. Bonds rated Caa or Ca by Moody's may already be in default on payment
of interest or principal, while bonds rated C by Moody's, their lowest bond
rating, can be regarded as having extremely poor prospects of ever attaining
any real investment standing. Bonds rated CI or D by S&P, their lowest bond
rating, are no longer making interest payments or are in default.
Because of the special nature of securities which are rated below
investment grade by national credit rating agencies ("lower-rated
securities"), the Investment Manager must take account of certain special
considerations in assessing the risks associated with such investments. For
example, as the lower rated securities market is relatively new, its growth
has paralleled a long economic expansion and it has not weathered a recession
in its present size and form. Therefore, an economic downturn or increase in
interest rates is likely to have a negative effect on this market and on the
value of the lower rated securities held by the Fund, as well as on the
ability of the securities' issuers to repay principal and interest on their
borrowings.
The prices of lower rated securities have been found to be less sensitive
to changes in prevailing interest rates than higher rated investments, but
are likely to be more sensitive to adverse economic changes or individual
corporate developments. During an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service their principal
and interest payment obligations, to meet their projected business goals or
to obtain additional financing. If the issuer of a fixed-income security
owned by the Fund defaults, the Fund may incur additional expenses to seek
recovery. In addition, periods of economic uncertainty and change can be
expected to result in an increased volatility of market prices of lower rated
securities and a concomitant volatility in the net asset value of a share of
the Fund. Moreover, the market prices of certain of the Fund's portfolio
securities which are structured as zero coupon securities are affected to a
greater extent by interest rate changes and thereby tend to be more volatile
than securities which pay interest periodically and in cash (see "Dividends,
Distributions and Taxes" for a discussion of the tax ramifications of
investments in such securities).
The secondary market for lower rated securities may be less liquid than
the markets for higher quality securities and, as such, may have an adverse
effect on the market prices of certain securities. The limited liquidity of
the market may also adversely affect the ability of the Fund's Trustees to
arrive at a fair value for certain lower rated securities at certain times
and should make it difficult for the Fund to sell certain securities.
New laws and proposed new laws may have a potentially negative impact on
the market for lower rated securities. For example, recent legislation
requires federally-insured savings and loan associations to divest their
investments in lower rated securities. This legislation and other proposed
legislation may have an adverse effect upon the value of lower rated
securities and a concomitant negative impact upon the net asset value of a
share of the Fund.
PORTFOLIO CHARACTERISTICS
Variable Rate Obligations. As stated in the Prospectus, the Fund may
invest in obligations of the type called "variable rate obligations".
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The interest rate payable on a variable rate obligation is adjusted either
at predesignated periodic intervals or whenever there is a change in the
market rate of interest on which the interest rate payable is based. Other
features may include the right whereby the Fund may demand prepayment of the
principal amount of the obligation prior to its stated maturity (a "demand
feature") and the right of the issuer to prepay the principal amount prior to
maturity. The principal benefit of a variable rate obligation is that the
interest rate adjustment minimizes changes in the market value of the
obligation. The principal benefit to the Fund of purchasing obligations with
a demand feature is that liquidity, and the ability of the Fund to obtain
repayment of the full principal amount of the obligation prior to maturity,
is enhanced.
When-Issued and Delayed Delivery Securities. As stated in the Prospectus,
the Fund may purchase tax-exempt securities on a when-issued or delayed
delivery basis. When such transactions are negotiated, the price is fixed at
the time of the commitment, but delivery and payment can take place a month
or more after the date of the commitment. While the Fund will only purchase
securities on a when-issued or delayed delivery basis with the intention of
acquiring the securities, the Fund may sell the securities before the
settlement date, if it is deemed advisable. The securities so purchased or
sold are subject to market fluctuation and no interest accrues to the
purchaser during this period. At the time the Fund makes the commitment to
purchase a Municipal Obligation on a when-issued or delayed delivery basis,
it will record the transaction and thereafter reflect the value, each day, of
the Municipal Obligation in determining its net asset value. The Fund will
also establish a segregated account with its custodian bank in which it will
maintain cash, cash equivalents or other high quality Municipal Obligations
equal in value to commitments for such when-issued or delayed delivery
securities. The Fund does not believe that its net asset value or income will
be adversely affected by its purchase of Municipal Obligations on a
when-issued or delayed delivery basis. The Fund may sell securities on a
when-issued or delayed delivery basis provided that the Fund owns the
security at the time of the sale. During the fiscal year ended September 30,
1995, the Fund's investments in when-issued and delayed delivery securities
did not exceed 5% of the Fund's total assets.
Repurchase Agreements. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it
may otherwise be invested or used for payments of obligations of the Fund.
These agreements, which may be viewed as a type of secured lending by the
Fund, typically involve the acquisition by the Fund of debt securities from a
selling financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying
security ("collateral"), which is held by the Fund's Custodian, at a
specified price and at a fixed time in the future, usually not more than
seven days from the date of purchase. The Fund will receive interest from the
institution until the time when the repurchase is to occur. Although such
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject
to any limits and may exceed one year. While repurchase agreements involve
certain risks not associated with direct investments in debt securities, the
Fund follows procedures designed to minimize such risks. These procedures
include effecting repurchase transactions only with large, well-capitalized
and well-established financial institutions, whose financial condition will
be continually monitored by the Investment Manager. In addition, the value of
the collateral underlying the repurchase agreement will always be a least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral
could involve certain costs or delays and, to the extent that proceeds from
any sale upon a default of the obligation to repurchase were less than the
repurchase price, the Fund could suffer a loss. It is the current policy of
the Fund not to invest in repurchase agreements that do not mature within
seven days if any such investment, together with any other illiquid assets
held by the Fund, amounts to more than 15% of its net assets. The Fund's
investments in repurchase agreements may at times be substantial when, in the
view of the Investment Manager, liquidity or other considerations warrant.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
As discussed in the Prospectus, the Fund may invest in financial futures
contracts ("futures contracts") and related options thereon. These futures
contracts and related options thereon will be used
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only as a hedge against anticipated interest rate changes. A futures contract
sale creates an obligation by the Fund, as seller, to deliver the specific
type of instrument called for in the contract at a specified future time for
a specified price. A futures contract purchase would create an obligation by
the Fund, as purchaser, to take delivery of the specific type of financial
instrument at a specified future time at a specified price. The specific
securities delivered or taken, respectively, at settlement date, would not be
determined until on or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale
or purchase was effected.
Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is usually effected by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale
is effected by the Fund entering into a futures contract purchase for the
same aggregate amount of the specific type of financial instrument at the
same delivery date. If the price in the sale exceeds the price in the
offsetting purchase, the Fund is immediately paid the difference and thus
realizes a gain. If the offsetting purchase price exceeds the sale price, the
Fund pays the difference and realizes a loss. Similarly, the closing out of a
futures contract purchase is effected by the Fund entering into a futures
contract sale. If the offsetting sale price exceeds the purchase price the
Fund realizes a gain, and if the offsetting sale price is less than the
purchase price the Fund realizes a loss.
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date, an option on a futures contract entitles its holder
to decide on or before a future date whether to enter into such a contract (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 contract is lost. Since the value of the option is fixed
at the point of sale, there are no daily payments of cash to reflect the
change in the value of the underlying contract, as discussed below for
futures contracts. The value of the option changes is reflected in the net
asset value of the Fund.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects futures contracts and options thereon. The initial
margin requirements vary according to the type of the underlying security. In
addition, due to current industry practice, daily variations in gains and
losses on open contracts are required to be reflected in cash in the form of
variation margin payments. The Fund may be required to make additional margin
payments during the term of the contract.
Currently, futures contracts can be purchased on debt securities such as
U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6 1/2
and 10 years, Certificates of the Government National Mortgage
Association, Bank Certificates of Deposit and on a municipal bond index (see
below). The Fund may invest in interest rate futures contracts covering these
types of financial instruments as well as in new types of contracts that
become available in the future.
Financial futures contracts are traded in an auction environment on the
floors of several Exchanges--principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. Each Exchange
guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the Exchange membership
which is also responsible for handling daily accounting of deposits or
withdrawals of margin.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject
to futures contracts may correlate imperfectly with the behavior of the cash
prices of the Fund's portfolio securities. The correlation may be distorted
by the fact that the futures market is dominated by short-term traders
seeking to profit from the difference between a contract or security price
objective and their cost of borrowed funds. This would reduce the value of
futures contracts for hedging purposes over a short time period. The
correlation may be further distorted since the futures contracts that are
being used to hedge are not based on municipal obligations.
Another risk is that the Fund's Investment Manager could be incorrect in
its expectations as to the direction or extent of various interest rate
movements or the time span within which the movements take place. For
example, if the Fund sold futures contracts for the sale of securities in
anticipation of an increase in interest rates, and then interest rates went
down instead, causing bond prices to rise, the Fund would lose money on the
sale.
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Put and call options on financial futures have characteristics similar to
Exchange traded options. For a further description of options, see below and
the Prospectus.
In addition to the risks associated in investing in options on securities,
there are particular risks associated with investing in options on futures.
In particular, the ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid
secondary market. It is not certain that such a market will develop.
In order to assure that the Fund is entering into transactions in futures
contracts for hedging purposes as such is defined by the Commodity Futures
Trading Commission either: 1) a substantial majority (i.e., approximately
75%) of all anticipatory hedge transactions (transactions in which the Fund
does not own at the time of the transaction, but expects to acquire, the
securities underlying the relevant futures contract) involving the purchase
of futures contracts will be completed by the purchase of securities which
are the subject of the hedge or 2) the underlying value of all long positions
in futures contracts will not exceed the total value of a) all short-term
debt obligations held by the Fund; b) cash held by the Fund; c) cash proceeds
due to the Fund on investments within thirty days; d) the margin deposited on
the contracts; and e) any unrealized appreciation in the value of the
contracts.
The Fund may not enter into futures contracts or related options thereon
if, immediately thereafter, the amount committed to margin plus the amount
paid for option premiums exceeds 5% of the value of the Fund's total assets.
In instances involving the purchase of futures contracts by the Fund, an
amount equal to the market value of the futures contract will be deposited in
a segregated account of cash and cash equivalents to collateralize the
position and thereby ensure that the use of such futures is unleveraged. The
Fund may not purchase or sell futures contracts or related options if,
immediately thereafter, more than one-third of its net assets would be
hedged.
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, futures contracts on a
municipal bond index will be settled in cash if held until the close of
trading in the contract. However, as in 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.
Options--The Fund may purchase or sell (write) options on debt securities
as a means of achieving additional return or hedging the value of the Fund's
portfolio. The Fund will only buy options listed on national securities
exchanges. The Fund will not purchase options if, as a result, the aggregate
cost of all outstanding options exceeds 10% of the Fund's total assets.
Presently there are no options on tax-exempt securities traded on national
securities exchanges and until such time as they become available, the Fund
will not invest in options on debt securities.
A call option is a contract that gives the holder of the option the right
to buy from the writer of the call option, in return for a premium, the
security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option has the
obligation, upon exercise of the option, to deliver the underlying security
upon payment of the exercise price during the option period. A put option is
a contract that gives the holder of the option the right to sell to the
writer, in return for a premium, the underlying security at a specified price
during the term of the option. The writer of the put has the obligation to
buy the underlying security upon exercise, at the exercise price during the
option period.
The Fund will only write covered call or covered put options listed on
national exchanges. The Fund may not write covered options in an amount
exceeding 20% of the value of its total assets. A call option is "covered" if
the Fund owns the underlying security covered by the call or has an absolute
and immediate right to acquire that security or futures contract without
additional cash consideration (or for
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<PAGE>
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option is also covered if the Fund holds a call on the same security or
futures contract as the call written, where the exercise price of the call
held is (i) equal to or less than the exercise price of the call written or
(ii) greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, Treasury bills or other high grade short-term
obligations in a segregated account with its custodian. A put option is
"covered" if the Fund maintains cash, Treasury bills or other high grade
short-term obligations with a value equal to the exercise price in a
segregated account with its custodian, or else holds a put on the same
security or futures contract as the put written where the exercise price of
the put held is equal to or greater than the exercise price of the put
written.
If the Fund has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing
an option of the same series as the option previously written. However, once
the Fund has been assigned an exercise notice, the Fund will be unable to
effect a closing purchase transaction. Similarly, if the Fund is the holder
of an option, it may liquidate its position by effecting a closing sale
transaction. This is accomplished by selling an option of the same series as
the option previously purchased. There can be no assurance that either a
closing purchase or sale transaction can be effected when the Fund so
desires.
The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; the Fund will realize a
loss from a closing transaction if the price of the transaction is more than
the premium received from writing the option or is less than the premium paid
to purchase the option. Since call option prices generally reflect increases
in the price of the underlying security, any loss resulting from the purchase
of a call option may also be wholly or partially offset by unrealized
appreciation of the underlying security. If a put option written by the Fund
is exercised, the Fund may incur a loss equal to the difference between the
exercise price of the option and the sum of the sale price of the underlying
security plus the premiums received from the sale of the option. Other
principal factors affecting the market value of a put or a call option
include supply and demand, interest rates, the current market price and price
volatility of the underlying security and the time remaining until the
expiration date.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Fund will
generally purchase or write only those options for which there appears to be
an active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option. In such event, it
might not be possible to effect closing transactions in particular options,
so that the Fund would have to exercise its options in order to realize any
profit and would incur brokerage commissions upon the exercise of call
options and upon the subsequent disposition of underlying securities for the
exercise of put options. If the Fund as a covered call option writer is
unable to effect a closing purchase transaction in a secondary market, it
will not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise.
PORTFOLIO MANAGEMENT
The Fund may engage in short-term trading consistent with its investment
objective. Securities may be sold in anticipation of a market decline (a rise
in interest rates) or purchased in anticipation of a market rise (a decline
in interest rates). In addition, a security may be sold and another security
of comparable quality purchased at approximately the same time to take
advantage of what the Investment Manager believes to be a temporary disparity
in the normal yield relationship between the two securities. These yield
disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates, such
as changes in the overall demand for, or supply of, various types of
tax-exempt securities.
In general, purchases and sales may also be made to restructure the
portfolio in terms of average maturity, quality, coupon yield, or
diversification for any one or more of the following purposes: (a) to
increase income, (b) to improve portfolio quality, (c) to minimize capital
depreciation, (d) to realize gains or losses, or for such other reasons as
the Investment Manager deems relevant in light of economic and market
conditions.
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The Fund may invest in obligations customarily sold to institutional
investors in private transactions with the issuers thereof and up to 5% of
its total assets in securities for which a bona fide market does not exist at
the time of purchase. With respect to any securities as to which a bona fide
market does not exist, the Fund may be unable to dispose of such securities
promptly at reasonable prices.
The Fund does not generally intend to invest more than 25% of its total
assets in securities of any one governmental unit or in the securities of
governmental units located in any one state, territory or possession of the
United States. Subject to investment restriction number 3 disclosed in the
Prospectus under the Section "Investment Restrictions," the Fund may invest
more than 25% of its total assets in industrial development and pollution
control bonds (two kinds of tax-exempt Municipal Bonds).
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, which may not be changed without the vote of a majority
of the outstanding voting securities of the Fund, as defined in the Act. Such
a majority is defined as the lesser of (a) 67% of the shares present at a
meeting of shareholders, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (b) more than 50%
of the outstanding shares of the Fund. For purposes of the following
restrictions: (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 amount of total or net assets does not require
elimination of any security from the portfolio.
The Fund may not:
1. Purchase or sell real estate or interests therein, although it may
purchase securities secured by real estate or interests therein. This
shall not prohibit the Trust from purchasing, holding and selling real
estate acquired as a result of the ownership of such securities.
2. Purchase or sell commodities except that the Fund may purchase or
sell financial futures contracts and related options thereon.
3. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs.
4. Write, purchase or sell puts, calls, or combinations thereof,
except for options on futures contracts or options on debt securities.
5. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
6. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of the value of its total assets (not
including the amount borrowed).
7. Pledge its assets or assign or otherwise encumber them except to
secure borrowing effected within the limitations set forth in Restriction
6. However, for the purpose of this restriction, collateral arrangements
with respect to the writing of options and collateral arrangements with
respect to initial margin for futures are not deemed to be pledges of
assets.
8. Issue senior securities as defined in the Act, except insofar as
the Fund may be deemed to have issued a senior security by reason of: (a)
entering into any repurchase agreement; (b) purchasing any securities on a
when-issued or delayed delivery basis; (c) purchasing or selling any
financial futures contracts; (d) borrowing money in accordance with
restrictions described above; or (e) lending portfolio securities.
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9. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which the Fund may invest consistent with its
investment objective and policies; and (b) by investment in repurchase
agreements.
10. Make short sales of securities.
11. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of purchases of portfolio securities.
12. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
13. Invest for the purpose of exercising control or management of any
other issuer.
In addition, as a nonfundamental policy, the Fund may not (i) invest in
securities of any issuer if, to the knowledge of the Fund, any officer or
trustee of the Fund or any officer or director of the Manager or the Adviser
owns more than 1/2 of 1% of the outstanding securities of such issuer, and
such officers, trustees and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuers; or (ii)
purchase securities of other investment companies, except in connection with
a merger, consolidation, reorganization or acquisition of assets or by
purchase in the open market of securities of closed-end investment companies
where no underwriter's or dealer's commission or profit, other than customary
broker's commissions, is involved and only if immediately thereafter not more
than (a) 5% of the Fund's total assets, taken at market value, would be
invested in any one such company, (b) 10% of the Fund's total assets, taken
at market value, would be invested in such securities and (c) 3% of any one
such company's voting securities would be owned by the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities
and futures contracts for the Fund, the selection of brokers and dealers to
effect the transactions, and the negotiation of brokerage commissions, if
any. The Fund expects that the primary market for the securities in which it
intends to invest will generally be the over-the-counter market. Securities
are generally traded in the over-the-counter market on a "net" basis with
dealers acting as principal for their own account without charging a stated
commission, although the price of the security usually includes a profit to
the dealer. Options and futures transactions will usually be effected through
a broker and a commission will be charged. The Fund also expects that
securities will be purchased at times in underwritten offerings, where the
price includes a fixed amount of compensation, generally referred to as the
underwriter's concession or discount. On occasion, the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid. During the fiscal period June 2, 1994
through September 30, 1994 and during the fiscal year ended September 30,
1995, the Fund paid no brokerage commissions.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act
as investment manager or adviser to others. It is the practice of the
Investment Manager to cause purchase and sale transactions to be allocated
among the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client
accounts, the main factors considered are the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held and the opinions of the persons responsible for
managing the portfolios of the Fund and other client accounts.
The policy of the Fund regarding purchases and sales of securities and
futures contracts for its portfolio is that primary consideration will be
given to obtaining the most favorable prices and efficient execution of
transactions. Consistent with this policy, when securities transactions are
effected on a stock exchange, the Fund's policy is to pay commissions which
are considered fair and reasonable without necessarily determining that the
lowest possible commissions are paid in all circumstances. The Fund believes
that a requirement always to seek the lowest commission cost could impede
effective portfolio management and preclude the Fund and the Investment
Manager from obtaining a high quality
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<PAGE>
of brokerage and research services. In seeking to determine the
reasonableness of brokerage commissions paid in any transaction, the
Investment Manager relies upon its experience and knowledge regarding
commissions generally charged by various brokers and on its judgment in
evaluating the brokerage and research services received from the broker
effecting the transaction. Such determinations are necessarily subjective and
imprecise, as in most cases an exact dollar value for those services is not
ascertainable.
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment
Manager believes provide the most favorable prices and who are capable of
providing efficient executions. If the Investment Manager believes such price
and execution are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and
dealers who also furnish research and other services to the Fund or the
Investment Manager. Such services may include, but are not limited to, any
one or more of the following: information as to the availability of
securities for purchase or sale; statistical or factual information or
opinions pertaining to investment; wire services; and appraisals or
evaluations of portfolio securities.
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of
research or services otherwise performed by the Investment Manager and thus
reduce its expenses, it is of indeterminable value and the management fee
paid to the Investment Manager is not reduced by any amount that may be
attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e., Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper (not including
Tax-Exempt Municipal Paper). Such transactions will be effected with DWR only
when the price available from DWR is better than that available from other
dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect portfolio transactions
for the Fund, the commissions, fees or other remuneration received by DWR
must be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. This standard would allow DWR to receive no more
than the remuneration which would be expected to be received by an
unaffiliated broker in a commensurate arm's-length transaction. Furthermore,
the Trustees of the Fund, including a majority of the Trustees who are not
"interested" Trustees, have adopted procedures which are reasonably designed
to provide that any commissions, fees or other remuneration paid to DWR are
consistent with the foregoing standard. The Fund did not effect any
securities transactions with or through DWR or any other selected
broker-dealer affiliated with the Fund or its Investment Manager during the
fiscal year ended September 30, 1995.
THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered
into a selected dealer agreement with DWR, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into selected dealer agreements with other selected broker-dealers. The
Distributor, a Delaware corporation, is an indirect wholly-owned subsidiary
of DWDC. The Trustees of the Fund, including a majority of the Trustees who
are not, and were not at the time they voted, interested persons of the Fund,
as defined in the Act (the "Independent Trustees"), approved, at their
meeting held on May 10, 1994, the current Distribution Agreement appointing
the Distributor as exclusive distributor of the Fund's shares and providing
for the Distributor to bear distribution expenses not borne by the Fund. By
its terms, the
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Distribution Agreement had an initial term ending April 30, 1995, and
provides that it will remain in effect from year to year thereafter if
approved by the Board. At its meeting held on April 20, 1995, the Board of
Trustees, including all of the Independent Trustees, approved the
continuation of the Distribution Agreement until April 30, 1996.
The Distributor bears all expenses incurred in providing services under
the Distribution Agreement. Such expenses include the payment of commissions
for sales of the Fund's shares and incentive compensation to account
executives. The Distributor also pays certain expenses in connection with the
distribution of the Fund's shares, including the costs of preparing, printing
and distributing advertising or promotional materials, and the costs of
printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears
the costs of initial typesetting, printing and distribution of prospectuses
and supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. Under the Distribution Agreement, the Distributor uses its best
efforts in rendering services to the Fund, but in the absense of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations, the Distributor is not liable to the fund or any of its
shareholders for any error of judgment or mistake of law or for any act or
omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
To compensate the Distributor for the services provided and for the
expenses borne by the Distributor or any selected dealer under the
Distribution Agreement, the Fund has adopted a Plan of Distribution pursuant
to Rule 12b-1 under the Act (the "Plan") pursuant to which the Fund pays the
Distributor compensation accrued daily and payable monthly at the 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 upon which such
charge has been waived; or (b) the Fund's average daily net assets. The
Distributor also receives the proceeds of contingent deferred sales charges
imposed on certain redemptions of shares, which are separate and apart from
payments made pursuant to the Plan (see "Redemption and
Repurchases--Contingent Deferred Sales Charge" in the Prospectus). The
Distributor has informed the Fund that it and/or DWR received approximately
$144,389 in contingent deferred sales charges for the fiscal year ended
September 30, 1995.
The Distributor has informed the Fund that an amount of the fees payable
by the Fund each year pursuant to the Plan of Distribution equal to 0.15% of
the Fund's average daily net assets is characterized as a "service fee" under
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (of which the Distributor is a member). Such fee is a payment made for
personal service and/or the maintenance of shareholder accounts. The
remaining portion of the Plan of Distribution fee payments made by the Fund
is characterized as an "asset-based sales charge" as such is defined by the
aforementioned Rules of Fair Practice. At their meeting held on October 26,
1995, the Trustees of the Fund, including all of the Independent 12b-1
Trustees, approved an amendment to the Plan to permit payments to be made
under the Plan with respect to certain distribution expenses incurred in
connection with the distribution of shares, including personal services to
shareholders with respect to holdings of such shares, of an investment
company whose assets are acquired by the Fund in a tax-free reorganization.
The Plan was adopted by a vote of the Trustees of the Fund on May 10,
1994, at a meeting of the Trustees called for the purpose of voting on such
Plan. The vote included the vote of a majority of the Trustees of the Fund
who are not "interested persons" of the Fund (as defined in the Act) and who
have no direct or indirect financial interest in the operation of the Plan
(the "Independent 12b-1 Trustees"). In making their decision to adopt the
Plan, the Trustees requested from the Distributor and received such
information as they deemed necessary to make an informed determination as to
whether or not adoption of the Plan was in the best interests of the
shareholders of the Fund. After due consideration of the
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<PAGE>
information received, the Trustees, including the independent 12b-1 Trustees,
determined that adoption of the Plan would benefit the shareholders of the
Fund. InterCapital, as sole shareholder of the Fund, approved the Plan on May
10, 1994, whereupon the Plan went into effect.
Under its terms, the Plan had an initial term ending April 30, 1995 and
will remain in effect from year to year thereafter, provided such continuance
is approved annually by a vote of the Trustees in the manner described above.
Under the Plan and as required by Rule 12b-1, the Trustees will receive and
review promptly after the end of each fiscal quarter a written report
provided by the Distributor of the amounts expended by the Distributor under
the Plan and the purpose for which such expenditures were made. At its
meeting held on April 20, 1995, the Board of Trustees, including all of the
Independent Trustees, approved the continuation of the Plan until April 30,
1996. Prior to approving the continuation of the Plan, the Board requested
and received from the Distributor and reviewed all the information which it
deemed necessary to arrive at an informed determination. In making their
determination to continue the Plan, the Trustees considered: (1) the Fund's
experience under the Plan and whether such experience indicates that the Plan
is operating as anticipated; (2) the benefits the Fund had obtained, was
obtaining and would be likely to obtain under the Plan; and (3) what services
had been provided and were continuing to be provided under the Plan by the
Distributor, DWR and other selected broker-dealers to the Fund and its
shareholders. Based upon their review, the Trustees of the Fund, including
each of the Independent 12b-1 Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. This
determination was based upon the conclusion of the Trustees that the Plan
provides an effective means of stimulating sales of shares of the Fund and of
reducing or avoiding net redemptions and the potentially adverse effects that
may occur therefrom. In the Trustee's quarterly review of the Plan, they will
consider its continued appropriateness and the level of compensation provided
therein.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each fiscal quarter a written report
provided by the Distributor of the amounts expended by the Distributor under
the Plan and the purpose for which such expenditures were made. The Fund
accrued amounts payable to the Distributor under the Plan, during the fiscal
year ended September 30, 1995, of $271,201. This amount is equal to 0.60% of
the Fund's average daily net assets for the fiscal year and was calculated
pursuant to clause (a) of the compensation formula under the Plan. This
amount is treated by the Fund as an expense in the year it is accrued.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares
without any deduction for sales charges. Shares of the Fund may be subject to
a contingent deferred sales charge, payable to the Distributor, if redeemed
during the three years after their purchase. DWR compensates its account
executives by paying them, from its own funds, commissions for the sale of
the Fund's shares, currently a gross sales credit of up to 3% of the amount
sold and an annual residual commission of up to .15 of 1% of the current
value of the amount sold. The gross sales credit is a charge which reflects
commissions paid by DWR to its account executives and DWR's Fund associated
distribution-related expenses, including sales compensation, and overhead and
other branch office distribution-related expenses including: (a) the expenses
of operating DWR's branch offices in connection with the sale of Fund shares,
including lease costs, the salaries and employee benefits of operations and
sales support personnel, utility costs, communications costs and the costs of
stationery and supplies; (b) the costs of client sales seminars; (c) travel
expenses of mutual fund sales coordinators to promote the sale of Fund
shares; and (d) other expenses relating to branch promotion of Fund share
sales. The distribution fee that the Distributor receives from the Fund under
the Plan, in effect, offsets distribution expenses incurred under the Plan on
behalf of the Fund and its opportunity costs, such as the gross sales credit
and an assumed interest charge thereon ("carrying charge"). In the
Distributor's reporting of the distribution expenses to the Fund, such
assumed interest (computed at the "broker's call rate") has been calculated
on the gross sales credit as it is reduced by amounts received by the
Distributor under the Plan and any contingent deferred sales charges received
by the Distributor upon
22
<PAGE>
redemption of shares of the Fund. No other interest charge is included as a
distribution expense in the Distributor's calculation of its distribution
costs for this purpose. The broker's call rate is the interest rate charged
to securities brokers on loans secured by exchange-listed securities.
The Fund paid 100% of the $271,201 accrued under the Plan for the fiscal
year ended September 30, 1995 to the Distributor. The Distributor and DWR
estimate that they have spent, pursuant to the Plan, $2,123,741 on behalf of
the Fund since the inception of the Fund. It is estimated that this amount
was spent in approximately the following ways: (i) 22.96%
($487,656)--advertising and promotional expenses; (ii) 6.39% ($135,623)
printing of prospectuses for distribution to other than current shareholders;
and (iii) 70.65% ($1,500,462)--other expenses, including the gross sales
credit and the carrying charge, of which 3.42% ($51,284) represents carrying
charges, 38.54% ($578,222) represents commission credits to DWR branch
offices for payments of commissions to account executives and 58.04%
($870,956) represents overhead and other branch office distribution-related
expenses.
At any given time, the expenses of distributing shares of the Fund may be
more or less than 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 redemption of shares. The Distributor has advised the Fund
that such excess amount, including the carrying charge designed to
approximate the opportunity costs incurred by DWR which arise from it having
advanced monies without having received the amount of any sales charges
imposed at the time of sale of the Fund's shares, totalled $1,667,655 as of
September 30, 1995. Because there is no requirement under the Plan that the
Distributor be reimbursed for all its expenses or any requirement that the
Plan be continued from year to year, this excess amount does not constitute a
liability of the Fund. Although there is no legal obligation for the Fund to
pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such
expenses. Any cumulative expenses incurred but not yet recovered through
distribution fees or contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales
charges.
No interested person of the Fund, nor any Trustee of the Fund who is not
an interested person of the Fund, as defined in the Act, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor, InterCapital, DWR or certain of their employees may be
deemed to have such an interest as a result of benefits derived from the
successful operation of the Plan or as a result of receiving a portion of the
amounts expended thereunder by the Fund.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of
the Fund, and all material amendments of the Plan must also be approved by
the Trustees in the manner described above. The Plan may be terminated at any
time, without payment of any penalty, by vote of a majority of the
Independent 12b-1 Trustees or by a vote of a majority of the outstanding
voting securities of the Fund (as defined in the Act) on not more than thirty
days' written notice to any other party to the Plan. So long as the Plan is
in effect, the election and nomination of Independent Trustees shall be
committed to the discretion of the Independent Trustees.
DETERMINATION OF NET ASSET VALUE
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As stated in the Prospectus, short-term securities with remaining
maturities of sixty days or less at the time of purchase are valued at
amortized cost, unless the Directors determine such does not reflect the
securities' market value, in which case these securities will be valued at
their fair value as determined by the Directors. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Directors
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair market value as determined by
the Directors. 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 Directors.
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The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting its liabilities, dividing by the number of shares outstanding and
adjusting to the nearest cent. The New York Stock Exchange currently observes
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
Portfolio securities (other than short-term debt securities and futures
and options) are valued for the Fund by an outside independent pricing
service approved by the Board of Trustees. The pricing service has informed
the Fund that in valuing the Fund's portfolio securities it uses both a
computerized grid matrix of tax-exempt securities and evaluations by its
staff, in each case based on information concerning market transactions and
quotations from dealers which reflect the bid side of the market each day.
The 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. The Board
of Trustees believes that timely and reliable market quotations are generally
not readily available to the Fund for purposes of valuing tax-exempt
securities and that the valuations supplied by the pricing service, using the
procedures outlined above and subject to periodic review, are more likely to
approximate the fair value of such securities. The Investment Manager will
periodically review and evaluate the procedures, methods and quality of
services provided by the pricing service then being used by the Fund and may,
from time to time, recommend to the Board of Trustees the use of other
pricing services or discontinuance of the use of any pricing service in whole
or part. The Board may determine to approve such recommendation or take other
provisions for pricing of the Fund's portfolio securities.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund, maintained by the Fund's
Transfer Agent, Dean Witter Trust Company (the "Transfer Agent"). This is an
open account in which shares owned by the investor are credited by the
Transfer Agent in lieu of issuance of a share certificate. If a share
certificate is desired, it must be requested in writing for each transaction.
Certificates are issued only for full shares and may be redeposited in the
account at any time. There is no charge to the investor for issuance of a
certificate. Whenever a shareholder instituted transaction takes place in the
Shareholder Investment Account, the shareholder will be mailed a confirmation
of the transaction from the Fund or DWR or other selected broker-dealer.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of
the Fund is made upon the condition that the Transfer Agent is thereby
automatically appointed as agent of the investor to receive all dividends and
capital gains distributions on shares owned by the investor. 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 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. At
any time an investor may request the Transfer Agent, in writing, to have
subsequent dividends and/or capital gains distributions paid to him or her in
cash rather than shares. To assure sufficient time to process the change,
such request should be received by the Transfer Agent at least five business
days prior to the record date of the dividend or distribution. In the case of
recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to DWR or other
selected broker-dealer, and will be forwarded to the shareholder, upon the
receipt of proper instructions.
Targeted Dividends. (Service Mark) In states where it is legally
permissible, shareholders may also have all income dividends and capital
gains distributions automatically invested in shares of an open-end Dean
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Witter Fund other than Dean Witter National Municipal Trust. Such investment
will be made as described above for automatic investment in shares of the
Fund, at the net asset value per share of the selected Dean Witter Fund as of
the close of business on the Fund's payment date and will begin to earn
dividends, if any, in the selected Dean Witter Fund the next business day. To
participate in the Targeted Dividends program, shareholders should contact
their DWR or other selected broker-dealer account executive or the Transfer
Agent. Shareholders of the Fund must be shareholders of the Dean Witter Fund
targeted to receive investments from dividends at the time they enter the
Targeted Dividends program. Investors should review the prospectus of the
targeted Dean Witter Fund before entering the program.
EasyInvest. (Service Mark) Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund. Shares purchased through EasyInvest will be
added to the shareholder's existing account at the net asset value calculated
the same business day the transfer of funds is effected. For further
information or to subscribe to EasyInvest, shareholders should contact their
DWR or other selected broker-dealer account executive or the Transfer Agent.
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value
next determined by returning the check or the proceeds to the Transfer Agent
within thirty days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset
value per share next determined after receipt of the proceeds by the Transfer
Agent.
Direct Investments through Transfer Agent. A shareholder may make
additional investments in Fund shares at any time by sending a check in any
amount, not less than $100, payable to Dean Witter National Municipal Trust,
directly to the Fund's Transfer Agent. Such amounts will be applied to the
purchase of Fund shares at the net asset value per share next determined
after receipt of the check or purchase payment by the Transfer Agent. The
shares so purchased will be credited to the investor's account.
Systematic Withdrawal Plan. As discussed in the Prospectus, a withdrawal
plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon
their current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount,
not less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable contingent deferred sales charge will be
imposed on shares redeemed under the Withdrawal Plan (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge" in the Prospectus). 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.
Dividends and capital gains distributions on shares held under the
Withdrawal Plan will be invested in additional full and fractional shares at
net asset value. Shares will be credited to an open account for the investor
by the Transfer Agent; no share certificates will be issued. A shareholder is
entitled to a share certificate upon written request to the Transfer Agent,
although in that event the shareholder's Withdrawal Plan will be terminated.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated in the application. The
shares will be redeemed at their net asset value determined on the tenth or
twenty-fifth day (or next following business day) of the relevant month or
quarter and normally a check for the proceeds will be mailed by the Transfer
Agent within five days after the date of redemption. The Systematic
Withdrawal Plan may be terminated at any time by the Transfer Agent.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted.
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<PAGE>
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six
years (see "Redemptions and Repurchases-- Contingent Deferred Sales Charge").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments and the address to which checks are mailed by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the Systematic Withdrawal Plan at
any time by written notice to the Transfer Agent. In the event of such
termination, the account will be continued as a Shareholder Investment
Account. The shareholder may also redeem all or part of the shares held in
the Withdrawal Plan Account (see "Redemptions and Repurchases" in the
Prospectus) at any time.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of the Fund may
exchange their shares for shares of other Dean Witter Funds sold with a
contingent deferred sales charge ("CDSC funds"), for shares of Dean Witter
Short-Term Bond Fund, Dean Witter Short-Term U.S. Treasury Trust, Dean Witter
Limited Term Municipal Trust, Dean Witter Balanced Income Fund, Dean Witter
Balanced Growth Fund, Dean Witter Intermediate Term U.S. Treasury Trust and
for shares of five Dean Witter Funds which are money market funds (the
foregoing eleven 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 will be treated for federal income tax
purposes the same as a repurchase or redemption of shares, on which the
shareholder may realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed).
As described below, and in the Prospectus under the captions "Exchange
Privilege" and "Contingent Deferred Sales Charge", a contingent deferred
sales charge ("CDSC") may be imposed upon a redemption, depending on a number
of factors, including the number of years from the time of purchase until the
time of redemption or exchange ("holding period"). When shares of the Fund or
any other CDSC fund are exchanged for shares of an Exchange Fund, without the
imposition of the CDSC at the time of the exchange. During the period of time
the shareholder remains in the Exchange Fund (calculated from the last day of
the month in which the Exchange Fund shares were acquired) the holding period
or "year since purchase payment made" is frozen. When shares are redeemed out
of an Exchange Fund, they will be subject to a CDSC which would be based upon
the period of time the shareholder held shares in a CDSC fund. However, in
the case of shares exchanged for shares of 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 which are
26
<PAGE>
attributable to those shares. Shareholders acquiring shares of an Exchange
Fund pursuant to this exchange privilege may exchange those shares back into
a CDSC fund from the Exchange Fund, with no CDSC being imposed on such
exchange. The holding period previously frozen when shares were first
exchanged for shares of the Exchange Fund resumes on the date shares of a
CDSC fund are reacquired. Thus, a CDSC is imposed only upon an ultimate
redemption, based upon the time (calculated as described above) the
shareholder was invested in a CDSC fund.
If shares of the Fund are exchanged for shares of another CDSC fund having
a CDSC which is imposed at a higher rate or is subject to a different time
schedule than the CDSC imposed upon a redemption of a share of the Fund, the
higher CDSC will be imposed upon redemption of shares of the fund exchanged
into. Likewise, if shares of another CDSC fund are exchanged for shares of
the Fund, upon redemption of shares of the Fund, a CDSC will be imposed in
accordance with the CDSC schedule applicable to the fund with the higher
CDSC. Moreover, if shares of the Fund are exchanged for shares of another
CDSC fund with a different CDSC schedule imposing a higher CDSC and are
subsequently exchanged again for shares of the Fund, the higher CDSC will
still apply upon ultimate redemption of shares of the Fund.
In addition, shares of the Fund may be acquired in exchange for shares of
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.
When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund, or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CDSC, the amount which represents the
current net asset value of shares at the time of the exchange which were (i)
purchased more than three or six years (depending on the CDSC schedule
applicable to the shares) prior to the exchange, (ii) originally acquired
through reinvestment of dividends or distributions (of the Fund or another
Dean Witter Fund) and (iii) acquired in exchange for shares of front-end
sales charge funds, or for shares of other Dean Witter Funds for which shares
of front-end sales charge funds have been exchanged (all such shares called
"Free Shares"), will be exchanged first. Shares of Dean Witter Strategist
Fund acquired prior to November 8, 1989, shares of Dean Witter American Value
Fund acquired prior to April 30, 1984, and shares of Dean Witter Dividend
Growth Securities Inc. and Dean Witter Natural Resource Development
Securities Inc. acquired prior to July 2, 1984, are also considered Free
Shares and will be the first Free Shares to be exchanged. After an exchange,
all dividends earned on shares in an Exchange Fund will be considered Free
Shares. If the exchanged amount exceeds the value of such Free Shares, an
exchange is made, on a block-by-block basis, of non-Free Shares held for the
longest period of time (except that if shares held for identical periods of
time but subject to different CDSC schedules are held in a block in the same
Exchange Privilege account, the shares of that block that are subject to a
lower CDSC rate will be exchanged prior to the shares of that block that are
subject to a higher CDSC rate). Shares equal to any appreciation in the value
of non-Free Shares exchanged will be treated as Free Shares, and the amount
of the purchase payments for the non-Free Shares of the fund exchanged into
will be equal to the lesser of (a) the purchase payments for, or (b) the
current net asset value of, the exchanged non-Free Shares. If an exchange
between funds would result in exchange of only part of a particular block of
non-Free Shares, then shares equal to any appreciation in the value of the
block (up to the amount of the exchange) will be treated as Free Shares and
exchanged first, and the purchase payment for that block will be allocated on
a pro rata basis between the non-Free Shares of that block to be retained and
the non-Free Shares to be exchanged. The prorated amount of such purchase
payment attributable to the retained non-Free Shares will remain as the
purchase payment for such shares, and the amount of purchase payment for the
exchanged non-Free Shares will be equal to the lesser of (a) the prorated
amount of the purchase payment for, or (b) the current net asset value of,
those exchanged non-Free Shares. Based upon the
27
<PAGE>
procedures described in the Prospectus under the caption "Contingent Deferred
Sales Charge", any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.
With respect to the repurchase of shares of the Fund, the application of
proceeds to the purchase of new shares in the Fund or any other of the funds
and the general administration of the Exchange Privilege, the Transfer Agent
acts as agent for the Distributor and for the shareholder's selected
broker-dealer, if any, in the performance of such functions.
With respect to exchanges, redemptions or repurchases, the Transfer Agent
shall be liable for its own negligence and not for the default or negligence
of its correspondents or for losses in transit. The Fund shall not be liable
for any default or negligence of the Transfer Agent, the Distributor or any
selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000
for Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter New York Municipal Money Market Trust and Dean Witter
California Tax-Free Daily Income Trust although those funds may, at their
discretion, accept initial investments of as low as $1,000. The minimum
initial investment for Dean Witter Short-Term U.S. Treasury Trust is $10,000
although that fund may, at its discretion, accept initial investments of as
low as $5,000. The minimum initial investment for all other Dean Witter Funds
for which the Exchange Privilege is available is $1,000.) Upon exchange into
an Exchange Fund, the shares of that fund will be held in a special Exchange
Privilege Account separately from accounts of those shareholders who have
acquired their shares directly from that fund. As a result, certain services
normally available to shareholders of Exchange Funds, including the check
writing feature, will not be available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required
by applicable regulatory agencies (presently sixty days prior written notice
for termination or material revision), provided that six months prior written
notice of termination will be given to the shareholders who hold shares of
Exchange Funds, pursuant to the Exchange Privilege and provided further that
the Exchange Privilege may be terminated or materially revised without notice
at times (a) when the New York Stock Exchange is closed for other than
customary weekends and holidays, (b) when trading on that Exchange is
restricted, (c) when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist), or (e) if the Fund
would be unable to invest amounts effectively in accordance with its
investment objective(s), policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. As stated in the Prospectus, 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 may be reduced by the amount of
any applicable contingent deferred sales charges (see below). If shares are
28
<PAGE>
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. The share certificate, or an accompanying stock
power, and the request for redemption, must be signed by the shareholder or
shareholders exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a share certificate, must be sent
to the Fund's Transfer Agent, which will redeem the shares at their net asset
value next computed (see "Purchase of Fund Shares" in the Prospectus) after
it receives the request, and certificate, if any, in good order. Any
redemption request received after such computation will be redeemed at the
next determined net asset value. The term "good order" means that the share
certificate, if any, and request for redemption are properly signed,
accompanied by any documentation required by the Transfer Agent, and bear
signature guarantees when required by the Fund or the Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary,
the Transfer Agent may require that written evidence of authority acceptable
to the Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than the Distributor or a selected broker-dealer for the account of
the shareholder), partnership, trust or fiduciary, or sent to the shareholder
at an address other than the registered address, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a revised prospectus.
Contingent Deferred Sales Charge. As stated in the Prospectus, a
contingent deferred sales charge ("CDSC") will be imposed on any redemption
by an investor if after such redemption the current value of the investor's
shares of the Fund is less than the dollar amount of all payments by the
shareholder for the purchase of Fund shares during the preceding three years.
However, no CDSC will be imposed to the extent that the net asset value of
the shares redeemed does not exceed: (a) the current net asset value of
shares purchased more than three years prior to the redemption, plus (b) the
current net asset value of shares purchased through reinvestment of dividends
or distributions of the Fund or another Dean Witter Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) the current net asset value of
shares acquired in exchange for (i) shares of Dean Witter front-end sales
charge funds, or (ii) shares of other Dean Witter Funds for which shares of
front-end sales charge funds have been exchanged (see "Shareholder
Services--Exchange Privilege"), plus (d) increases in the net asset value of
the investor's shares above the total amount of payments for the purchase of
Fund shares made during the preceding three years. The CDSC will be paid to
the Distributor. In addition, no CDSC will be imposed on redemptions of
shares which were purchased by certain Unit Investment Trusts (on which a
sales charge has been paid) or which are attributable to reinvestment of
dividends or distributions from, or the proceeds of, such Unit Investment
Trusts.
In determining the applicability of the CDSC to each redemption, the
amount which represents an increase in the net asset value of the investor's
shares above the amount of the total payments for the purchase of shares
within the last three years will be redeemed first. In the event the
redemption amount exceeds such increase in value, the next portion of the
amount redeemed will be the amount which represents the net asset value of
the investor's shares purchased more than three years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions
and/or shares acquired in exchange for shares of Dean Witter front-end sales
charge funds, or for shares of other Dean Witter funds for which shares of
front-end sales charge funds have been exchanged. A portion of the amount
redeemed which exceeds an amount which represents both such increase in value
and the value of shares purchased more than three years prior to the
redemption and/or shares purchased through reinvestment of dividends or
distributions and/or shares acquired in the above-described exchanges will be
subject to a CDSC.
29
<PAGE>
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years
from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last
day of the month. The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
- ------------------------- -----------------------
<S> <C>
First .................... 3.0%
Second ................... 2.0%
Third .................... 1.0%
Fourth and thereafter ... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable three year period. This will result in any such CDSC being
imposed at the lowest possible rate. Accordingly, shareholders may redeem,
without incurring any CDSC, amounts equal to any net increase in the value of
their shares above the amount of their purchase payments made within the past
three years and amounts equal to the current value of shares purchased more
than three years prior to the redemption and shares purchased through
reinvestment of dividends or distributions or acquired in exchange for shares
of Dean Witter front-end sales charge funds, or for shares of other Dean
Witter Funds for which shares of front-end sales charge funds have been
exchanged. The CDSC will be imposed in accordance with the table shown above,
on any redemptions within three years of purchase which are in excess of
these amounts and which redemptions are not (a) requested within one year of
death or initial determination of disability of a shareholder, or (b) made
pursuant to certain taxable distributions from retirement plans or retirement
accounts, as described in the Prospectus.
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. The term good order means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent.
Such payment may be postponed or the right of redemption suspended at times
(a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c)
when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
(d) during any other period when the Securities and Exchange Commission by
order so permits; provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist. If the shares to be redeemed have recently
been purchased by check (including a certified or bank cashier's check),
payment of 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 proceeds 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.
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the charge have been
held), any transfer involving less than all of the shares in an account will
be made on a pro-rata basis (that is, by transferring shares in the same
proportion that the transferred shares bear to the total shares in the
account immediately prior to the transfer). The transferred shares will
continue to be subject to any applicable contingent deferred sales charge as
if they had not been so transferred.
30
<PAGE>
Reinstatement Privilege. As described in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within 30 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 the net asset value
next determined after a reinstatement request, together with such proceeds,
is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and
reinstatement is made in shares of the Fund, some or all of the loss,
depending on the amount reinstated, will not be allowed as a deduction for
federal income tax purposes but will be applied to adjust the cost basis of
the shares acquired upon reinstatement.
Involuntary Redemption. As described in the Prospectus, due to the
relatively high cost of handling small investments, the Fund reserves the
right to redeem, at net asset value, the shares of any shareholder whose
shares have a value of less than $100, or such lesser amount as may be fixed
by the Board of Trustees. However, before the Fund redeems such shares and
sends the proceeds to the shareholder, it will notify the shareholder that
the value of the shares is less than $100 and allow him or her sixty days to
make an additional investment in an amount which will increase the value of
his or her account to $100 or more before the redemption is processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Each shareholder will receive at least a quarterly summary of his or her
account, including information as to reinvested dividends and capital gains
distributions. Share certificates for dividends or distributions will not be
issued unless a shareholder requests in writing that a certificate be issued
for a specific number of shares.
In computing net investment income, the Fund will amortize any premiums
and original issue discounts on securities owned, if applicable. Capital
gains or losses realized upon sale or maturity of such securities will be
based on their amortized cost.
Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses.
The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code. If so
qualified, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, realized during any fiscal year
to the extent that it distributes such income and capital gains to its
shareholders.
With respect to the Fund's investments in zero coupon bonds, the Fund
accrues income prior to any actual cash payments by their issuers. In order
to continue to comply with Subchapter M of the Internal Revenue Code and
remain able to forego payment of federal income tax on its income and capital
gains, the Fund must distribute all of its net investment income, including
income accrued from zero coupon bonds. As such, the Fund may be required to
dispose of some of its portfolio securities under disadvantageous
circumstances to generate the cash required for distribution.
As discussed in the Prospectus, the Fund intends to qualify to pay
"exempt-interest dividends" to its shareholders by maintaining, as of the
close of each of its taxable years, at least 50% of the value of its assets
in tax-exempt securities. An exempt-interest dividend is that part of the
dividend distributions made by the Fund which consists of interest received
by the Fund on tax-exempt securities upon which the shareholder incurs no
federal income taxes. 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.
As also discussed in the Prospectus, the Fund intends to invest a portion
of its assets in certain "private activity bonds" issued after August 7,
1986. As a result, a portion of the exempt-interest dividends paid by the
Fund will be an item of tax preference to shareholders subject to the
alternative minimum tax. Certain corporations which are subject to the
alternative minimum tax may also have to
31
<PAGE>
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.
Within sixty days after the end of its fiscal year, the Fund will mail to
shareholders a statement indicating the percentage of the dividend
distributions for each fiscal year which constitutes exempt- interest
dividends, the percentage, if any, that is taxable, and the percentage, if
any, of the exempt- interest dividends which constitutes an item of tax
preference, and to what extent the taxable portion is long-term capital gain,
short-term capital gain or ordinary income. This percentage should be applied
uniformly to all monthly distributions made during the fiscal year to
determine the proportion of dividends that is tax-exempt. The percentage may
differ from the percentage of tax-exempt dividend distributions for any
particular month.
Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of net
short-term capital gains. Such dividends and distributions are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Distributions of
long-term capital gains, if any, are taxable as long-term 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. Since the Fund's income is expected to be derived entirely from
interest rather than dividends, it is anticipated that no portion of such
dividend distributions will be eligible for the federal dividends received
deduction available to corporations.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund is not deductible. Furthermore, entities or persons who
are "substantial users" (or related persons) of facilities financed by
industrial development bonds should consult their tax advisers before
purchasing shares of the Fund. "Substantial user" is defined generally by
Income Tax Regulation 1.103-11(b) as including a "non-exempt person" who
regularly uses in a trade or business a part of a facility financed from the
proceeds of industrial development bonds.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be affected. In that event, the
Fund would re-evaluate its investment objective and policies.
Any dividends or capital gains distributions received by a shareholder
from any investment company will have the effect of reducing the net asset
value of the shareholder's shares in that fund by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains
distributions are, and some portion of the dividends may be, subject to
income tax. If the net asset value of the shares should be reduced below a
shareholder's cost as a result of the payment of taxable dividends or the
distribution of capital gains, such payment or distribution would be in part
a return of capital but nonetheless taxable to the shareholder. Therefore, an
investor should consider the tax implications of purchasing Fund shares
immediately prior to a distribution record date.
Shareholders should consult their tax advisers regarding specific
questions as to state or local taxes.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature.
Yield is calculated for any 30-day period as follows: the amount of interest
income for each security in the Fund's portfolio is determined as described
below; the total for the entire portfolio constitutes the Fund's gross income
for the period. Expenses accrued during the period are subtracted to arrive
at "net investment income". The resulting amount is divided by the product of
the maximum offering price per share on the last day of the period (reduced
by any undeclared earned income per share that is expected to be declared
shortly after the end of the period) multiplied
32
<PAGE>
by the average number of Fund shares outstanding during the period that were
entitled to dividends. This amount is added to 1 and raised to the sixth
power. 1 is then subtracted from the result and the difference is multiplied
by 2 to arrive at the annualized yield.
To determine interest income from debt obligations, a yield-to-maturity,
expressed as a percentage, is determined for obligations held at the
beginning of the period, based on the current market value of the security
plus accrued interest, generally as of the end of the month preceding the
30-day period, or, for obligations purchased during the period, based on the
cost of the security (including accrued interest). The yield-to-maturity is
multiplied by the market value (plus accrued interest) for each security and
the result is divided by 360 and multiplied by 30 days or the number of days
the security was held during the period, if less. Modifications are made for
determining yield-to-maturity on certain tax-exempt securities. For the
30-day period ended September 30, 1995, the Fund's yield, calculated pursuant
to the formula described above was 5.11%. During this period, InterCapital
waived its management fee and assumed certain expenses of the Fund. Had the
Fund borne these expenses and paid the management fee for the period, the
yield for the 30-day period would have been 4.47%.
The Fund may also quote a "tax-equivalent yield" determined by dividing
the tax-exempt portion of quoted yield by 1 minus the stated income tax rate
and adding the result to the portion of the yield that is not tax-exempt. The
Fund's tax-equivalent yield, based upon a Federal personal income tax bracket
of 39.6% for the 30-day period ended September 30, 1995 was 8.46% based upon
the yield calculated above. Without the waiver of the management fee or the
assumption of certain expenses, the Fund's tax-equivalent yield for the
period would have been 7.40%.
The Fund's "average annual total return" represents an annualization of
the Fund's total return over a particular period and is computed by finding
the annual percentage rate which will result in the ending redeemable value
of a hypothetical $1,000 investment made at the beginning of a one, five or
ten year period, or for the period from the date of commencement of the
Fund's operations, if shorter than any of the foregoing. The ending
redeemable value is reduced by any contingent deferred sales charge at the
end of the one, five or ten year or other period. For the purpose of this
calculation, it is assumed that all dividends and distributions are
reinvested. The formula for computing the average annual total return
involves a percentage obtained by dividing the ending redeemable value by the
amount of the initial investment, taking a root of the quotient (where the
root is equivalent to the number of years in the period) and subtracting 1
from the result. The average annual total return of the Fund for the fiscal
year ended September 30, 1995 and for the period June 2, 1994 (commencement
of operations) through September 30, 1995 was 7.54% and 5.99%, respectively.
During this period, InterCapital waived its management fee and assumed
certain expenses of the Fund. Had the Fund borne these expenses and paid
these fees for the fiscal year ended September 30, 1995 and during the stated
period, the average annual total return for the period would have been 6.72%
and 4.70% respectively. Computations of average annual total return for
periods of less than one year represent an annualization of the Fund's actual
total return for the applicable period. The Fund's actual annual total return
for its first full year of operation cannot be predicted and therefore is
likely to be different from any such annualized computations.
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 calculation may or may not reflect
the deduction of the contingent deferred sales charge which, if reflected,
would reduce the performance quoted. For example, the average annual total
return of the Fund may be calculated in the manner described in the preceding
paragraph, but without the deduction for any applicable contingent deferred
sales charge. Based on this calculation, the Fund's average annual total
return for the fiscal year ended September 30, 1995 and the period June 2,
1994 (commencement of operations) through September 30, 1995 was 7.46% and
10.54%, respectively.
In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage
33
<PAGE>
obtained by dividing the ending value (without reduction for any contingent
deferred sales charge) by the initial $1,000 investment and subtracting 1
from the result. Based on the foregoing calculation, the Fund's total return
for the fiscal year ended September 30, 1995 and the period June 2, 1994
(commencement of operations) through September 30, 1994 was 10.54% and
10.02%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal and without taking
into account the effect of any applicable contingent deferred sales charge)
and multiplying by $10,000, $50,000 or $100,000 as the case may be.
Investments of $10,000, $50,000 and $100,000 in the Fund since inception
would have grown to $11,002, $55,010, and $110,020, respectively, at
September 30, 1995.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations.
DESCRIPTION OF SHARES
- -----------------------------------------------------------------------------
The Shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an
unlimited number of shares of beneficial interest. The Trustees themselves
have the power to alter the number and the terms of office of the Trustees
(as provided for in the Declaration of Trust), and they may at any time
lengthen or shorten their own terms or make their terms of unlimited duration
and appoint their own successors, provided that always at least a majority of
the Trustees has been elected by the shareholders of the Fund. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees. The voting rights of shareholders are not cumulative, so that
holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being selected, while the holders of the remaining shares
would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the managed portfolios) and additional classes
of shares within any series (which would be used to distinguish among the
rights of different categories of shareholders, as might be required by
future regulations or other unforeseen circumstances). However, the Trustees
have not authorized any such additional series or classes of shares and the
Fund has no present intention to add additional classes or series of shares.
The Declaration of Trust further provides that no Trustee, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor
is any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise
from his/her or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of his duties. It also provides that all third persons
shall look solely to the Fund property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated above,
the Declaration of Trust provides that a Trustee, officer, employee or agent
is entitled to be indemnified against all liability in connection with the
affairs of the Fund.
The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders or
the Trustees.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Custodian of the Fund's assets. The Custodian has no part in deciding the
Fund's investment policies or which securities are to be purchased or sold
for the Fund's portfolio. Any of the Fund's cash balances with the Custodian
in excess of $100,000 are unprotected by Federal deposit insurance. Such
balances may, at times, be substantial.
34
<PAGE>
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust Company is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager, and Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts, including providing subaccounting and recordkeeping services for
certain retirement accounts; disbursing cash dividends and reinvesting
dividends; processing account registration changes; handling purchase and
redemption transactions; mailing prospectuses and reports; mailing and
tabulating proxies; processing share certificate transactions; and
maintaining shareholder records and lists. For these services Dean Witter
Trust Company receives a per shareholder account fee from the Fund.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent accountants, will be
sent to shareholders each year.
The Fund's fiscal year is September 30. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The annual financial statements of the Fund for the year ended September
30, 1995, included in this Statement of Additional Information and
incorporated by reference in the Prospectus, have been so included and
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
35
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------------------------------------------------------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (91.7%) General Obligation (21.3%)
$ 3,000 North Slope Borough, Alaska, Ser 1994 B (CGIC) ............... 0.00% 06/30/05 $ 1,779,060
1,000 Santa Margarita / Dana Point Authority, California, Impr Dists
#3, 3A, 4 & 4A 1994 Ser B Refg (MBIA) ....................... 5.75 08/01/20 962,830
500 Florida Board of Education, Cap Outlay Ser 1994 A ............ 6.10 06/01/24 506,865
1,000 Atlanta, Georgia, Public Impr Ser 1994 A ..................... 6.125 12/01/23 1,009,960
1,500 Hawaii, 1995 Ser C J ......................................... 6.25 01/01/15 1,536,855
1,000 Chicago Park District, Illinois, Ser 1995 .................... 6.60 11/15/14 1,050,460
1,000 Chelsea, Massachusetts, School Act of 1948 (AMBAC) ........... 6.50 06/15/12 1,061,710
1,000 Massachusetts, 1994 Ser C (FGIC) ............................. 6.75 11/01/12 1,086,280
1,500 New York City, New York, 1995 Ser D (MBIA) ................... 6.20 02/01/07 1,636,560
1,000 Delaware City School District, Ohio, Construction & Impr dtd
8/15/95 (FGIC) .............................................. 5.75 12/01/20 988,110
2,000 Washington, 1994 Ser A ....................................... 5.80 09/01/08 2,061,640
- ----------- ------------
14,500 13,680,330
- ----------- ------------
Educational Facilities Revenue (7.9%)
500 Glendale Industrial Development Authority, Arizona,
Thunderbird - The American Graduate School of International
Management (Connie Lee) ..................................... 7.125 07/01/20 561,975
1,000 California Educational Facilities Authority, Claremont
Colleges Ser 1992 ........................................... 6.375 05/01/22 996,750
500 Atlanta Urban Residential Finance Authority, Georgia,
Morehouse College Refg Ser 1995 (MBIA) ...................... 5.75 12/01/14 494,800
2,000 New Jersey Economic Development Authority, Educational Testing
Service Ser 1995 (MBIA) ..................................... 6.125 05/15/15 2,040,660
500 New York State Dormitory Authority, City University 1994 3rd
Resolution Ser 1 (AMBAC) .................................... 6.30 07/01/24 516,500
500 Rhode Island Health & Educational Building Corporation,
Providence College Ser 1993 (MBIA) .......................... 5.60 11/01/15 477,915
- ----------- ------------
5,000 5,088,600
- ----------- ------------
Electric Revenue (5.3%)
900 Sacramento Municipal Utility District, California, Refg 1994 5.75 01/01/15 883,476
Ser I (MBIA) ................................................
1,500 Puerto Rico Electric Power Authority, Power Ser X ............ 6.00 07/01/15 1,484,430
1,000 Austin, Texas, Combined Utilities Refg Ser 1994 (FGIC) ....... 6.25 05/15/16 1,027,350
- ----------- ------------
3,400 3,395,256
- ----------- ------------
See Notes to Financial Statements
36
<PAGE>
Dean Witter National Municipal Trust
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------------------------------------------------------------- -------- ---------- ------------
Hospital Revenue (11.9%)
$ 500 Rancho Mirage Joint Powers Financing Authority, California,
Eisenhower Memorial Hospital COPs ........................... 7.00% 03/01/22 $ 519,585
2,000 Orange County Health Facilities Authority, Florida, Adventist
Health System/Sunbelt Obligated Group Ser 1995 (AMBAC) ...... 5.25 11/15/20 1,835,520
1,000 Maryland Health & Higher Educational Facilities Authority,
Kernan Hospital Ser 1994 (Connie Lee) ....................... 6.10 07/01/24 1,003,780
1,300 New Hampshire Higher Educational & Health Facilities
Authority, St Joseph Hospital Ser 1994 (Connie Lee) ......... 6.35 01/01/07 1,399,606
3,000 Jackson, Tennessee, Jackson-Madison County General Hospital
Refg & Impr Ser 1995 (AMBAC) ................................ 5.625 04/01/15 2,895,030
- ----------- ------------
7,800 7,653,521
- ----------- ------------
Industrial Development/Pollution Control Revenue (6.4%)
1,500 Hawaii Department of Budget & Finance, Hawaiian Electric Co
Ser 1995 A (AMT) (MBIA) ..................................... 6.60 01/01/25 1,553,475
2,500 New York State Energy Research & Development Authority, New
York State Electric & Gas Corp 1987 Ser A (AMT) (MBIA) ...... 6.15 07/01/26 2,524,700
- ----------- ------------
4,000 4,078,175
- ----------- ------------
Mortgage Revenue - Multi-Family (2.4%)
500 Honolulu, Hawaii, Waipahu Towers GNMA Collateralized 1995 Ser
A (AMT) ..................................................... 6.90 06/20/35 518,235
1,000 Massachusetts Housing Finance Agency, Rental 1994 Ser A (AMT)
(AMBAC) ..................................................... 6.65 07/01/19 1,028,480
- ----------- ------------
1,500 1,546,715
- ----------- ------------
Mortgage Revenue - Single Family (4.7%)
1,000 Pennsylvania Housing Finance Agency, Ser 1995-96 (AMT) (WI) .. 6.30 10/01/27 1,002,480
1,000 Tennessee Housing Development Agency, Finance 1994 Ser B (AMT) 6.55 07/01/19 1,019,190
1,000 Utah Housing Finance Agency, Federally Insured/Guaranteed
Loans 1994 Issue E (AMT) .................................... 6.50 07/01/26 1,022,380
- ----------- ------------
3,000 3,044,050
- ----------- ------------
Public Facilities Revenue (6.3%)
North City West School Facilities Financing Authority,
California, Community Facs Dist #1 Spl Tax
1,000 Ser 1995 B (CGIC) ........................................... 5.75 09/01/15 969,980
2,000 Ser 1995 B (CGIC) ........................................... 6.00 09/01/19 1,979,840
1,000 Essex County Improvement Authority, New Jersey, County Jail &
Youth House Ser 1994 (AMBAC) ................................ 6.90 12/01/14 1,121,100
- ----------- ------------
4,000 4,070,920
- ----------- ------------
See Notes to Financial Statements
37
<PAGE>
Dean Witter National Municipal Trust
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------------------------------------------------------------- -------- ---------- ------------
Transportation Facilities Revenue (12.1%)
$ 1,000 Lee County, Florida, Ser 1995 (MBIA) ......................... 5.75% 10/01/22 $ 987,830
850 Regional Transportation Authority, Illinois, Ser 1994 A ...... 6.25 06/01/15 865,810
1,000 Kentucky Turnpike Authority, Economic Development Road
Revitalization Refg Ser 1995 (AMBAC) ........................ 5.625 07/01/15 986,410
2,500 Maine Turnpike Authority, Ser 1994 (MBIA) .................... 6.00 07/01/18 2,493,550
1,000 New York State Thruway Authority, General 1995 Ser C (FGIC) .. 6.00 01/01/25 1,001,510
1,500 Port Authority of New York & New Jersey, Cons One Hundredth
Ser Second Installment** .................................... 5.75 12/15/20 1,460,895
------------
7,850 7,796,005
- ----------- ------------
Water & Sewer Revenue (11.8%)
1,000 Birmingham Waterworks & Sewer Board, Alabama, Ser 1993-A ..... 6.00 01/01/20 1,002,700
1,000 Castaic Lake Water Agency, California, Refg Ser 1994 A COPs
(MBIA) ...................................................... 6.00 08/01/18 990,090
1,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA) ................ 6.375 01/01/24 1,027,770
500 Indiana Bond Bank, Revolving Fund Ser 1994 A ................. 6.00 02/01/16 488,475
2,000 Massachusetts Water Resources Authority, 1992 Ser A .......... 6.50 07/15/07 2,204,580
500 Santa Fe, New Mexico, Ser 1994 A (AMBAC) ..................... 6.30 06/01/24 514,225
1,250 Philadelphia, Pennsylvania, Water & Wastewater Ser 1995 (MBIA) 6.25 08/01/11 1,335,813
- ----------- ------------
7,250 7,563,653
- ----------- ------------
Other Revenue (1.6%)
1,000 New Jersey Economic Development Authority, Market Transition
Sr Lien Ser 1994 A (MBIA) ................................... 5.875 07/01/11 1,013,020
- ----------- ------------
59,300 TOTAL MUNICIPAL BONDS (Identified Cost $56,842,190) ................................ 58,930,245
- ----------- ------------
38
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------------------------------------------------------------- -------- ---------- ------------
Short-Term Municipal Obligations (7.0%)
$ 1,200 Dade County Health Facilities Authority, Florida, Miami
Children's Hospital Ser 1990 (Demand 10/02/95) .............. 4.60*% 01/02/00 $ 1,200,000
400 Massachusetts Port Authority, Refg Ser 1995 A (Demand
10/02/95) ................................................... 4.75* 07/01/15 400,000
1,100 New Jersey Economic Development Authority, Toys 'R' Us Inc
(Demand 10/02/95) ........................................... 4.20* 04/01/19 1,100,000
1,300 Delaware County Industrial Development Authority,
Pennsylvania, United Parcel Service Ser 1985 (Demand
10/02/95) ................................................... 4.75* 12/01/15 1,300,000
500 Harris County Health Facilities Development Corporation,
Texas, Methodist Hospital Ser 1994 (Demand 10/02/95) ........ 4.85* 12/01/25 500,000
------------
4,500 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $4,500,000) ................ 4,500,000
- ----------- ------------
$63,800 TOTAL INVESTMENTS (Identified Cost $61,342,190) (a) .................... 98.7% 63,430,245
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ......................... 1.3 845,430
------------
NET ASSETS ............................................................. 100.0% $64,275,675
============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
WI Security purchased on a when issued basis.
* Current coupon of variable rate security.
** Joint exemption in New York and New Jersey.
(a) The aggregate cost for federal income tax purposes is $61,342,190;
the aggregate gross unrealized appreciation is $2,088,527 and the
aggregate gross unrealized depreciation is $472, resulting in net
unrealized appreciation of $2,088,055.
Bond Insurance
- -------------
AMBAC AMBAC Indemnity Corporation.
CGIC Capital Guaranty Insurance Company.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
Geographic Summary of Investments
Based on Market Value as a Percent of Net Assets
September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Alabama ........ 1.5%
Alaska ......... 2.8
Arizona ........ 0.9
California ..... 11.4
Florida ........ 7.0
Georgia ........ 2.3
Hawaii ......... 5.6
Illinois ....... 4.6%
Indiana ........ 0.8
Kentucky ....... 1.5
Maine .......... 3.9
Maryland ....... 1.6
Massachusetts . 9.0
New Hampshire . 2.2
New Jersey ..... 8.2%
New Mexico ..... 0.8
New York ....... 8.8
Ohio ........... 1.5
Pennsylvania .. 5.7
Puerto Rico ... 2.3
Rhode Island .. 0.7
Tennessee ...... 6.1%
Texas .......... 2.4
Utah ........... 1.6
Washington ..... 3.2
Joint Exemption 2.3
------
Total .......... 98.7%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $61,342,190) ............. $63,430,245
Cash ....................................... 128,550
Receivable for:
Shares of beneficial interest sold ...... 973,284
Interest ................................. 820,324
Deferred organizational expenses ........... 113,095
Receivable from affiliate .................. 53,107
Prepaid expenses and other assets .......... 4,222
-------------
TOTAL ASSETS ............................. 65,522,827
-------------
LIABILITIES:
Payable for:
Investments purchased .................... 1,009,275
Plan of distribution fee ................. 29,490
Shares of beneficial interest
repurchased ............................. 19,522
Dividends to shareholders ................ 18,441
Accrued expenses and other payables ....... 57,329
Organizational expenses payable ............ 113,095
-------------
TOTAL LIABILITIES ........................ 1,247,152
-------------
NET ASSETS:
Paid-in-capital ............................ 62,177,772
Net unrealized appreciation ................ 2,088,055
Accumulated undistributed net investment
income .................................... 9,072
Accumulated undistributed net realized gain 776
-------------
NET ASSETS ............................... $64,275,675
=============
NET ASSET VALUE PER SHARE,
6,183,399 shares outstanding (unlimited
shares authorized of $.01 par value) ..... $ 10.39
=============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ....................... $2,500,615
------------
EXPENSES
Plan of distribution fee .............. 271,201
Investment management fee ............. 158,216
Professional fees ..................... 53,598
Shareholder reports and notices ...... 40,745
Organizational expenses ............... 30,784
Transfer agent fees and expenses ..... 21,733
Registration fees ..................... 17,784
Other ................................. 10,129
------------
Total Expenses before fees paid
indirectly and Amounts
Waived/Assumed ...................... 604,190
LESS: AMOUNTS WAIVED/ASSUMED ....... (329,874)
Less: Fees paid indirectly .......... (3,115)
------------
Total Expenses after fees paid
indirectly and Amounts
Waived/Assumed ...................... 271,201
------------
NET INVESTMENT INCOME ............... 2,229,414
------------
NET REALIZED AND UNREALIZED GAIN :
Net realized gain ..................... 776
Net change in unrealized depreciation 2,452,914
------------
NET GAIN ............................ 2,453,690
------------
NET INCREASE .......................... $4,683,104
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
FOR THE YEAR ENDED JUNE 2, 1994* THROUGH
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
- ------------------------------------------------------ ------------------ ---------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 2,229,414 $186,504
Net realized gain ..................................... 776 --
Net change in unrealized depreciation ................. 2,452,914 (364,859)
------------------ ---------------------
NET INCREASE (DECREASE) ............................. 4,683,104 (178,355)
Dividends from net investment income .................. (2,220,342) (186,504)
Net increase from transactions in shares of beneficial
interest ............................................. 31,953,161 30,124,611
------------------ ---------------------
TOTAL INCREASE ...................................... 34,415,923 29,759,752
NET ASSETS:
Beginning of period ................................... 29,859,752 100,000
------------------ ---------------------
END OF PERIOD
(Including undistributed net investment income of
$9,072 and $0, respectively) ........................ $64,275,675 $29,859,752
================== =====================
</TABLE>
- ------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1995
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 at time of purchase are valued on a mark-to-market basis until
sixty days prior to maturity and thereafter at amortized cost based on their
value on the 61st day. Short-term debt securities having a maturity date of
sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Discounts are accreted and premiums are amortized 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
42
<PAGE>
Dean Witter National Municipal Trust
NOTES TO FINANCIAL STATEMENTS September 30, 1995, continued
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 which will be
reimbursed, exclusive of amounts assumed of $40,905. Such expenses 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, the Fund pays 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.
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 December 31, 1995.
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 dividend 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
43
<PAGE>
Dean Witter National Municipal Trust
NOTES TO FINANCIAL STATEMENTS September 30, 1995, continued
affiliate of the Investment Manager and Distributor, and 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 year ended September 30,
1995, it received approximately $144,000 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 year ended September 30, 1995
aggregated $39,204,511 and $786,191, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1995, the Fund
had transfer agent fees and expenses payable of approximately $2,300.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED FOR THE PERIOD JUNE 2, 1994*
SEPTEMBER 30, 1995 THROUGH SEPTEMBER 30, 1994
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------- ---------------
Sold ............................ 4,055,681 $ 40,945,963 3,078,785 $30,761,843
Reinvestment of dividends ....... 129,694 1,316,413 11,037 109,831
------------- -------------- ------------- ---------------
4,185,375 42,262,376 3,089,822 30,871,674
Repurchased ..................... (1,026,786) (10,309,215) (75,012) (747,063)
------------- -------------- ------------- ---------------
Net increase .................... 3,158,589 $ 31,953,161 3,014,810 $30,124,611
============= ============== ============= ===============
</TABLE>
- ------------
* Commencement of operations.
44
<PAGE>
Dean Witter National Municipal Trust
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
JUNE 2, 1994*
FOR THE YEAR ENDED THROUGH
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
- ------------------------------------------------- ---------------------- ----------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............. $ 9.87 $10.00
---------------------- ----------------------
Net investment income ............................ 0.50 0.09
Net realized and unrealized gain (loss) ......... 0.52 (0.13)
---------------------- ----------------------
Total from investment operations ................. 1.02 (0.04)
Dividends from net investment income ............. (0.50) (0.09)
---------------------- ----------------------
Net asset value, end of period ................... $10.39 $ 9.87
====================== ======================
TOTAL INVESTMENT RETURN .......................... 10.54% (0.46)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ......................................... 0.60%(4) 0.60 %(2)(3)
Net investment income ............................ 4.93%(4) 3.07 %(2)(3)
SUPPLEMENTAL DATA:
Net asset value, end of period, in thousands .... $64,276 $29,860
--
Portfolio turnover rate .......................... 2% %
</TABLE>
- ------------
* Commencement of operations .
+ Does not reflect the deduction of sales charge.
(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 and net investment
income ratios would have been 2.08% and 1.59%, respectively.
(4) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above expense and net investment income
ratios would have been 1.34% (which includes 0.01% gross-up for
custody cash credits) and 4.20%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
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 present
fairly, in all material respects, the financial position of Dean Witter
National Municipal Trust (the "Fund") at September 30, 1995, the results of
its operations for the year then ended, and the changes in its net assets and
the financial highlights for the year then ended and for the period 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 audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
September 30, 1995 by correspondence with the custodian and a broker, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 10, 1995
1995 FEDERAL TAX NOTICE (unaudited)
During the year ended September 30, 1995, the Fund paid to the shareholders
$0.50 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.
46
<PAGE>
APPENDIX
- --------
RATINGS OF INVESTMENTS
- -----------------------------------------------------------------------------
Moody's Investors Service Inc. ("Moody's")
MUNICIPAL BOND RATINGS
<TABLE>
<CAPTION>
<S> <C>
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as
well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal payments may be very moderate, and therefore
not well safeguarded during both good and bad times in the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest
and principal payments or of maintenance of other terms of the contract over any long period of time may
be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements
of danger with respect to principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
</TABLE>
Conditional Rating: Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These bonds are secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed or (d) payments to
which some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination of
basis of condition.
47
<PAGE>
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa though B in its municipal bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and a modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal note and other short-term loans
are designated Moody's Investment Grade (MIG). MIG 1 denotes best quality and
means there is present strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the market
for refinancing. MIG 2 denotes high quality and means that margins of
protection are ample although not as large as in MIG 1. MIG 3 denotes
favorable quality and means that all security elements are accounted for but
that the undeniable strength of the previous grades, MIG 1 and MIG 2, is
lacking. MIG 4 denotes adequate quality and means that the protection
commonly regarded as required of an investment security is present and that
while the notes are not distinctly or predominantly speculative, there is
specific risk.
VARIABLE RATE DEMAND OBLIGATIONS
A short-term rating, in addition to the Bond or MIG ratings, designated
VMIG may also be assigned to an issue having a demand feature. The assignment
of the VMIG symbol reflects such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. The VMIG rating criteria are identical to the MIG criteria
discussed above.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess
of nine months. These ratings apply to Municipal Commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment
capacity of rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3
have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
MUNICIPAL BOND RATINGS
A Standard & Poor's municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers
or lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.
48
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest-rated
issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other speculative grade debt. However,
it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions
which would lead to inadequate capacity or willingness to pay interest and repay principal.
B Debt rated "B" has a greater vulnerability to default but presently has the capacity to meet interest payments
and principal repayments. Adverse business, financial or economic conditions would likely impair capacity
or willingness to pay interest and repay principal.
CCC Debt rated "CCC" has a current identifiable vulnerability to default, and is dependent upon favorable business,
financial and economic conditions to meet timely payments of interest and repayments of principal. In the
event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay
interest and repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior debt which is assigned an actual or
implied "CCC" rating.
C The rating "C" is typically applied to debt subordinated to senior debt which is assigned an actual or
implied "CCC-'' debt rating.
Cl The rating "Cl" is reserved for income bonds on which no interest is being paid.
D Debt rated "D" is in payment default. The 'D' rating category is used when interest payments or principal
payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The 'D' rating also will be used upon the filing
of a bankruptcy petition if debt service payments are jeopardized.
NR Indicates that no rating has been requested, that there is insufficient information on which to base a
rating or that Standard & Poor's does not rate a particular type of obligation as a matter of policy.
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having predominantly speculative characteristics
with respect to capacity to pay interest and repay principal. "BB" indicates the least degree of speculation
and "C" the highest degree of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus(-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus
sign to show relative standing within the major ratings categories.
The foregoing ratings are sometimes followed by a "p" which indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being financed by the bonds being rated
and indicates that payment of debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing credit quality subsequent
to completion of the project, makes no comment on the likelihood or risk of default upon failure of such
completion.
</TABLE>
49
<PAGE>
MUNICIPAL NOTE RATINGS
Commencing on July 27, 1984, Standard & Poor's instituted a new rating
category with respect to certain municipal note issues with a maturity of
less than three years. The new note ratings denote the following:
SP-1 denotes a very strong or strong capacity to pay principal and
interest. Issues determined to possess overwhelming safety characteristics
are given a plus (+) designation (SP-1+).
SP-2 denotes a satisfactory capacity to pay principal and interest.
SP-3 denotes a speculative capacity to pay principal and interest.
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to
purchase or sell a security. The ratings are based upon current information
furnished by the issuer or obtained by S&P from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into
group categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. Ratings are applicable to both taxable and tax-exempt
commercial paper. The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity
for timely payment. Issues in this category are further refined with the
designation 1, 2 and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payments is
very strong.
A-2 indicates capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is not as
overwhelming as for issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations
carrying this designation are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the
higher designations.
50
DEAN WITTER NATIONAL MUNICIPAL TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
Financial highlights for the period June 2, 1994
through September 30, 1994 and for the year
ended September 30, 1996 ............................ 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
Portfolio of Investments at September 30, 1995 ..... 36
Statement of assets and liabilities at
September 30, 1995 ................................. 40
Statement of operations for the year ended
September 30, 1995 ................................. 40
Statement of changes in net assets for
the period June 2, 1994 through
September 30, 1994 and the year ended
September 30, 1995 ................................. 41
Notes to Financial Statements ...................... 42
Financial highlights for the period June 2, 1994
through September 30, 1994 and for the year
ended September 30, 1995 ............................ 45
(3) Financial statements included in Part C:
None
(b) Exhibits:
2. -- Form of Amended and Restated By-Laws of Registrant
9. -- Form of Services Agreement between InterCapital and
Dean Witter Services Company Inc.
11. -- Consent of Independent Accountants
15. -- Form of Amended and Restated Plan of Distribution
between Registrant and Dean Witter Distributors Inc.
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
All other exhibits previously filed and incorporated by reference.
Item 25. Persons Controlled by or Under Common Control With
Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at October 30, 1995
Shares of Beneficial Interest 1,923
Item 27. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the
indemnification of the Registrant's trustees, officers, employees and
agents is permitted if it is determined that they acted under the
belief that their actions were in or not opposed to the best interest
of the Registrant, and, with respect to any criminal proceeding, they
had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that
the actions in question did not render them liable by reason of
willful misfeasance, bad faith or gross negligence in the performance
of their duties or by reason of reckless disregard of their
obligations and duties to the Registrant. Trustees, officers,
employees and agents will be indemnified for the expense of
litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation.
The Registrant may also advance money for these expenses provided
that they give their undertakings to repay the Registrant unless
their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust
and paragraph 8 of the Registrant's Investment Management Agreement,
neither the Investment Manager nor any trustee, officer, employee or
agent of the Registrant shall be liable for any action or failure to
act, except in the case of bad faith, willful misfeasance, gross
negligence or reckless disregard of duties to the Registrant.
2
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of the Registrant in connection with the
successful defense of any action, suit or proceeding) is asserted
against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act, and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with
Release 11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940, so long as the interpretation of
Sections 17(h) and 17(i) of such Act remains in effect.
Registrant, in conjunction with the Investment Manager,
Registrant's Trustees, and other registered investment management
companies managed by the Investment Manager, maintains insurance on
behalf of any person who is or was a Trustee, officer, employee, or
agent of Registrant, or who is or was serving at the request of
Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against
him and incurred by him or arising out of his position. However, in
no event will Registrant maintain insurance to indemnify any such
person for any act for which Registrant itself is not permitted to
indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
See "The Fund and Its Management" in the Prospectus regarding
the business of the investment adviser. The following information is
given regarding officers of Dean Witter InterCapital Inc.
InterCapital is a wholly-owned subsidiary of Dean Witter, Discover &
Co. The principal address of the Dean Witter Funds is Two World
Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following
registered investment companies:
Closed-End Investment Companies
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
3
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
Open-end Investment Companies:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Managed Assets Trust
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
4
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
(33) Dean Witter Diversified Income Trust
(34) Dean Witter U.S. Government Money Market Trust
(35) Dean Witter Global Dividend Growth Securities
(36) Active Assets California Tax-Free Trust
(37) Dean Witter Natural Resource Development Securities Inc.
(38) Active Assets Government Securities Trust
(39) Active Assets Money Trust
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Global Asset Allocation Fund
(51) Dean Witter Balanced Growth Fund
(52) Dean Witter Balanced Income Fund
(53) Dean Witter Hawaii Municipal Trust
(54) Dean Witter Capital Appreciation Fund
(55) Dean Witter Intermediate Term U.S. Treasury Trust
(56) Dean Witter Information Fund
The term "TCW/DW Funds" refers to the following registered investment
companies:
Open-End Investment Companies
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Global Convertible Trust
(8) TCW/DW Total Return Trust
5
Closed-End Investment Companies
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
- ----------------- -------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co. ("DWDC"); Director and/or officer
of various DWDC subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds;Member (since
January, 1993) and Chairman(since January,
1995) of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
6
Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
- ----------------- -------------------------------------------------
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
David A. Hughey Executive Vice President and Chief Administrative
Executive Vice Officer of DWSC, Distributors and DWTC; Director
President and Chief of DWTC; Vice President of the Dean Witter Funds
Administrative Officer and the TCW/DW Funds.
Edmund C. Puckhaber Director of DWTC; Vice President of the Dean
Executive Vice Witter Funds.
President
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC, Distributors
and DWTC; Vice President of the Dean Witter Funds
and the TCW/DW Funds.
7
Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
- ----------------- -------------------------------------------------
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Joseph McAlinden
Senior Vice President Vice President of the Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira Ross
Senior Vice President Vice President of various Dean Witter Funds.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
8
Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
- ----------------- -------------------------------------------------
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Douglas Brown
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
9
Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
- ----------------- -------------------------------------------------
Peter W. Gurman
Vice President
Russell Harper
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of Dean Witter Mid-Cap Growth Fund.
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
Stanley Kapica
Vice President
Michael Knox Vice President of Dean Witter Convertible
Vice President Securities Trust.
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
Lou Anne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
10
Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
- ----------------- -------------------------------------------------
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Hugh Rose
Vice President
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Marianne Zalys
Vice President
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
11
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Limited Term Municipal Trust
(52) Dean Witter Variable Investment Series
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
12
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Global Convertible Trust
(8) TCW/DW Total Return Trust
(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None
of the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained
by the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 22nd day of November, 1995.
DEAN WITTER NATIONAL MUNICIPAL TRUST
By /s/ Sheldon Curtis
---------------------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 2 has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/Charles A. Fiumefreddo 11/22/95
--------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/Thomas F. Caloia 11/22/95
--------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/Sheldon Curtis 11/22/95
--------------------------
Sheldon Curtis
Attorney-in-Fact
Jack F. Bennett Manuel H. Johnson
Michael Bozic Paul Kolton
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/David M. Butowsky 11/22/95
--------------------------
David M. Butowsky
Attorney-in-Fact
EXHIBIT INDEX
2. -- Amended and Restated By-Laws of Registrant
9. -- Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Company Inc.
11. -- Consent of Independent Accountants
15. -- Amended and Restated Plan of Distribution between
Registrant and Dean Witter Distributors Inc.
16. -- Schedules for Computation of Performance Quotations
27. -- Financial Data Schedule
<PAGE>
BY-LAWS
OF
DEAN WITTER NATIONAL MUNICIPAL TRUST
(AMENDED AND RESTATED AS OF JANUARY 25, 1995)
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", and "Trustees" have the
respective meanings given them in the Declaration of Trust of Dean Witter
National Municipal Trust dated March 29, 1994.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote as otherwise required by Section
16(c) of the 1940 Act and to the extent required by the corporate or business
statute of any state in which the Shares of the Trust are sold, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. Except to the extent otherwise
required by Section 16(c) of the 1940 Act, as made applicable to the Trust by
the provisions of Section 2.3 of the Declaration, the Secretary shall inform
such Shareholders of the reasonable estimated cost of preparing and mailing
such notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares
<PAGE>
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for
the transaction of business. In the absence of a quorum, the Shareholders
present or represented by proxy and entitled to vote thereat shall have power
to adjourn the meeting from time to time. Any adjourned meeting may be held
as adjourned without further notice. At any adjourned meeting at which a
quorum shall be present, any business may be transacted as if the meeting had
been held as originally called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under Section 32 of the Corporations Law of the
State of Massachusetts.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the Chairman and shall
be called by the Chairman or the Secretary upon the written request of any
two (2) Trustees.
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SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
3
<PAGE>
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists
of Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person
shall be entitled to indemnification for any liability, whether or not
there is an adjudication of liability, arising by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties
as described in Section 17(h) and (i) of the Investment Company Act of
1940 ("disabling conduct"). A person shall be deemed not liable by reason
of disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit
or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the
Trustee, officer, employee or agent of the Trust to repay the advance if
it is not ultimately determined that such person is entitled to be
indemnified by the Trust; and
4
<PAGE>
(3) either, (i) such person provides a security for his
undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
5
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SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the Chairman the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. The Chairman. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders
and of the Trustees; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the
Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to the President or to one or more Vice Presidents
such of his powers and duties at such times and in such manner as he may deem
advisable; he shall be a signatory on all Annual and Semi-Annual Reports as
may be sent to shareholders, and he shall perform such other duties as the
Trustees may from time to time prescribe.
(b) In the absence of the Chairman, the Board shall determine who shall
preside at all meetings of the shareholders and the Board of Trustees.
SECTION 6.7. The President. The President shall perform such duties as the
Board of Trustees and the Chairman may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the Chairman, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
Chairman may from time to time prescribe.
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SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the Chairman.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
Chairman, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the Chairman, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
Chairman may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the Chairman, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the Chairman, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the Chairman, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the Chairman, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of
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the Trust by the Chairman, the President, or a Vice President, and
countersigned by the Secretary or an Assistant Secretary or the Treasurer and
an Assistant Treasurer of the Trust; shall be sealed with the seal; and shall
contain such recitals as may be required by law. Where any certificate is
signed by a Transfer Agent or by a Registrar, the signature of such officers
and the seal may be facsimile, printed or engraved. The Trust may, at its
option, determine not to issue a certificate or certificates to evidence
Shares owned of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
8
<PAGE>
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
9
<PAGE>
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter National Municipal
Trust, dated March 29, 1994, a copy of which is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter National Municipal Trust refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, Shareholder, officer, employee or agent of Dean Witter National
Municipal Trust shall be held to any personal liability, nor shall resort be
had to their private property for the satisfaction of any obligation or claim
or otherwise, in connection with the affairs of said Dean Witter National
Municipal Trust, but the Trust Estate only shall be liable.
10
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a Delaware
corporation (herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which InterCapital is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice);
(ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts
and other records required under the Investment Company Act of 1940, as
amended (the "Act"), the notification to the Fund and InterCapital of
available funds for investment, the reconciliation of account information and
balances among the Fund's custodian, transfer agent and dividend disbursing
agent and InterCapital, and the calculation of the net asset value of the
Fund's shares; (iii) provide the Fund with the services of persons competent
to perform such supervisory, administrative and clerical functions as are
necessary to provide effective operation of the Fund; (iv) oversee the
performance of administrative and professional services rendered to the Fund
by others, including its custodian, transfer agent and dividend disbursing
agent, as well as accounting, auditing and other services; (v) provide the
Fund with adequate general office space and facilities; (vi) assist in the
preparation and the printing of the periodic updating of the Fund's
registration statement and prospectus (and, in the case of an open-end Fund,
the statement of additional information), tax returns, proxy statements, and
reports to its shareholders and the Securities and Exchange Commission; and
(vii) monitor the compliance of the Fund's investment policies and
restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to
perform administrative services hereunder, it shall notify DWS in writing. If
DWS is willing to render such services, it shall notify InterCapital in
writing, whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to
time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of DWS shall be deemed to include officers
of DWS and persons employed or otherwise retained by DWS (including officers
and employees of InterCapital, with the consent of InterCapital) to furnish
services, statistical and other factual data, information with respect to
technical and scientific developments, and such other information, advice and
assistance as DWS may desire. DWS shall maintain each Fund's records and
books of account (other than those maintained by the Fund's transfer agent,
registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, DWS
shall surrender to InterCapital or to the Fund such of the books and records
so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as DWS may
reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation
or request of the Board of Directors/Trustees of the Fund.
1
<PAGE>
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of
a closed-end Fund) by applying the annual rate or rates set forth on Schedule
B to the net assets of each Fund. Except as hereinafter set forth, (i) in the
case of an open-end Fund, compensation under this Agreement shall be
calculated by applying 1/365th of the annual rate or rates to the Fund's or
the Series' daily net assets determined as of the close of business on that
day or the last previous business day and (ii) in the case of a closed-end
Fund, compensation under this Agreement shall be calculated by applying the
annual rate or rates to the Fund's average weekly net assets determined as of
the close of the last business day of each week. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before
the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth on Schedule B. Subject to the provisions
of paragraph 5 hereof, payment of DWS' compensation for the preceding month
shall be made as promptly as possible after completion of the computations
contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof
imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, or, in the case of
InterCapital Income Securities Inc. or Dean Witter Variable Investment Series
or any Series thereof, the expense limitation specified in the Fund's
Investment Management Agreement, the fee payable hereunder shall be reduced
on a pro rata basis in the same proportion as the fee payable by the Fund
under the Investment Management Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by
DWS, and such clerical help and bookkeeping services as DWS shall reasonably
require in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, DWS shall not be liable to the Fund or any of its
investors for any error of judgment or mistake of law or for any act or
omission by DWS or for any losses sustained by the Fund or its investors. It
is understood that, subject to the terms and conditions of the Investment
Management Agreement between each Fund and InterCapital, InterCapital shall
retain ultimate responsibility for all services to be performed hereunder by
DWS. DWS shall indemnify InterCapital and hold it harmless from any liability
that InterCapital may incur arising out of any act or failure to act by DWS
in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person
controlling, controlled by or under common control with DWS, and that DWS and
any person controlling, controlled by or under common control with DWS may
have an interest in the Fund. It is also understood that DWS and any
affiliated persons thereof or any persons controlling, controlled by or under
common control with DWS have and may have advisory, management,
administration service or other contracts with other organizations and
persons, and may have other interests and businesses, and further may
purchase, sell or trade any securities or commodities for their own accounts
or for the account of others for whom they may be acting.
9. This Agreement shall continue until April 30, 1995, and thereafter
shall continue automatically for successive periods of one year unless
terminated by either party by written notice delivered to the other party
within 30 days of the expiration of the then-existing period. Notwithstanding
the foregoing, this Agreement may be terminated at any time, by either party
on 30 days' written notice delivered to the other party. In the event that
the Investment Management Agreement between any Fund and InterCapital is
terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
2
<PAGE>
11. This Agreement may be assigned by either party with the written
consent of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By:
.......................................
Attest:
..................................
DEAN WITTER SERVICES COMPANY INC.
By:
.......................................
Attest:
...................................
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
AT APRIL 17, 1995
<TABLE>
<CAPTION>
<S> <C>
OPEN-END FUNDS
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter Balanced Growth Fund
7. Dean Witter Balanced Income Fund
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter California Tax-Free Income Fund
10. Dean Witter Capital Growth Securities
11. Dean Witter Convertible Securities Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter Diversified Income Trust
14. Dean Witter Dividend Growth Securities Inc.
15. Dean Witter European Growth Fund Inc.
16. Dean Witter Federal Securities Trust
17. Dean Witter Global Asset Allocation Fund
18. Dean Witter Global Dividend Growth Securities
19. Dean Witter Global Short-Term Income Fund Inc.
20. Dean Witter Global Utilities Fund
21. Dean Witter Health Sciences Trust
22. Dean Witter High Income Securities
23. Dean Witter High Yield Securities Inc.
24. Dean Witter Intermediate Income Securities
25. Dean Witter International Small Cap Fund
26. Dean Witter Limited Term Municipal Trust
27. Dean Witter Liquid Asset Fund Inc.
28. Dean Witter Managed Assets Trust
29. Dean Witter Mid-Cap Growth Fund
30. Dean Witter Multi-State Municipal Series Trust
31. Dean Witter National Municipal Trust
32. Dean Witter Natural Resource Development Securities Inc.
33. Dean Witter New York Municipal Money Market Trust
34. Dean Witter New York Tax-Free Income Fund
35. Dean Witter Pacific Growth Fund Inc.
36. Dean Witter Precious Metals and Minerals Trust
37. Dean Witter Premier Income Trust
38. Dean Witter Retirement Series
39. Dean Witter Select Dimensions Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Short-Term Bond Fund
42. Dean Witter Short-Term U.S. Treasury Trust
43. Dean Witter Strategist Fund
44. Dean Witter Tax-Exempt Securities Trust
45. Dean Witter Tax-Free Daily Income Trust
46. Dean Witter U.S. Government Money Market Trust
47. Dean Witter U.S. Government Securities Trust
48. Dean Witter Utilities Fund
49. Dean Witter Value-Added Market Series
50. Dean Witter Variable Investment Series
51. Dean Witter World Wide Income Trust
52. Dean Witter World Wide Investment Trust
CLOSED-END FUNDS
53. High Income Advantage Trust
54. High Income Advantage Trust II
55. High Income Advantage Trust III
56. InterCapital Income Securities Inc.
57. Dean Witter Government Income Trust
58. InterCapital Insured Municipal Bond Trust
59. InterCapital Insured Municipal Trust
60. InterCapital Insured Municipal Income Trust
61. InterCapital California Insured Municipal Income Trust
62. InterCapital Insured Municipal Securities
63. InterCapital Insured California Municipal Securities
64. InterCapital Quality Municipal Investment Trust
65. InterCapital Quality Municipal Income Trust
66. InterCapital Quality Municipal Securities
67. InterCapital California Quality Municipal Securities
68. InterCapital New York Quality Municipal Securities
</TABLE>
4
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES--APRIL 17, 1995
Monthly compensation calculated daily by applying the following annual
rates to a fund's net assets:
<TABLE>
<CAPTION>
FIXED INCOME FUNDS
<S> <C>
Dean Witter Balanced Income Fund 0.60% to the net assets.
Dean Witter California Tax-Free
Income Fund 0.055% of the portion of daily net assets not exceeding $500 million; 0.0525% of
the portion exceeding $500 million but not exceeding $750 million; 0.050% of the
portion exceeding $750 million but not exceeding $1 billion; and 0.0475% of the
portion of the daily net assets exceeding $1 billion.
Dean Witter Convertible Securities
Securities Trust 0.060% of the portion of the daily net assets not exceeding $750 million; .055% of
the portion of the daily net assets exceeding $750 million but not exceeding $1
billion; 0.050% of the portion of the daily net assets of the exceeding $1 billion
but not exceeding $1.5 billion; 0.0475% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2 billion; 0.045% of the portion of the
daily net assets exceeding $2 billion but not exceeding $3 billion; and 0.0425% of
the portion of the daily net assets exceeding $3 billion.
Dean Witter Diversified
Income Trust 0.040% of the net assets.
Dean Witter Federal Securities Trust 0.055% of the portion of the daily net assets not exceeding $1 billion; 0.0525% of
the portion of the daily net assets exceeding $1 billion but not exceeding $1.5
billion; 0.050% of the portion of the daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.0475% of the portion of the daily net assets exceeding
$2 billion but not exceeding $2.5 billion; 0.045% of the portion of daily net
assets exceeding $2.5 billion but not exceeding $5 billion; 0.0425% of the
portion of the daily net assets exceeding $5 billion but not exceeding $7.5
billion; 0.040% of the portion of the daily net assets exceeding $7.5 billion
but not exceeding $10 billion; 0.0375% of the portion of the daily net assets
exceeding $10 billion but not exceeding $12.5 billion; and 0.035% of the portion
of the daily net assets exceeding $12.5 billion.
Dean Witter Global Short-Term
Income Fund 0.055% of the portion of the daily net assets not exceeding $500 million; and
0.050% of the portion of the daily net assets exceeding $500 million.
Dean Witter High Income
Securities 0.050% to the net assets.
Dean Witter High Yield
Securities Inc. 0.050% of the portion of the daily net assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.0325% of
the portion of the daily net assets exceeding $2 billion but not exceeding $3
billion; and 0.030% of the portion of daily net assets exceeding $3 billion.
Dean Witter Intermediate
Income Securities 0.060% of the portion of the daily net assets not exceeding $500 million; 0.050% of
the portion of the daily net assets exceeding $500 million but not exceeding $750
million; 0.040% of the portion of the daily net assets exceeding $750 million but
not exceeding $1 billion; and 0.030% of the portion of the daily net assets
exceeding $1 billion.
Dean Witter Limited Term
Municipal Trust 0.050% to the net assets.
Dean Witter Multi-State Municipal
Series Trust (10) 0.035% to the net assets.
Dean Witter National
Municipal Trust 0.035% to the net assets.
Dean Witter New York Tax-Free
Income Fund 0.055% to the net assets not exceeding $500 million and 0.0525% of the net assets
exceeding $500 million.
Dean Witter Premier
Income Trust 0.050% to the net assets.
Dean Witter Retirement Series
Intermediate Income 0.065% to the net assets.
Dean Witter Retirement Series
U.S. Government Securities Trust 0.065% to the net assets.
Dean Witter Select Dimensions
Series-North American Government
Securities Portfolio 0.65% to the net assets.
Dean Witter Short-Term
Bond Fund 0.070% to the net assets.
Dean Witter Short-Term U.S.
Treasury Trust 0.035% to the net assets.
Dean Witter Tax-Exempt
Securities Trust 0.050% of the portion of the daily net assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; and 0.035% of the portion of the daily net assets
exceeding $1 billion but not exceeding $1.25 billion; .0325% of the portion of the
daily net assets exceeding $1.25 billion.
Dean Witter U.S. Government
Securities Trust 0.050% of the portion of such daily net assets not exceeding $1 billion; 0.0475% of
the portion of such daily net assets exceeding $1 billion but not exceeding $1.5
billion; 0.045% of the portion of such daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.0425% of the portion of such daily net assets exceeding
$2 billion but not exceeding $2.5 billion; 0.040% of that portion of such daily net
assets exceeding $2.5 billion but not exceeding $5 billion; 0.0375% of that portion
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
of such daily net assets exceeding $5 billion but not exceeding $7.5 billion;
0.035% of that portion of such daily net assets exceeding $7.5 billion but not
exceeding $10 billion; 0.0325% of that portion of such daily net assets
exceeding $10 billion but not exceeding $12.5 billion; and 0.030% of that
portion of such daily net assets exceeding $12.5 billion.
Dean Witter Variable Investment
Series-High Yield 0.050% to the net assets.
Dean Witter Variable Investment
Series-Quality Income 0.050% to the net assets.
Dean Witter World Wide Income
Trust 0.075% of the daily net assets up to $250 million; 0.060% of the portion of the
daily net assets exceeding $250 million but not exceeding $500 million; 0.050% of
the portion of the daily net assets of the exceeding $500 million but not exceeding
$750 milliion; 0.040% of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; and 0.030% of the daily net assets exceeding $1
billion.
Dean Witter Select Municipal
Reinvestment Fund 0.050% to the net assets.
<CAPTION>
EQUITY FUNDS
<S> <C>
Dean Witter American Value
Fund 0.0625% of the portion of the daily net assets not exceeding $250 million and
0.050% of the portion of the daily net assets exceeding $250 million.
Dean Witter Balanced Growth Fund 0.60% to the net assets.
Dean Witter Capital Growth
Securities 0.065% to the portion of daily net assets not exceeding $500 million; 0.055% of the
portion exceeding $500 million but not exceeding $1 billion; 0.050% of the portion
exceeding $1 billion but not exceeding $1.5 billion; and 0.0475% of the net assets
exceeding $1.5 billion.
Dean Witter Developing Growth
Securities Trust 0.050 of the portion of daily net assets not exceeding $500 million; and 0.0475% of
the portion of daily net assets exceeding $500 million.
Dean Witter Dividend Growth
Securities Inc. 0.0625% of the portion of the daily net assets not exceeding $250 million; 0.050%
of the portion exceeding $250 million but not exceeding $1 billion; 0.0475% of the
portion of daily net assets exceeding $1 billion but not exceeding $2 billion;
0.045% of the portion of daily net assets exceeding $2 billion but not exceeding $3
billion; 0.0425% of the portion of daily net assets exceeding $3 billion but not
exceeding $4 billion; 0.040% of the portion of daily net assets exceeding $4
billion but not exceeding $5 billion; 0.0375% of the portion of the daily net
assets exceeding $5 billion but not exceeding $6 billion; 0.035% of the portion of
the daily net assets exceeding $6 billion but not exceeding $8 billion; and 0.0325%
of the portion of the daily net assets exceeding $8 billion.
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Dean Witter European Growth
Fund Inc. 0.060% of the portion of daily net assets not exceeding $500 million; and 0.057% of
the portion of daily net assets exceeding $500 million.
Dean Witter Global Asset Allocation Fund 1.0% to the net assets.
Dean Witter Global Dividend
Growth Securities 0.075% to the net assets.
Dean Witter Global Utilities Fund 0.065% to the net assets.
Dean Witter Health Sciences Trust 0.10% to the net assets.
Dean Witter International
Small Cap Fund 0.075% to the net assets.
Dean Witter Managed Assets Trust 0.060% to the daily net assets not exceeding $500 million and 0.055% to the daily
net assets exceeding $500 million.
Dean Witter Mid-Cap Growth Fund 0.75% to the net assets.
Dean Witter Natural Resource
Development Securities Inc. 0.0625% of the portion of the daily net assets not exceeding $250 million and
0.050% of the portion of the daily net assets exceeding $250 million.
Dean Witter Pacific Growth
Fund Inc. 0.060% of the portion of daily net assets not exceeding $1 billion; and 0.057% of
the portion of daily net assets exceeding $1 billion.
Dean Witter Precious Metals
and Minerals Trust 0.080% to the net assets.
Dean Witter Retirement Series
American Value 0.085% to the net assets.
Dean Witter Retirement Series
Capital Growth 0.085% to the net assets.
Dean Witter Retirement Series
Dividend Growth 0.075% to the net assets.
Dean Witter Retirement Series
Global Equity 0.10% to the net assets.
Dean Witter Retirement Series
Intermediate Income Securities 0.065% to the net assets.
Dean Witter Retirement Series
Liquid Asset 0.050% to the net assets.
Dean Witter Retirement Series
Strategist 0.085% to the net assets.
Dean Witter Retirement Series
U.S. Government Money Market 0.050% to the net assets.
Dean Witter Retirement Series
U.S. Government Securities 0.065% to the net assets.
Dean Witter Retirement Series
Utilities 0.075% to the net assets.
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Dean Witter Retirement Series
Value Added 0.050% to the net assets.
Dean Witter Select Dimensions Series-
American Value Portfolio 0.625% to the net assets.
Balanced Portfolio 0.75% to the net assets.
Core Equity Portfolio 0.85% to the net assets.
Developing Growth Portfolio 0.50% to the net assets.
Diversified Income Portfolio 0.40% to the net assets.
Dividend Growth Portfolio 0.625% to the net assets.
Emerging Markets Portfolio 1.25% to the net assets.
Global Equity Portfolio 1.0% to the net assets.
Utilities Portfolio 0.65% to the net assets.
Value-Added Market Portfolio 0.50% to the net assets.
Dean Witter Strategist Fund 0.060% of the portion of daily net assets not exceeding $500 million; 0.055% of the
portion of the daily net assets exceeding $500 million but not exceeding $1
billion; and 0.050% of the portion of the daily net assets exceeding $1 billion.
Dean Witter Utilities Fund 0.065% of the portion of daily net assets not exceeding $500 million; 0.055% of the
portion exceeding $500 million but not exceeding $1 billion; 0.0525% of the portion
exceeding $1 billion but not exceeding $1.5 billion; 0.050% of the portion
exceeding $1.5 billion but not exceeding $2.5 billion; 0.0475% of the portion
exceeding $2.5 billion but not exceeding $3.5 billion; 0.045% of the portion of the
daily net assets exceeding $3.5 but not exceeding $5 billion; and 0.0425% of the
portion of daily net assets exceeding $5 billion.
Dean Witter Value-Added Market
Series 0.050% of the portion of daily net assets not exceeding $500 million; and 0.45% of
the portion of daily net assets exceeding $500 million.
Dean Witter Variable Investment
Series-Capital Growth 0.065% to the net assets.
Dean Witter Variable Investment
Series-Dividend Growth 0.0625% of the portion of daily net assets not exceeding $500 million; and 0.050%
of the portion of daily net assets exceeding $500 million.
Dean Witter Variable Investment
Series-Equity 0.050% to the net assets.
Dean Witter Variable Investment
Series-European Growth 0.060% to the net assets.
Dean Witter Variable Investment
Series-Managed 0.050% to the net assets.
Dean Witter Variable Investment
Series-Utilities 0.065% of the portion of daily net assets exceeding $500 million and 0.055% of the
portion of daily net assets exceeding $500 million.
Dean Witter World Wide
Investment Trust 0.055% of the portion of daily net assets not exceeding $500 million; and 0.05225%
of the portion of daily net assets exceeding $500 million.
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MONEY MARKET FUNDS
Active Assets Account (4) 0.050% of the portion of the daily net assets not exceeding $500 million;
0.0425% of the portion of the daily net assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.035% of the portion of
the daily net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5 billion but not
exceeding $2 billion; 0.030% of the portion of the daily net assets exceeding
$2 billion but not exceeding $2.5 billion; 0.0275% of the portion of the
daily net assets exceeding $2.5 billion but not exceeding $3 billion; and
0.025% of the portion of the daily net assets exceeding $3 billion.
Dean Witter California Tax-Free
Daily Income Trust 0.050% of the portion of the daily net assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily net assets
exceeding $1 billion but not exceeding $1.5 billion; 0.0325% of the portion of the
daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.030% of
the portion of the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding $2.5 billion but
not exceeding $3 billion; and 0.025% of the portion of the daily net assets
exceeding $3 billion.
Dean Witter Liquid Asset
Fund Inc. 0.050% of the portion of the daily net assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the daily net assets exceeding $750 million
but not exceeding $1 billion; 0.035% of the portion of the daily net assets
exceeding $1 billion but not exceeding $1.35 billion; 0.0325% of the portion of
the daily net assets exceeding $1.35 billion but not exceeding $1.75 billion;
0.030% of the portion of the daily net assets exceeding $1.75 billion but not
exceeding $2.15 billion; 0.0275% of the portion of the daily net assets exceeding
$2.15 billion but not exceeding $2.5 billion; 0.025% of the portion of the daily
net assets exceeding $2.5 billion but not exceeding $15 billion; 0.0249% of the
portion of the daily net assets exceeding $15 billion but not exceeding $17.5
billion; and 0.0248% of the portion of the daily net assets exceeding $17.5
billion.
Dean Witter New York Municipal
Money Market Trust 0.050% of the portion of the daily net assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the daily net assets exceeding $750
million but not exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion; 0.0325% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets exceeding $2 bil-
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
lion but not exceeding $2.5 billion; 0.0275% of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3 billion; and 0.025% of the portion of
the daily net assets exceeding $3 billion.
Dean Witter Retirement Series
Liquid Assets 0.050% of the net assets.
Dean Witter Retirement Series
U.S. Government Money Market 0.050% of the net assets.
Dean Witter Select Dimensions Series-
Money Market Portfolio 0.50% to the net assets.
Dean Witter Tax-Free Daily
Income Trust 0.050% of the portion of the daily net assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the daily net assets exceeding $750
million but not exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion; 0.0325% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets exceeding $2 billion but not
exceeding $2.5 billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the portion of the daily
net assets exceeding $3 billion.
Dean Witter U.S. Government
Money Market Trust 0.050% of the portion of the daily net assets not exceeding $500 million; 0.0425%
of the portion of the daily net assets exceeding $500 million but not exceeding
$750 million; 0.0375% of the portion of the daily net assets exceeding $750
million but not exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion; 0.0325% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets exceeding $2 billion but not
exceeding $2.5 billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the portion of the daily
net assets exceeding $3 billion.
Dean Witter Variable Investment
Series-Money Market 0.050% to the net assets.
</TABLE>
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
<TABLE>
<CAPTION>
CLOSED-END FUNDS
<S> <C>
Dean Witter Government Income
Trust 0.060% to the average weekly net assets.
High Income Advantage Trust 0.075% of the portion of the average weekly net assets not exceeding $250 million;
0.060% of the portion of average weekly net assets exceeding $250 million and not
exceeding $500 million; 0.050% of the portion of average weekly net assets
exceeding $500 million and not exceeding $750 million; 0.040% of the portion of
average weekly net assets exceeding
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
$750 million and not exceeding $1 billion; and 0.030% of the portion of average
weekly net assets exceeding $1 billion.
High Income Advantage Trust II 0.075% of the portion of the average weekly net assets not exceeding $250 million;
0.060% of the portion of average weekly net assets exceeding $250 million and not
exceeding $500 million; 0.050% of the portion of average weekly net assets
exceeding $500 million and not exceeding $750 million; 0.040% of the portion of
average weekly net assets exceeding $750 million and not exceeding $1 billion;
and 0.030% of the portion of average weekly net assets exceeding $1 billion.
High Income Advantage Trust III 0.075% of the portion of the average weekly net assets not exceeding $250 million;
0.060% of the portion of average weekly net assets exceeding $250 million and not
exceeding $500 million; 0.050% of the portion of average weekly net assets
exceeding $500 million and not exceeding $750 million; 0.040% of the portion of
the average weekly net assets exceeding $750 million and not exceeding $1 billion;
and 0.030% of the portion of average weekly net assets exceeding $1 billion.
InterCapital Income Securities Inc. 0.050% to the average weekly net assets.
InterCapital Insured Municipal
Bond Trust 0.035% to the average weekly net assets.
InterCapital Insured Municipal
Trust 0.035% to the average weekly net assets.
InterCapital Insured Municipal
Income Trust 0.035% to the average weekly net assets.
InterCapital California Insured
Municipal Income Trust 0.035% to the average weekly net assets.
InterCapital Quality Municipal
Investment Trust 0.035% to the average weekly net assets.
InterCapital New York Quality
Municipal Securities 0.035% to the average weekly net assets.
InterCapital Quality Municipal
Income Trust 0.035% to the average weekly net assets.
InterCapital Quality Municipal
Securities 0.035% to the average weekly net assets.
InterCapital California Quality
Municipal Securities 0.035% to the average weekly net assets.
InterCapital Insured Municipal
Securities 0.035% to the average weekly net assets.
InterCapital Insured California
Municipal Securities 0.035% to the average weekly net assets.
</TABLE>
B-8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 10, 1995, relating to the financial statements and financial highlights
of Dean Witter National Municipal Trust, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Independent Accountants" and
"Experts" in such Statement of Additional Information and to the reference to us
under the heading "Financial Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
November 21, 1995
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER NATIONAL MUNICIPAL TRUST
Whereas, Dean Witter National Municipal Trust (the "Fund") is engaged in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (the "Act"); and
Whereas, on May 10, 1994, the Fund adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act, and the Trustees then determined that
there was a reasonable likelihood that adoption of the Plan of Distribution
would benefit the Fund and its shareholders; and
Whereas, the Trustees believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to continue
to benefit the Fund and its shareholders; and
Whereas, the Fund and the Distributor entered into a separate
Distribution Agreement dated as of May 10, 1994, pursuant to which the Fund has
employed the Distributor in such capacity during the continuous offering of
shares of the Fund.
Now, Therefore, the Fund hereby amends the Plan of Distribution
previously adopted, and the Distributor hereby agrees to the terms of said Plan
of Distribution (the "Plan"), as amended herein, in accordance with Rule 12b-1
under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of
securities of which the Fund is the issuer, compensation for distribution of its
shares at the rate of the lesser of (i) 0.60% per annum of the average daily
aggregate sales of the shares of the Fund since its inception (not including
reinvestment of dividends and capital gains distributions from the Fund) less
the average daily aggregate net asset value of the shares of the Fund 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 (ii) 0.60% per annum
of the Fund's average daily net assets. Such compensation shall be calculated
and accrued daily and paid monthly or at such other intervals as the Trustees
shall determine. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to Dean Witter Reynolds Inc.
("DWR"), its affiliates or other broker-dealers who provide distribution and
shareholder services. All payments made hereunder pursuant to the Plan shall be
in accordance with the terms and limitations of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
services of the Distributor, DWR, its affiliates and other broker-dealers it may
select, in connection with the distribution of the Fund's shares, including
personal services to shareholders with respect to their holdings of Fund shares,
and may be spent by the Distributor, DWR, its affiliates and such broker-dealers
on any activities or expenses related to the distribution of the Fund's shares
or services to shareholders, including, but not limited to: compensation to, and
expenses of, account executives or other employees of the Distributor, DWR, its
affiliates or other broker-dealers; overhead and other branch office
distribution-related expenses and telephone expenses of persons who engage in or
support distribution of shares or who provide personal services to shareholders;
printing of prospectuses and reports for other than existing shareholders;
preparation, printing and distribution of sales literature and advertising
materials and opportunity costs in incurring the foregoing expenses (which may
be calculated as a carrying charge on the excess of the distribution expenses
incurred by the Distributor, DWR, its affiliates or other broker-dealers over
distribution revenues received by them, such excess being hereinafter referred
to as "carryover expenses"). The overhead and other branch office distribution-
related expenses referred to in this paragraph 2 may include: (a) the expenses
of operating the branch offices of the Distributor or other broker-dealers,
including DWR, in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies; (b) the costs of client sales seminars; (c) travel expenses of mutual
fund sales coordinators to promote the sale of Fund shares; and (d) other
expenses relating to branch promotion of Fund sales. Payments may also be made
with respect to distribution expenses incurred in connection with the
distribution of shares, including personal services to shareholders with respect
to holdings of such shares, of an investment company whose assets are acquired
by the Fund in a tax-free reorganization, provided that carryover expenses as a
percentage of Fund assets will not be materially increased thereby.
3. This Plan, as amended and restated, shall not take effect until it
has been approved, together with any related agreements, by votes of a majority
of the Board of Trustees of the Fund and of the Trustees who are not "interested
persons" of the Fund (as defined in the Act) and have no direct or indirect
financial interest in the operation of this Plan or any agreements related to it
(the "Rule 12b-1 Trustees"), cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan and such related agreements.
4. This Plan shall continue in effect until April 30, 1996, and from
year to year thereafter, provided such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph 3
hereof.
5. The Distributor shall provide to the Trustees of the Fund and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made. In this regard,
the Trustees shall request the Distributor to specify such items of expenses as
the Trustees deem appropriate. The Trustees shall consider such items as they
deem relevant in making the determinations required by paragraph 4 hereof.
6. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. In the event of any such termination or in the event of
nonrenewal, the Fund shall have no obligation to pay expenses which have been
incurred by the Distributor, DWR, its affiliates or other broker-dealers in
excess of payments made by the Fund pursuant to this Plan. However, this shall
not preclude consideration by the Trustees of the manner in which such excess
expenses shall be treated.
7. This Plan may not be amended to increase materially the amount the
Fund may spend for distribution provided in paragraph 1 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the Act)
of the outstanding voting securities of the Fund, and no material amendment to
the Plan shall be made unless approved in the manner provided for approval in
paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of
Trustees who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the Trustees who are not interested
persons.
9. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 5 hereof, for a period of
not less than six years from the date of this Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
10. The Declaration of Trust establishing Dean Witter National
Municipal Trust, dated March 29, 1994, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter National Municipal Trust refers to the Trustees under the Declaration
collectively as Trustees but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of Dean Witter National Municipal Trust
shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise,
in connection with the affairs of said Dean Witter National Municipal Trust, but
the Trust Estate only shall be liable.
In Witness Whereof, the Fund and the Distributor have executed this
amended and restated Plan of Distribution as of the day and year set forth below
in New York, New York.
Date: May 10, 1994
As amended on October 26, 1995 Dean Witter National Municipal Trust
By
.....................................
Attest:
................................
Dean Witter Distributors Inc.
By
.....................................
Attest:
................................
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER NATIONAL MUNICIPAL TRUST
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Sep-95 YEARS - n COMPOUND RETURN - T
- ------------ ----------- ----------- --------------------
<S> <C> <C> <C>
30-Sep-94 $1,075.40 1.00 7.54%
02-Jun-94 $1,080.20 1.33 5.99%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Sep-95 YEARS - n COMPOUND RETURN - t
- ------------ ----------- ----------- --------------------
<S> <C> <C> <C>
30-Sep-94 $1,067.20 1.00 6.72%
02-Jun-94 $1,062.90 1.33 4.70%
</TABLE>
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(D) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (D)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 34972 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
30-Sep-94 $1,105.40 10.54% 1.00 10.54%
02-Jun-94 $1,100.20 10.02% 1.33 7.46%
</TABLE>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT-G $100,000 INVESTMENT - G
- ----------- ----------- ---------------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
02-Jun-94 10.02 $11,002 $55,010 $110,020
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 61,342,190
<INVESTMENTS-AT-VALUE> 63,430,245
<RECEIVABLES> 1,846,715
<ASSETS-OTHER> 245,867
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 65,522,827
<PAYABLE-FOR-SECURITIES> 1,009,275
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 237,877
<TOTAL-LIABILITIES> 1,247,152
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,177,772
<SHARES-COMMON-STOCK> 6,183,399
<SHARES-COMMON-PRIOR> 3,024,810
<ACCUMULATED-NII-CURRENT> 9,072
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 776
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,088,055
<NET-ASSETS> 64,275,675
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,500,615
<OTHER-INCOME> 0
<EXPENSES-NET> 271,201
<NET-INVESTMENT-INCOME> 2,229,414
<REALIZED-GAINS-CURRENT> 776
<APPREC-INCREASE-CURRENT> 2,452,914
<NET-CHANGE-FROM-OPS> 4,683,104
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,220,342
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,055,681
<NUMBER-OF-SHARES-REDEEMED> 1,026,786
<SHARES-REINVESTED> 129,694
<NET-CHANGE-IN-ASSETS> 3,158,589
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 158,216
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 604,190
<AVERAGE-NET-ASSETS> 45,200,129
<PER-SHARE-NAV-BEGIN> 9.87
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0.52
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.39
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
