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Filed Pursuant to Rule 497(e)
Registration File No.: 33-53015
DEAN WITTER
NATIONAL MUNICIPAL TRUST
PROSPECTUS --NOVEMBER 26, 1996
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Dean Witter National Municipal Trust (the "Fund") is an open-end diversified
management investment company whose investment objective is to provide a high
level of current income exempt from federal income tax, consistent with the
preservation of capital. The Fund invests principally in tax-exempt
fixed-income securities which are rated in the three highest categories by
Moody's Investors Service, Inc. or Standard & Poor's Corporation. (See
"Investment Objective and Policies.")
Shares of the Fund are continuously offered at net asset value. However,
redemptions and/or repurchases are subject in most cases to a contingent
deferred sales charge, scaled down from 3% to 1% of the amount redeemed, if
made within three years of purchase, which charge will be paid to the Fund's
Distributor, Dean Witter Distributors Inc. See "Redemptions and
Repurchases--Contingent Deferred Sales Charge." In addition, the Fund pays the
Distributor a distribution fee pursuant to a Plan of Distribution at the annual
rate of 0.60% of the lesser of the (i) average daily aggregate net sales or
(ii) average daily net assets of the Fund. See "Purchase of Fund Shares--Plan
of Distribution."
This Prospectus sets forth concisely the information you should know
before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated November 26, 1996, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Risk Considerations and Investment Practices ......................... 7
Investment Restrictions ............................................... 9
Purchase of Fund Shares ............................................... 10
Shareholder Services .................................................. 11
Redemptions and Repurchases ........................................... 14
Dividends, Distributions and Taxes .................................... 15
Performance Information ............................................... 16
Additional Information ................................................ 17
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
DEAN WITTER
NATIONAL MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR
(800) 869-NEWS (TOLL FREE)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Dean Witter Distributors Inc., Distributor
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PROSPECTUS SUMMARY
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<S> <C>
THE The Fund is organized as a Trust, commonly known as a Massachusetts
business trust, and is an open-end FUND diversified management investment
company investing principally in investment grade, tax-exempt
fixed-income securities (see page 5).
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SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page
17).
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OFFERING PRICE At net asset value (see page 10). Shares redeemed
within three years of purchase are subject to a contingent
deferred sales charge under most circumstances (see pages
14-15).
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MINIMUM Minimum initial purchase is $1,000 ($100 if the account was opened
through EasyInvest (Service Mark)); PURCHASE minimum subsequent purchase is
$100 (see page 10).
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INVESTMENT The investment objective of the Fund is to provide a high level of
current income exempt from federal OBJECTIVE income tax, consistent with the
preservation of capital (see page 5).
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INVESTMENT Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly-owned
MANAGER subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory, management
and administrative capacities to 100 investment companies
and other portfolios with assets of approximately $88
billion at October 31, 1996 (see page 5).
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MANAGEMENT The monthly fee is at an annual rate of 0.35% of average daily net assets (see page 5).
FEE
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DIVIDENDS AND Income dividends are declared daily and paid monthly; capital
gains, if any, may be distributed annually CAPITAL GAINS or retained for
reinvestment by the Fund. Dividends and distributions are automatically
reinvested in DISTRIBUTIONS additional shares at net asset value (without sales
charge), unless the shareholder elects to receive
cash (see page 15).
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DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor"). For its services as Distributor, which include payment
of sales commissions to account executives and various other promotional and sales related expenses,
the Distributor receives from the Fund a distribution fee accrued daily and payable monthly at the rate
of 0.60% per annum of the lesser of (i) the Fund's average daily aggregate net sales or (ii) the Fund's
average daily net assets. This fee compensates the Distributor for the services it provides in distributing
shares of the Fund and for its sales related expenses. The
Distributor also receives the proceeds of any contingent
deferred sales charges (see pages 10-11).
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REDEMPTION-- At net asset value; redeemable involuntarily if total value of the
account is less than $100 or, if the CONTINGENT account was opened through
EasyInvest (Service Mark), if after twelve months the shareholder has invested
DEFERRED less than $1,000 in the account. Although no commission or sales load
is imposed upon the purchase of SALES shares, a contingent deferred sales
charge (scaled down from 3% to 1%) is imposed on any redemption of CHARGE
shares if after such redemption the aggregate current value of an account with
the Fund is less than
the aggregate amount of the investor's purchase payments made during the three years preceding the
redemption. However, there is no charge imposed on
redemption of shares purchased through reinvestment of
dividends or distributions (see pages 14-15).
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RISKS The value of the Fund's portfolio securities, and therefore the Fund's net asset value per share, may
increase or decrease due to various factors, principally changes in prevailing interest rates and the
ability of the issuers of the Fund's portfolio securities to pay interest and principal on such obligations.
The Fund may purchase when-issued and delayed delivery securities (see pages 7-8). The Fund may invest
in lease obligations and variable rate obligations which
may entail additional risks (see pages 6-7).
The Fund may also invest in futures and options, which may be considered speculative in nature and which
may involve greater risks than those customarily assumed by
certain other investment companies which do not invest in
such instruments (see pages 7-8).
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The above is qualified in its entirety by the detailed
information appearing elsewhere in the Prospectus and
in the Statement of Additional Information.
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2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth are for the fiscal year ended
September 30, 1996.
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases ............................................ None
Maximum Sales Charge Imposed on Reinvested Dividends ................................. None
Contingent Deferred Sales Charge ..................................................... None
(as a percentage of the lesser of original purchase price or redemption proceeds) .. 3.0%
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A contingent deferred sales charge is imposed at the following
declining rates:
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YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
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First .............................. 3.0%
Second ............................. 2.0%
Third .............................. 1.0%
Fourth and thereafter .............. None
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<S> <C>
Redemption Fees ..................................................... None
Exchange Fee ......................................................... None
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ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (after fee waiver)* ................................... 0.27%
12b-1 Fees** ......................................................... 0.59%
Other Expenses* ...................................................... 0.25%
Total Fund Operating Expenses* ....................................... 1.11%
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"Management Fee" and "Other Expenses" have been restated to reflect current
fees and expenses.
* Pursuant to an undertaking, the Investment Manager assumed all expenses
(except for any brokerage and 12b-1 fees) and waived the compensation
provided for in its Management Agreement until December 31, 1995. The
Investment Manager has undertaken from January 1, 1996 through June 30,
1997, to continue to waive management fees and to continue to assume
expenses (except for brokerage and 12b-1 fees) to the extent such fees
and expenses exceed, on an annualized basis, 0.50% of the daily net
assets of the Fund. Without the waiver of fees and assumption of
expenses, Management Fees would have been 0.35% and Other Expenses
would have been 0.25%.
** 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").
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period ................................................. $41 $45 $61 $136
You would pay the following expenses on the investment, assuming
no redemption: ................................................... $11 $35 $61 $136
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equiv alent of the maximum front-end sales
charges permitted by the NASD.
3
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FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding 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. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, which may be obtained without
charge upon request to the Fund.
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<CAPTION>
FOR THE PERIOD
JUNE 2, 1994*
FOR THE YEAR ENDED FOR THE YEAR ENDED THROUGH
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
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<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ....... $10.39 $ 9.87 $10.00
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Net investment income ....................... 0.50 0.50 0.09
Net realized and unrealized gain (loss) .... 0.11 0.52 (0.13)
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Total from investment operations ............ 0.61 1.02 (0.04)
Less dividends from net investment income .. (0.50) (0.50) (0.09)
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Net asset value, end of period .............. $10.50 $10.39 $ 9.87
====== ====== ======
TOTAL INVESTMENT RETURN+ .................... 5.94% 10.54% (0.46)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... 0.97%(5) 0.60%(4) 0.60 %(2)(3)
Net investment income ....................... 4.72%(5) 4.93%(4) 3.07 %(2)(3)
SUPPLEMENTAL DATA:
Net asset value, end of period, in thousands $81,616 $64,276 $29,860
Portfolio turnover rate ..................... 13% 2% -- ++%
</TABLE>
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* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
++ Less than 0.5%.
(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 annualized 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.
(5) If the Fund had borne all expenses that were reimbursed or waived by the
Investment Manager, the above annualized expense and net investment
income ratios would have been
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 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
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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.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased by
the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payments in cash on the
security during the year.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may enter into financial
futures contracts ("futures
7
<PAGE>
contracts"), options on such futures and municipal bond index futures contracts
for hedging purposes. The Fund may sell a futures contract or a call option
thereon or purchase a put option on such futures contract, if the Investment
Manager anticipates interest rates to rise, as a hedge against a decrease in
the value of the Fund's portfolio securities. If the Investment Manager
anticipates that interest rates will decline, the Fund may purchase a futures
contract or a call option thereon or sell a put option on such futures
contract, to protect against an increase in the price of the securities the
Fund intends to purchase. These futures contracts and related options thereon
will be used only as a hedge against anticipated interest rate changes. A
futures contract sale creates an obligation by the Fund, as seller, to deliver
the specific type of instrument called for in the contract at a specified
future time for a specified price. A futures contract purchase creates an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specified future time at a specified price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was effected.
Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is effected by entering into an offsetting
purchase or sale transaction.
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date, an option on a futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract (a long
position in the case of a call option and a short position in the case of a put
option). If the holder decides not to enter into the contract, the premium paid
for the option on the contract is lost. Since the value of the option is fixed
at the point of sale, there are not daily payments of cash to reflect the
change in the value of the underlying contract as there are by a purchaser or
seller of a futures contract. The value of the option does change and is
reflected in the net asset value of the Fund.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may correlate imperfectly with the behavior of the cash
prices of the Fund's portfolio securities. The risk of imperfect correlation
may be increased by the fact that the Fund will invest in futures contracts on
taxable securities and there is no guarantee that the prices of taxable
securities will move in a similar manner to the prices of tax-exempt
securities. The correlation may be distorted by the fact that the futures
market is 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."
8
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PORTFOLIO MANAGEMENT
The Fund is actively managed by the Investment Manager with a view to achieving
the Fund's investment objective. In determining which securities to purchase
for the Fund or hold in the Fund's portfolio, the Investment Manager will rely
on information from various sources, including research, analysis and
appraisals of brokers and dealers, including Dean Witter Reynolds Inc. ("DWR"),
a broker-dealer affiliate of InterCapital, the views of Trustees of the Fund
and others regarding economic developments and interest rate trends, and the
Investment Manager's own analysis of factors it deems relevant. The Fund is
managed within InterCapital's Tax-Exempt Income Group, which manages 40
tax-exempt municipal funds and fund portfolios, with approximately $10.7
billion in assets as of October 31, 1996. 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 Information.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as
such, may be changed without shareholder approval.
INVESTMENT RESTRICTIONS
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The investment restrictions listed below are among the restrictions which have
been adopted by the Fund as fundamental policies. Under the Investment Company
Act of 1940, as amended (the "Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the
Fund, as defined in the Act.
For purposes of the following restrictions: (a) an "issuer" of a security is
the entity whose assets and revenues are committed to the payment of interest
and principal on that particular security; (b) a "taxable security" is any
security the interest on which is subject to federal income tax; and (c) all
percentage limitations apply immediately after a purchase or initial
investment, and any subsequent change in any applicable percentage resulting
from market fluctuations or other changes in the Fund's total assets does not
require elimination of any security from the portfolio.
The Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (other than obligations issued
or guaranteed by the United States Government, its agencies or
instrumentalities).
2. As to 75% of its total assets, purchase more than 10% of all outstanding
voting securities of any one issuer (other than obligations issued, or
guaranteed as to principal and interest, by the United States Government, its
agencies or instrumentalities).
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities (industrial development and pollution control bonds are
grouped into industries based upon the business in which the issuers of such
obligations are engaged).
4. Invest more than 5% of the value of its total assets in taxable
securities of issuers having a record, together with predecessors, of less than
three years of continuous operation. This restriction shall not apply to any
obligation of the United States Government, its agencies or instrumentalities.
9
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PURCHASE OF FUND SHARES
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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. The minimum initial purchase in the case of
investments through EasyInvest (Service Mark), an automatic purchase plan (see
"Shareholder Services"), is $100, provided that the schedule of automatic
investments will result in investments totalling $1,000 within the first twelve
months. 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 three
business day settlement basis; that is payment generally is due on or before
the third 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.
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. The service fee is a payment made for
personal service and/or the maintenance of shareholder accounts.
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
10
<PAGE>
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, 1996, the Fund accrued payments
under the Plan amounting to $452,823 which amount is equal to 0.59% 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 $2,185,656 at September 30, 1996
which was equal to 2.68% 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.
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' market 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
11
<PAGE>
Fund, the "Dean Witter Funds")), unless the shareholder requests that they be
paid in cash. Shares so acquired are not subject to the imposition of a
contingent deferred sales charge upon their redemption (see "Redemptions and
Repurchases"). Such dividends and distributions will be paid, at the net asset
value per share, in shares of the Fund (or in cash if the shareholder so
requests) on the monthly payment date, which generally will be no later than
the last business day of the month for which the dividend or distribution is
payable. Processing of dividend checks begins immediately following the monthly
payment date. Shareholders who have requested to receive dividends in cash will
normally receive their monthly dividend check during the first ten days of the
following month.
EASYINVEST(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 (see "Purchase of Fund Shares" and "Redemptions and
Repurchases").
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September,
December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on shares redeemed under the
Withdrawal Plan (See "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). Therefore, any shareholder participating in the Withdrawal Plan will
have sufficient shares redeemed from his or her account so that the proceeds
(net of any applicable contingent deferred sales charge) to the shareholder
will be the designated monthly or quarterly amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Transfer
Agent.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege" allowing
the exchange of shares of the Fund for shares of other Dean Witter Funds sold
with a contingent deferred sales charge ("CDSC funds"), and for shares of Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, 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
12
<PAGE>
which are attributable to those shares. (Exchange Fund 12b-1 distribution fees,
if any, are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
certain Dean Witter Funds sold with a front-end sales charge ("front-end sales
charge funds"), but shares of the Fund, however acquired, may not be exchanged
for shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the best
interests of the Fund and its other shareholders, investors 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
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.
13
<PAGE>
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
PAYMENT MADE AMOUNT REDEEMED
------------ ---------------
<S> <C>
First .................... 3.0%
Second ................... 2.0%
Third .................... 1.0%
Fourth and thereafter ... None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the three years preceding the 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:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination
of disability;
(2) 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 IRA or 403(b) Custodial Account following attainment of
age 59 1/2; or (C) a tax-free return of an excess contribution to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of
the Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust Company,
an affiliate of the Investment Manager, serves as recordkeeper or Trustee
("Eligible 401(k) Plan"), provided that either: (A) the plan continues to be an
Eligible 401(k) Plan after the redemption; or (B) the redemption is in
connection with the complete termination of the plan involving the distribution
of all plan assets to participants.
With reference to (1) above, 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. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder'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
14
<PAGE>
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 or, in the case of an account opened through EasyInvest
(Service Mark), if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares is less than the applicable amount and allow the shareholder to
make an additional investment in an amount which will increase the value of the
account to at least the applicable amount or more before the redemption is
processed. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends from net investment
income on each day the New York Stock Exchange is open for business (see
"Purchase of Fund Shares"). Such dividends are paid monthly. The Fund intends
to distribute all of the Fund's net investment income on an annual basis.
The Fund will distribute at least once each year all net realized short-term
capital gains in excess of any realized net long-term capital losses, if any.
The Fund intends to distribute all of its realized net long-term capital gains,
if any, in excess of any realized net short-term capital losses and any
available net capital loss carryovers, at least once per fiscal year, although
it may elect to retain all or part of such gains for reinvestment. Taxable
capital gains may be generated by the sale of portfolio securities and by
transactions in options and futures contracts engaged in by the Fund. All
dividends and capital gains distributions will be paid in additional Fund
shares (without sales charge) and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder requests
in writing that all dividends be paid in cash and such request is received by
the close of business on the day prior to the record date for such
distributions (see "Shareholder Services--Automatic Investment of Dividends and
Distributions"). Any dividends declared in the last quarter of any year which
are paid in the following year prior to February 1 will be deemed received by
the shareholder in the prior year.
TAXES. Because the Fund intends to distribute all of its net investment income
and capital gains to shareholders and intends to otherwise qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
it is not expected that the Fund will be required to pay any federal income
tax.
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by maintaining, as of the close of each quarter of its taxable
year, at least 50% of the value of its total assets in tax-exempt securities.
If the Fund satisfies such requirement, distributions from net investment
income to shareholders, whether taken in cash or reinvested in additional
shares, will be excludable from gross income for federal income tax purposes to
the extent net investment income is represented by interest on tax-exempt
securities. Exempt-interest dividends are
15
<PAGE>
included, however, in determining what portion, if any, of a person's Social
Security benefits are subject to federal income tax. The Internal Revenue Code
may subject interest received on certain otherwise tax-exempt securities to an
alternative minimum tax. This alternative minimum tax may be incurred due to
interest received on certain "private activity bonds" (in general, bonds that
benefit non-government entities) issued after August 7, 1986 which, although
tax-exempt, are used for purposes other than those generally performed by
government units (e.g., bonds used for commercial or housing purposes). Income
received on such bonds is classified as a "tax preference item," under the
alternative minimum tax, for both individual and corporate investors. The Fund
anticipates that a portion of its investments will be made in such "private
activity bonds," with the result that a portion of the exempt-interest
dividends paid by the Fund will be an item of tax preference to shareholders
subject to the alternative minimum tax. In addition, certain corporations which
are subject to the alternative minimum tax may also have to include
exempt-interest dividends in calculating their alternative minimum taxable
income in situations where the "adjusted current earnings" of the corporation
exceeds its alternative minimum taxable income.
Under the Revenue Reconciliation Act of 1993, all or a portion of the Fund's
gain from the sale or redemption of tax-exempt obligations purchased at a
market discount after April 30, 1993 will be treated as ordinary income rather
than capital gain. This rule may increase the amount of ordinary income
dividends received by shareholders.
Within sixty days after the end of its fiscal year, the Fund will mail to
its shareholders a statement indicating the percentage of the dividend
distributions for such fiscal year which constitutes exempt-interest dividends
and the percentage, if any, that is taxable, and the percentage, if any, of the
exempt-interest dividends which constitutes an item of tax preference.
Shareholders will normally be subject to federal income tax on dividends
paid from interest income derived from taxable securities and on distributions
of net short-term capital gains, if any. Distributions of long-term capital
gains, if any, are taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund shares and regardless of whether the
distribution is received in additional shares or in cash. To avoid being
subject to a 31% federal backup withholding tax on taxable dividends, capital
gains distributions and proceeds of redemptions or repurchases, shareholders'
taxpayer identification numbers must be furnished and certified as to 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
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the Fund's assets, all expenses incurred by the Fund and all sales charges
which would be incurred by redeeming shareholders, for the stated periods. It
also assumes reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations may or may not reflect the
deduction of the contingent deferred sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations
(such as mutual fund performance rankings of Lipper Analytical Services, Inc.).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability and
the nature of the Fund's assets and operations the possibility of the Fund's
being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean Witter
Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure
that the interests of shareholders and other clients are placed ahead of any
personal interest, that no undue personal benefit is obtained from a person's
employment activities and that actual and potential conflicts of interest are
avoided. To achieve these goals and comply with regulatory requirements, the
Code of Ethics requires, among other things, that personal securities
transactions by employees of the companies be subject to an advance clearance
process to monitor that no Dean Witter Fund is engaged at the same time in a
purchase or sale of the same security. The Code of Ethics bans the purchase of
securities in an initial public offering, and also prohibits engaging in
futures and options transactions and profiting on short-term trading (that is,
a purchase within 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 1994 report by the
Investment Company Institute Advisory Group on Personal Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
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DEAN WITTER
NATIONAL MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
BOARD OF TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Manuel H. Johnson
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 F. 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.
